Different Types of Blockchains: Comprehensive Guide
When discussing blockchains, it is easy to identify a blockchain as a single object, but from there the topic can be broken down a lot further. Many different types of blockchains exist and not all of them serve the same purpose.
When investing in cryptocurrencies and web3 assets it’s important to know how to distinguish between the different types of chains and networks that exist because they explain a lot about the functions and details associated with the tokens being examined.
Public Blockchains
Public blockchains are the most common type of blockchain. It is made from a decentralized group of computers called nodes that broadcast and record transactions onto the blockchain. Between Bitcoin and Ethereum, public blockchains support the majority of web3.
Popular examples:
Bitcoin
Ethereum
Binance Smart Chain
2. Private Blockchains
Blockchains can also be private networks that companies and businesses use for their own management systems. This is often used for supply chain management and other logistic services. Business tasks like signing approval and facilitating financial transactions are also common on private networks.
Popular examples:
Hyperledger Fabric
MultiChain
IBM Blockchain
3. Consortium Blockchains
Consortium blockchains are networks that are only partially decentralized and run by a group of separate organizations. This allows them to govern the network more directly in order to facilitate cross-organizational collaboration. Essentially, if borders were to be drawn between networks, this blockchain would act as an intermediary.
Popular examples:
Enterprise Ethereum Alliance,
Hyperledger Besu
SWIFT's blockchain project
4. Side Chains
Sidechains are chains that run parallel to a larger blockchain and bring additional features to the user. They can be used to offer reduced gas fees and faster transaction times.
Popular examples:
Liquid Network
xDai Chain
Loom Network
5. Parachains and Parathreads (Polkadot ecosystem)
Parachains are a collection of blockchains that are connected to a primary network. Specifically, they are native to the Polkadot network and allow it to share additional security features and expand interoperability.
Popular examples:
Acala Network
Moonbeam
Kusama
6. Beacon Chain (Ethereum 2.0)
The Beacon Chain is a specific chain for the Ethereum network that allowed it to merge from a proof-of-work consensus mechanism to a proof-of-stake consensus. To do so, a beacon chain was developed to run alongside the primary Ethereum blockchain as the on-ramp for the merge.
7. Testnets
Testnets are essential for blockchain and web3 development because they allow developers to make errors that can be corrected, unlike a mainnet where nothing can be changed due to immutability.
Popular Examples:
Ropsten
Rinkeby
Binance Smart Chain Testnet
8. Layer 2 Scaling Solutions
Layers 2 scaling solutions are blockchains built on top of an established blockchain such as Bitcoin or Ethereum. They are essential for efficient scalability as more users join web3 and activity grows. Layer 2 blockchains can help increase transaction times and reduce high gas fees that make networks like Ethereum difficult.
Popular Examples:
Polygon
ZK-Rollups
Lightning Network
9. Interoperability Chains and Networks
Interoperable chains are blockchains that facilitate communications between networks. This allows networks like Ethereum and BNB Smart Chain to interact and exchange information with each other.
Popular examples:
Cosmos Network
ICON
Wanchain
10. Storage Chains
Storage chains are an incentive layer used to encourage the deployment of additional web3 storage nodes on decentralized platforms like IPFS. They are a crucial building block to the growth of web3 and how data is managed.
Popular examples:
Filecoin
Siacoin
Arweave
11. Oracle Networks
Oracle networks are blockchains that onboard off-chain information to blockchain networks. They allow decentralized networks to be dynamic, receiving new data gathered on web2 platforms and storing it on-chain.
Popular examples:
Chainlink
Band Protocol
12. Privacy Chains
Privacy chains keep certain information about transactions such as origins and values secret. These chains tend to be controversial among web3 communities that debate the importance of financial privacy.
Popular examples:
Monero
Zcash
Dash
Choosing a blockchain
Overall, there are a variety of different blockchains available in the web3 industry that all serve different purposes. When choosing a network to develop or invest in, it is important to understand the fundamental role that each blockchain plays.
