What are the different types of blockchain network?

When we think of blockchain technology, we typically picture a database of information that is distributed among a large network of computers or nodes. That’s an accurate representation of what a blockchain is, but not all blockchain networks operate in the same way. While some, like those built for decentralized projects, are open and public, others are private.

In this AAG Academy guide, we’ll teach you the differences between the various blockchain network types currently in use today, as well as why those differences exist in the first place. We’ll also look at some of the biggest and most popular blockchains currently in operation.

There are four main types of blockchain networks, which are:

Public blockchain
Public blockchains are completely decentralized and anyone with the right hardware and internet capabilities can join them and view the data they hold. These are some of the most common blockchains in existence within the cryptocurrency industry, and they are the backbone of some of the biggest projects, including Bitcoin and Ethereum.

Private blockchain
Private blockchains are essentially the opposite of public blockchains in that they are centralized and controlled by one authority. Only authorized users can become network participants and access the data they hold. Private blockchains are most commonly used in industries like financial services, healthcare, and retail.

Hybrid blockchain
Hybrid blockchains, which are sometimes known as permissionless blockchains, combine both public and private elements. The extent to which they are public or private depends on the blockchain, but it is important to note they aren’t completely open to all.

Consortium blockchain
Consortium blockchains, which are sometimes referred to as federated blockchains, are similar to hybrid blockchains. The primary difference is that consortium blockchains allow multiple private entities, as opposed to just one, to control and collaborate on the same network.

What are blockchain networks?

Although there are several different types of blockchain networks, the underlying technology for all of them is essentially the same. All blockchains consist of a digital database or ledger that is distributed among all the computers or nodes that make up the network. Every participant (computer) runs the same software and has access to the same data.

What makes a blockchain database different from a traditional database is how its data is structured. Rather than being stored in tables, blockchain data — as the name suggests — is stored in blocks, each of which is linked together to make up the complete chain. Each block can carry a certain amount of data, and when it’s full, it is closed and cannot be edited.

This structure is what allows a blockchain database to be distributed and entirely decentralized since it does not need to be stored in one centralized location. As we covered above, however, not every blockchain is completely open to the public and accessible by anyone. Some are private and are therefore only accessible to authorized users.

By far the most common use of blockchain technology today is cryptocurrency, which uses it to store a complete ledger of all transactions that is permanent and viewable by anyone. However, in recent years, the technology has made its way into other industries — such as healthcare and medicine — which use blockchains to store other kinds of information.

How are blockchain networks secured?

To protect all that information, blockchains use cryptographic security. This involves assigning every block in the chain a unique identifier, which is known as a hash, that is created by solving complex calculations. The hash is determined partly by the data it carries, so if the data changes so does the hash. This would render the block unrecognizable to the wider blockchain.

In other words, a block, once it has been closed, cannot be tampered with by an individual or group because doing so would simply cause the block to be rejected. Every single network participant would need to be involved in an attack for it to be successful. This gives blockchains a big advantage over centralized databases, which are much easier to target and breach.

Why are there different types of blockchain networks?

As we’ve touched upon briefly above, blockchain technology is no longer used exclusively by the decentralized cryptocurrency industry. It has also made its way to a growing number of centralized industries, many of which do not or cannot have the same views on transparency. So, different types of blockchain networks have been developed to suit different needs.

For instance, in the healthcare industry, blockchain technology is now being used to store patient data and make it accessible to different sectors, such as hospitals, laboratories, pharmacists, and physicians. This data must remain completely confidential, and therefore only a private blockchain accessible to a select few is suitable.

How many blockchain networks are there?

Although it is difficult to track exactly how many blockchain networks are in use, it is estimated that more than 1,000 are active as of September 2020. Together, they support more than 80 million users and have recorded almost 700 million transactions worth nearly $12 billion.

Those figures are only expected to grow in the coming years as cryptocurrency, web3, and blockchain technology itself become even more popular and industries continue to recognize the benefits they offer. By 2030, the value of all blockchains is expected to reach $3.1 trillion.

Blockchain networks list

With more than 1,000 blockchain networks in use today, it would be impractical to list everyone here. Here is a list of 10 of the most notable, either because of their value, their popularity or because of their significance within the industry:

• Bitcoin
• Ethereum
• Solana
• Avalanche
• Cardano
• Ripple
• IBM Blockchain
• Polkadot
• Tezos
• Stellar

References

• Public-private-permissioned-blockchains-compared
• Types-of-blockchain
• Blockchain
• How-many-blockchains-are-there
• 79+ blockchain-statistics
• 20 blockchain-platforms driving the industry