Blockchain: one size does not fit all

When you don’t have a tech background it is easy to tune out when you hear someone talk about blockchain technology. I get it. It is confusing and complicated (DeFi, DLT, NFT, ZKP 🤯) but over the next few years almost every industry is going to be looking at ways to incorporate blockchain technology, so it is important to understand the basics. Here is a brief overview of the different types of blockchain and what they are commonly used for.

There are four main types of blockchain: public, private, hybrid (combination of public and private) and consortium-led (private or hybrid).

Public blockchain

Most people are familiar with the Bitcoin blockchain which is a public blockchain. These types of blockchain are also called permissionless, as anyone can join the network and view the data and transactions without permission from a central authority. Public blockchain are also pseudo-anonymous, meaning that transaction data are publicly visible and can be traced through public key addresses.

A notable advantage of a public blockchain is its security, which is achieved by utilizing a decentralized network of users (nodes) to validate the transactions as they are added to the chain. This is done via consensus mechanisms such as proof of work or proof of stake.

Transparency and security are key features of a public blockchain, however, given the need to validate the data being recorded they are harder to scale and tend to have long transaction processing times. Public blockchain are also costly to develop so developers tend to use an existing public blockchain when creating applications that run on a blockchain.

The main advantage of a public blockchain is that the information stored can be transferred from one party to another directly and securely without the need for central control or a 'middleman', reducing costs and increasing efficiencies. Imagine millions of people buying and selling houses without needing an estate agent or lawyer. Public blockchain technology has already allowed millions to gain control of their money from the traditional banking system via the uptake of cryptocurrencies such as bitcoin and ether (the Ethereum blockchain token).

Private blockchain

Many companies wishing to capitalize on the advantages of blockchain technology use private blockchain networks. Private blockchain, also called permissioned, preserve the privacy of members by denying non-members access to view the data being stored and transacted on the network.

Private blockchain are normally under the control of a single organization in order to safeguard sensitive information such as supply chain data. In this case, the blockchain owner can override, edit, or delete the entries on the private blockchain.

Functioning more like a secure intranet rather than a decentralized ledger, a private blockchain can be fast and scalable as it does not require the same level of validation as a fully open public blockchain.

Walmart uses blockchain technology to trace the origin of products from suppliers around the world, while luxury brands like Prada and Cartier are using blockchain to clamp down on counterfeit goods.

Hybrid

A hybrid blockchain is also a viable alternative to public and private blockchain. Using blockchain as a service (BaaS) providers organizations can make certain components of their blockchain public and permissionless, while keeping other parts private and accessible to members only. These types of blockchain are also known as permissioned, as there are some access requirements to see all the transactions.

An emerging use case for hybrid blockchain includes securing electronic health record (EHR) data. Here privacy is a central concern, with most of the data only accessible to pre-authorized healthcare providers such as physicians, hospitals or insurance companies. However, there may also be instances where some of the data are available to a wider group, such as for medical research or public health reporting.

Consortium

A consortium blockchain is one controlled by multiple organizational members. This type of network can be private or hybrid depending on its use.

One example is PharmaLedger, a consortium comprised of 29 partners from 13 countries; 12 pharmaceutical companies including Novartis, GSK, Bayer, Pfizer and AstraZeneca, together with 17 public and private entities.

The PharmaLedger consortium aims to “drive early adoption of disruptive blockchain-based digitization technology, with key industry participants joining forces to build a comprehensive solution for improving the quality of healthcare.”

Private, hybrid and consortium blockchain are also known as enterprise blockchain as they are mostly used by large companies or organizations where speed and scalability are paramount.

There are pros and cons associated with each of these blockchain network types so it is important to consider the importance of factors such as transparency, performance, scalability and security, that your data and transactions require in order to select the best way forward.

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