What types of blockchain are there?
There are three main categories of blockchain networks — public, public-permissioned and private-permissioned.
Public blockchains run on the internet. Anyone can run a node on the network, and in order to transact with the network, you have to pay a fee using the native cryptocurrency of that network. For instance, on the public Ethereum network, you pay a fee in Ether. This is also called gas which is described in more detail in What are gas fees?.
Public blockchain networks include the Bitcoin, Ethereum and Polkadot networks.
Public-permissioned blockchain networks also run on the internet, however, access to those networks is restricted. Only specific participants on the network can run transaction-validating nodes that can process transactions. In addition access to those nodes can be restricted either physically or by using a cryptocurrency created exclusively for this network.
Public-permissioned blockchain networks include LACChain and the Palm network.
Private-permissioned blockchain networks run on private networks which are only accessible by participants with access to that network infrastructure. These are often formed by consortia for enterprise use cases.
Private permissioned networks include J.P. Morgan’s Onyx network and the Fnality network.
Layer one versus layer two networks
Networks such as Ethereum main network (mainnet) and the Bitcoin network are called layer one networks. However, due to the level of decentralisation and security they provide, they do face scalability issues with the number of transactions they can process during a given time window.
The trade-offs with respect to decentralisation, security and scalability of blockchain networks are referred to as the blockchain trilemma. You can only have two out of the three possibilities, not all three.
Layer two networks have emerged which are less decentralised than their layer one equivalents, but they can support a greater transaction throughput. Examples include the Polygon network for Ethereum and the Lightening network for Bitcoin.
These layer two networks are not as secure as the layer one network, as they are less decentralised, but for many users, they are willing to compromise on this in order to achieve greater scalability.
Summary
There are three main categories of blockchain network:
- Public such as the Ethereum network
- Public-permissioned such as the Palm network
- Private-permissioned such as the Fnality network
The Ethereum network is a layer one network, that prioritises decentralisation and security over scalability. Networks that prioritise scalability and security, or scalability and decentralisation are referred to as layer two networks. Polygon is one of the best-known Ethereum layer two networks.
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