This article will discuss the different types of blockchains and their use cases.
Public vs. Private Blockchains
The first difference to note between public and private blockchains is the identity of the participants of the network. Public blockchains such as Bitcoin or Ethereum allow anyone to participate in their ecosystem. This means that the incentives of the network need to keep their members honest and punish bad actors because the identity of the participants is not known. Private blockchains are only accessible through invites and thus the identity of each member is known. Knowing the user means that the enterprise can determine what role the user will play and how much information they have access to. Further differences are shown in the table below.
The pro’s of public blockchains include open read and write, a distributed ledger, immutability, and security. These advantages come from the openness of public blockchains in terms of who can participate in the network. Generally, as the number of participants increases, the security and immutability of the blockchain also strengthen. The pro’s of private blockchains include enterprise permission, faster transactions, better scalability, compliance support, and a more efficient consensus. These result from the enterprise having full control of the nodes, participants, and information that is being transacted on its private blockchain.
Open vs. Closed
Another type of blockchain is open vs. closed. Public vs. private determines who is able to write data onto the ledger while open vs. closed determines who is able to read the data on the blockchain. Examples of use cases for the 4 types are shown in the table below.
Determining what type of blockchain to use depends on the problem you are trying to solve and the best fit for the use case. It is important to understand the problem fundamentally and determine, if at all, one of these types of blockchains would be appropriate to use.