What are the 4 different types of blockchain technology?

How it works. A blockchain network that works in a restrictive environment like a closed network, or that is under the control of a single entity, is a private blockchain. While it operates like a public blockchain network in the sense that it uses peer-to-peer connections and decentralization, this type of blockchain is on a much smaller scale. Instead of just anyone being able to join and provide computing power, private blockchains typically are operated on a small network inside a company or organization. They’re also known as permissioned blockchains or enterprise blockchains.

Advantages. The controlling organization sets permission levels, security, authorizations and accessibility. For example, an organization setting up a private blockchain network can determine which nodes can view, add or change data. It can also prevent third parties from accessing certain information.

“You can think of private blockchains as being the intranet, while the public blockchains are more like the internet,” Godefroy said.

Because they’re limited in size, private blockchains can be very fast and can process transactions much more quickly than public blockchains.

Disadvantages. The disadvantages of private blockchains include the controversial claim that they aren’t true blockchains, since the core philosophy of blockchain is decentralization. It’s also more difficult to fully achieve trust in the information, since centralized nodes determine what is valid. The small number of nodes can also mean less security. If a few nodes go rogue, the consensus method can be compromised.

Additionally, the source code from private blockchains is often proprietary and closed. Users can’t independently audit or confirm it, which can lead to less security. There is no anonymity on a private blockchain, either.

Use cases. The speed of private blockchains makes them ideal for cases where the blockchain needs to be cryptographically secure but the controlling entity doesn’t want the information to be accessed “For example, companies may choose to take advantage of blockchain technology while not giving up their competitive advantage to third parties. They can use private blockchains for trade secret management, for auditing,” Godefroy said.

Other use cases for private blockchain include supply chain management, asset ownership and internal voting.