The Blockchain is undoubtedly a brilliant invention – conceptualized first in 2008 by a person (or a group of people) known as Satoshi Nakamoto.
Nakamoto mined the first Bitcoin block in 2009 and with that, the cryptocurrency era was born. Since then, Blockchain has evolved better and today more and more products utilizing the Blockchain technology are emerging in the market. So, let’s take a look at what exactly is the Blockchain technology.
Blockchain is a decentralized, distributed and public digital ledger used to record information about transactions in cryptographic blocks connected to each other hierarchically. This creates an endless chain of blocks and hence the name Blockchain. Once the data or transaction is written to these blocks, they cannot be modified or tampered, creating an extremely high degree of security.
Let us take a closer look at the different types of Blockchain available in the market and their functionality.
There are mainly three types of Blockchain:
- Consortium or Federated
Private Blockchain as its name suggests is a private property of an individual or organization. In a private Blockchain, read and write access permissions are kept centralized to one organization. Access rights are restricted to a group of participants. Private Blockchain is mainly used for database management and auditing, which are internal to that particular organization and require data privacy and security, so permissions are given to a group of participants who can access the Blockchain network. Private Blockchain is also known as Permissioned Blockchain.
Examples of private Blockchain include MONAX, Multichain etc.
As the name suggests, a Public Blockchain is the one where anyone can participate without permission. In a public Blockchain, anyone can download the code and run a public node on their local servers, validate transactions in the network and thus, participate in the consensus process. Anyone in the world can send transactions through the network and expect them to be included in the Blockchain, given that they are valid transactions. All the transactions in a Public Blockchain are transparent (and anonymous) and hence, anyone can read these transactions on the public block explorer. Public Blockchain is also known as Permissionless Blockchain.
One of the key benefits of using a Public Blockchain is that it incurs no infrastructure costs. There is no need to maintain servers for creating or running decentralized apps.
Examples of Public Blockchain include Bitcoin, Ethereum, Litecoin, Dodgecoin, Monero, Dash etc.
Consortium or Federated Blockchain
Consortium or federated Blockchain is the one that operates under the leadership of a group. Here, a group of companies or representative individuals come together and make decisions for the benefit of the network. Such groups are called consortium or federation and hence the name. Consortium Blockchains are mostly used in the banking sector. For example, let’s suppose there is a consortium of 15 financial institutions, and each institution operates a node, so 10 nodes must sign every block in order for the block to be valid. Here the consensus process is controlled by these pre-selected set of nodes.
Examples of Consortium Blockchain include R3 (banks), EWF (energy), Corda etc.
Read more: How Blockchain is Solving the KYC/AML Woes?
These different types of Blockchain are used for different type of industries. If privacy and control is required, Private and Consortium Blockchain are the best solutions and where openness and anonymity is required, Public Blockchain is the solution.