What Is Blockchain Technology & Its 4 Different Types [2025 Update]

Upon hearing the term blockchain, most would immediately associate it with cryptocurrency. Well, it’s sort of true but it’s more than that. With many web articles explaining this technology and its concepts, learning what is blockchain technology can be overwhelming for some. But we want to keep things simple and break down the concepts so that it’s easier for you to understand. By the end of this blog, you will have understood blockchain and its applications in the tech sector, let’s get started.

The Beginners Guide To Blockchain

Blockchain is a cutting-edge decentralized distributed ledger that is used to record a consistently growing list of digital transactions called “blocks”. These so-called blocks are linked using cryptography. Blockchain gets its name from the way it stores data—in blocks linked together to form a chain. Each block records and confirms the time and sequence of transactions, which are then stored within a discrete network governed by rules agreed to by the network participants. This makes it difficult to alter or modify the data without changing all subsequent blocks of information.

Even though the primary purpose of blockchain is recording digital transactions, its advantages extend beyond that. One of the main perks is its tighter security that effectively removes any chances of tampering by external means. Since blockchain transactions are typically done in minutes, this saves valuable time, improves efficiency and helps save costs.

How Blockchain Technology Works

Now that you learned what is blockchain technology, let’s see how this technology creates immutable ledgers and power transaction records that cannot be changed or destroyed easily.

As explained in the beginners guide to blockchain, every digital record conducted is stored on the online ledger and is connected to multiple computer servers worldwide. Each block contains a timestamp, transaction data, and a unique cryptographic hash that connects it to the previous block eventually resulting in the formation of a chronological chain. This chain is then distributed across the network of computers, making them decentralized. 

Whenever users conduct a transaction through a consensus mechanism, the data is added as newer blocks and is linked with the previous blocks in the chain. Once the blocks are added they cannot be altered. Moreover, the data is updated in real-time and the record of every transaction is transmitted across the computers part of the blockchain network. Since digitally encrypted signatures and contracts are used to ensure privacy between transactors, integrity and security of the recorded data is thereby ensured.

Decoding The Three Pillars

Understanding how blockchain technology works is only part of the journey as there is even more to learn. Does this phrase “three pillars” seem similar? In the case of blockchain, this has significant importance because these “pillars” refer to the three main characteristics of blockchain technology. They are decentralization, security, and scalability. All three blockchain terms are explained below.

Decentralization

In the blockchain environment, decentralization refers to any kind of technology that has no governing authority by any type of organization. Decentralization is one of the key features of blockchain technology.

As there is no central point of control, this makes blockchain considerably more secure. Instead of relying on a dedicated governing entity, the transactions are made secure between users by using innovative consensus protocols across the network. These protocols ensure that the transactions are valid and the transferred data is incorruptible. 

Security

Security is always a concern in the field of online transactions. When a person initiates an online transaction, it must be secure and private so that there are no issues. One of the principal reasons for the existence of online payment and wallet systems is the security measures provided in the event of an unfortunate situation.

Blockchain technology utilises cryptography algorithms that generate a unique combination of public and private keys, that give the users the ownership of their data and assets associated with it. Another highlight is that your information is stored on different computers or nodes, which makes hacking at a single point typically useless for a hacker.

They would have to hack multiple nodes simultaneously which is not generally feasible. With blockchain, your stored information is safe from external threats and it is not possible to hack the details. In simple words, only you can access your data and no one else. 

Scalability

Another highlight of blockchain is its ability to increase capacity and maintain smooth operations simultaneously. The advantages are faster processing times, and no bloating or lags. Due to its immense popularity and demand, blockchains generally get larger. The system must be able to handle multiple transactions per second. This is managed by implementing powerful hardware and software infrastructure.

Learning The Types Of Blockchain 

With multiple blockchain events Dubai being conducted this year, blockchain is one of the most sought-after technologies by businesses and tech enthusiasts. 

Blockchain is primarily categorized into two which are permissionless and permissioned. The former is a type of blockchain network that allows anyone to participate in the network and doesn’t require special permissions or approvals. However, the latter blockchain network type allows only a selected group of authorized users with prior permission to participate in the network and restricts others. Even though that’s the case, there are generally four types of blockchain in existence, all of which are subtypes of one or both of the two primary types: 

Public Blockchain Network

There are permissionless blockchain networks that are decentralised in operation. These networks aren’t owned by anyone and offer no restrictions. Anyone with a computer and internet can participate in the network. Since it’s public, all users hold a copy of other nodes or blocks present in the network. Trust, security, anonymity and decentralized nature are some of the advantages. Despite the perks, the processing time and energy consumption are often on the higher side. Bitcoin, Ethereum, etc are examples of public blockchain networks.

Private Blockchain Network

Also known as a permissioned blockchain network, these networks are often managed by a central authority, unlike the decentralised nature of public blockchains. This authority typically grants access to a selective number of users to join the network. Since they are closed, private networks are considered secure and controlled. 

This results in multiple advantages such as faster transaction speeds, customizable scalability, and enhanced privacy. However, private blockchains also have their share of drawbacks such as potential security vulnerabilities, risk of system failure, and tighter controlled structure. Despite these flaws, private blockchains are ideal for companies preferring to store information securely from the public eye.

Hybrid Blockchain Network

If you wish to experience the best of private and public blockchain networks, hybrid blockchain is the answer to that. Combining both aspects offers a perfect mix of controlled access and public visibility. There will be a single authority controlling certain aspects of the network while the others are made visible to the public. 

A hybrid approach will have a customizable architecture, cost-effective transactions, and improved security compared to public blockchain networks.  However, hybrid blockchains can suffer from transparency issues, closed ecosystems, and implementation challenges. The IBM Food Trust is a prominent example of a hybrid blockchain system.

Consortium Blockchain Network

Often known as a federated blockchain, this is also similar to the hybrid blockchain network. However, there are multiple organizations instead of one controlling the network. This results in faster transaction verification and increased privacy. Being permissioned in nature, consortium blockchains are more decentralized than private blockchain networks. 

Despite offering multiple perks including faster decision-making, consortium blockchain networks will have flexibility issues as they still require protocol approval from all the managing organizations. Logical obstructions and risk of antitrust accusations can occur.

Winding Up

What is blockchain technology? By now you must have learned what it is and its various types. Blockchain is more than just storing information, this sophisticated technology offers immense potential to maximize businesses across multiple industrial sectors. Blockchain technology for ecommerce is also quite widely known in the new world.

Offering significant perks such as security, higher trust, faster transaction times, improved speed and cost-efficiency, transparency and more, various events are being conducted to highlight blockchain’s potential. Many organizations are incorporating various types of blockchain technology to streamline their day-to-day business operations and it’s high time that you did too.