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Blockchain 101 #4: Exploring Blockchain Types: Public, Private, and Permissioned Explained

Explains different types of blockchains, such as public, private, and permissioned, and their respective characteristics.

Blockchain technology, initially conceptualised as the underlying technology for cryptocurrencies, has evolved into a versatile and transformative force in various industries. As the blockchain landscape continues to expand, it's essential to delve into the different types of blockchains: public, private, and permissioned. Each type comes with its unique characteristics, advantages, and use cases. In this comprehensive article, we will explore these blockchain types in detail, helping you gain a deeper understanding of their functionalities and applications.

Public Blockchains: The Decentralisation Revolution

Public blockchains represent the pioneering force of blockchain technology, synonymous with cryptocurrencies like Bitcoin and Ethereum. These blockchains are open networks that allow anyone to participate, making them truly decentralised. Let's delve into the key characteristics of public blockchains:

  • Decentralisation - Public blockchains operate on a decentralised model, where no single entity has control over the network. Instead, a distributed network of nodes, often referred to as miners, validate and record transactions. This decentralisation ensures resilience and security.

  • Transparency - Transactions on public blockchains are transparent and immutable, meaning that anyone can view the entire transaction history. This transparency reduces the potential for fraud and corruption, making it ideal for financial applications.

  • Security - Public blockchains employ robust cryptographic algorithms to secure transactions, making them highly resistant to hacking and fraud. The more nodes in the network, the more secure it becomes.

  • Permissionless - One of the defining features of public blockchains is their permissionless nature. Anyone can participate in a public blockchain network without needing prior authorisation. Users can create wallets, send and receive cryptocurrencies, and even participate in network consensus by becoming miners.

  • Incentives - To maintain network integrity, public blockchains often use incentives like mining rewards. These rewards encourage participants to contribute their computing power to validate transactions and secure the network.

Use Cases - Public blockchains go beyond cryptocurrencies and are utilised for decentralised applications (DApps), tokenisation of assets, and functions as a foundation for smart contracts, enabling automated and trustless agreements.

Private Blockchains: Controlled and Confidential

Private blockchains, in stark contrast to their public counterparts, are restricted and controlled networks. They are typically operated by a single organisation or a consortium of entities with shared interests. Here's a closer look at the defining characteristics of private blockchains:

  • Centralised Control - Private blockchains are characterised by centralised control. They are typically operated by a central authority or a select group of participants, making them more centralised compared to public blockchains.

  • Privacy and Confidentiality - Transactions on private blockchains are often kept confidential, allowing only authorised participants to access and view transaction details. This feature is essential for businesses that need to protect sensitive data and maintain privacy.

  • Efficiency - Private blockchains are known for their efficiency in terms of transaction processing speed and scalability. They do not rely on the extensive consensus mechanisms of public blockchains, making them ideal for enterprise use cases.

  • Permissions Required - To participate in a private blockchain network, users must be granted permission by the network operator. This control ensures that only trusted parties can engage with the network, enhancing security and trust among participants.

Use Cases - Private blockchains find applications in various industries, such as supply chain management, healthcare, and finance. They are well-suited for organisations looking to streamline operations, improve transparency among trusted partners, and maintain control over their blockchain infrastructure.

Permissioned Blockchains: Striking a Balance

Permissioned blockchains aim to strike a balance between the open nature of public blockchains and the controlled environment of private blockchains. They maintain some level of decentralisation while allowing for controlled access. Here are the key features of permissioned blockchains:

  • Controlled Access - Permissioned blockchains restrict access to certain participants, ensuring that only trusted parties can join the network. This controlled access maintains a level of trust among participants.

  • Decentralisation - While not as decentralised as public blockchains, permissioned blockchains often involve multiple nodes or validators to maintain a distributed ledger. This enhances security and resilience compared to fully centralised systems.

  • Confidentiality Options - Participants in permissioned blockchains can choose the level of transaction confidentiality they require, offering flexibility for different use cases. This feature is particularly valuable in industries with regulatory requirements.

  • Regulatory Compliance - Permissioned blockchains are often designed with regulatory compliance in mind, allowing organisations to adhere to legal and regulatory requirements while still benefiting from blockchain technology.

Use Cases - Permissioned blockchains are well-suited for scenarios where some level of trust is required among participants while still maintaining a degree of decentralisation. Common use cases include cross-border payments, identity verification, and supply chain tracking, among others.

In conclusion, the blockchain landscape is diverse, with public, private, and permissioned blockchains each serving specific purposes. Public blockchains excel in decentralisation and transparency, making them ideal for cryptocurrencies and decentralised applications. Private blockchains prioritise control and confidentiality, catering to businesses seeking efficient and secure solutions. Permissioned blockchains offer a middle ground, combining aspects of both public and private blockchains, and are adaptable to various use cases.

Understanding these distinctions is crucial for individuals, businesses, and developers aiming to harness the potential of blockchain technology. Your choice of blockchain type should align with your specific needs and goals, whether you are an individual investor, a business looking to implement blockchain technology, or a developer exploring new possibilities in the world of decentralised ledger technology. On top of these 3 types of Blockchains, there are Federated Blockchains and Consortium Blockchains that bounce between the public and private spectrums. Blockchain's potential is vast, and selecting the right type can pave the way for innovation and success in diverse industries.

We, from Blockchain at NTU, thank you for being part of this enlightening journey and extend a warm welcome to the enthralling universe of blockchain!

NOTE: Articles written by Blockchain at NTU ARE NOT FINANCIAL ADVICE!

Written By:
Dann Wee
Research Director of Blockchain at NTU Club AY23/24

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