What are the different types of blockchains?

Public Blockchains: Open and Decentralized Networks

Public blockchains are the most widely recognized type of blockchain, characterized by their open access and decentralized structure. Anyone with an internet connection can join the network, participate in consensus mechanisms, and validate transactions. These blockchains operate without a central authority, relying on cryptographic verification and distributed nodes to maintain integrity. Bitcoin and Ethereum are prominent examples of public blockchains.

In a public blockchain, transaction transparency is a core feature. Every transaction is recorded on a public ledger, viewable by all participants. This transparency enhances trust among users who do not need to rely on intermediaries. To ensure security and prevent malicious activity, public blockchains use consensus algorithms such as Proof of Work (PoW) or Proof of Stake (PoS). In PoW, miners compete to solve complex mathematical puzzles to add new blocks. In PoS, validators are chosen based on the number of tokens they hold and are willing to 'stake' as collateral.

Running a node on a public blockchain requires downloading the full ledger or a lightweight version, depending on the implementation. For example, to run a full Bitcoin node:

• Download the Bitcoin Core software from the official website
• Install the application and allow it to sync with the network
• Ensure sufficient disk space (over 400 GB as of recent updates)
• Keep the node online regularly to contribute to network validation

Private Blockchains: Controlled and Permissioned Systems

Private blockchains restrict participation to a specific group of individuals or organizations. Access is granted only through invitation or approval, making them suitable for enterprise environments where data privacy and regulatory compliance are essential. Unlike public blockchains, private networks are typically managed by a central authority or consortium that controls node permissions and transaction validation.

One of the primary advantages of private blockchains is high transaction throughput. Since the number of validating nodes is limited, consensus can be achieved more quickly. This makes private blockchains ideal for internal banking systems, supply chain tracking, or healthcare data management. Hyperledger Fabric and R3 Corda are widely used private blockchain platforms.

To set up a private blockchain using Hyperledger Fabric:

• Install Docker and Docker Compose to manage containerized components
• Clone the Hyperledger Fabric samples repository from GitHub
• Use the provided scripts to generate cryptographic materials (certificates and keys)
• Launch the network using the docker-compose command
• Deploy a smart contract (chaincode) using the CLI tools

Access control is enforced through membership services, which authenticate users and assign roles. Only authorized participants can read, write, or validate data, ensuring confidentiality.

Consortium Blockchains: Collaborative and Semi-Private Networks

Consortium blockchains, also known as federated blockchains, are jointly managed by a group of organizations. This hybrid model combines elements of both public and private blockchains. While not fully open, they are more decentralized than private blockchains because multiple entities participate in governance and validation.

These networks are commonly used in industries requiring inter-organizational collaboration, such as banking, logistics, and trade finance. For example, a group of banks might form a consortium to streamline cross-border payments. Each member operates a validating node, and consensus is achieved through a pre-selected set of nodes.

Key features include:

• Shared responsibility for network maintenance
• Faster transaction processing than public blockchains
• Greater transparency among members compared to private blockchains
• Customizable rules for data access and smart contract execution

Setting up a consortium blockchain with MultiChain involves:

• Installing MultiChain on each participant’s server
• Creating a new blockchain with custom parameters (e.g., mining diversity, transaction limits)
• Granting connect, send, and receive permissions to each node
• Starting the network and connecting all nodes using their IP addresses and ports
• Configuring stream permissions for data sharing

Hybrid Blockchains: Flexible and Customizable Solutions

Hybrid blockchains blend the features of public and private blockchains, allowing organizations to control data access while enabling selective transparency. In a hybrid model, certain data can remain private, accessible only to authorized parties, while other information is made public for auditability or verification.

These blockchains are particularly useful in sectors like real estate or government services, where public accountability is required for some records, but personal or sensitive data must remain confidential. For instance, a land registry could store ownership transfers on a public layer while keeping personal identity details in a private, permissioned section.

Smart contracts in hybrid blockchains can be programmed to execute actions based on conditions met in either layer. To implement such a system:

• Choose a blockchain platform that supports hybrid architecture, such as Quant or XinFin
• Define which data sets will be public and which will be private
• Establish identity verification protocols for private access
• Deploy separate consensus mechanisms for each layer if needed
• Integrate oracles to bridge data between public and private segments

The flexibility of hybrid blockchains allows for dynamic permissioning, where access rights can change based on time, role, or external events.

Sidechains and Layer-Two Solutions: Extending Blockchain Functionality

Sidechains are independent blockchains that are pegged to a main blockchain, allowing assets to be moved between them. They operate under their own rules and consensus mechanisms but maintain a connection to the primary chain for asset validation. This enables experimentation without risking the stability of the main network.

For example, the Liquid Network is a sidechain of Bitcoin that enables faster and confidential transactions for exchanges. To transfer BTC to Liquid:

• Initiate a withdrawal from a supported exchange to a Liquid address
• The gateway locks the BTC on the main chain
• An equivalent amount of L-BTC is issued on the Liquid sidechain
• Transactions occur on the sidechain with higher speed and privacy
• To return, L-BTC is burned and original BTC is unlocked

Layer-two solutions, such as the Lightning Network for Bitcoin or Optimistic Rollups for Ethereum, function similarly by processing transactions off the main chain and settling final results on-chain. These systems reduce congestion and lower fees while maintaining security through cryptographic proofs.

Frequently Asked Questions

Can a private blockchain be converted into a public one?No, a private blockchain cannot be directly converted into a public one due to fundamental differences in access control and consensus design. To achieve public access, the network would need to be restructured, cryptographic permissions removed, and open node participation enabled—effectively creating a new deployment.

How do consortium blockchains handle disputes between members?Disputes are managed through pre-agreed governance frameworks. These may include voting mechanisms, arbitration committees, or smart contracts that enforce rules. Each member’s influence often depends on their stake or role in the network.

Are hybrid blockchains more secure than public ones?Security depends on implementation. Hybrid blockchains can be more secure for specific use cases by limiting attack surfaces through permissioning. However, they may introduce centralization risks if private nodes are poorly distributed or controlled by few entities.

Do sidechains inherit the security of the main chain?Not entirely. While asset pegging relies on the main chain’s security, sidechains use their own consensus mechanisms. If a sidechain has weak validation, it may be vulnerable to attacks even if the main chain remains secure.