Blockchain Fundamentals—Public, Private, Consortium, and Hybrid Explained

Blockchain Fundamentals—Public, Private, Consortium, and Hybrid Explained

Hiba Lydia Alili Hiba Lydia Alili

Hiba Lydia Alili

Data Scientist (MSc. Finance) | Machine Learning, Blockchain & FinTech Innovator

发布日期: 2025年1月20日
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In our previous article, we explored the big-picture view of blockchain’s role in modern finance—especially in Canada—laying out why this technology matters for banks, fintechs, and everyday consumers.

Today, we’re diving deeper into four major types of blockchain networks—public, private, consortium, and hybrid—to see how they work and why they matter for Canada’s financial sector.

Quick Recap: What Makes a Blockchain?

At its core, a blockchain is a distributed ledger composed of “blocks.” Each block is cryptographically tied to the previous one, forming a “chain.” This design makes it extremely difficult to alter historical data—if someone tampers with an earlier block, it breaks the links to all subsequent blocks.

Key traits include:

  • Decentralization: No single authority—multiple nodes share and validate the ledger.
  • Immutability: Once recorded, data is very hard to change.
  • Transparency: Participants can typically see transaction data, increasing trust.

Traditional finance often centralizes trust in big institutions. Blockchain seeks to distribute that trust across a network—how much distribution you get depends on whether the blockchain is public, private, consortium, or hybrid.


Source: MT Pelerin - Understanding how a blockchain works

The illustration above shows a simplified “Chain of Blocks” where each block references the hash of the previous block, creating a secure chain. Attempting to alter one block invalidates all subsequent blocks

Public vs. Private vs. Consortium vs. Hybrid Blockchains


Blockchain Types

A. Public Blockchains

  • Examples: Bitcoin, Ethereum
  • Open to Everyone: Anyone can join, read, and write data (subject to consensus rules).
  • Incentive-Based: Commonly use algorithms like Proof of Work or Proof of Stake.
  • Pros: True decentralization, censorship resistance, high transparency.
  • Cons: Slower transaction speeds, higher fees during network congestion, large energy consumption (for Proof of Work).

Canadian Angle:

  • Some Canadian fintechs connect to public networks for cross-border payments or DeFi solutions.

  • Concrete Example: Montreal-based Shakepay leverages public blockchains (Bitcoin, Ethereum) for buying, selling, and transferring crypto. Users can quickly convert CAD to cryptocurrency and send funds worldwide, effectively reducing the time and cost often associated with traditional remittances or cross-border banking.

B. Private (Permissioned) Blockchains

  • Examples: Hyperledger Fabric, R3 Corda
  • Restricted Access: Only approved participants can join—useful for internal corporate deployments.
  • Controlled Governance: A single organization (or small group) decides who can read/write data.
  • Pros: High transaction speed, privacy controls, compliance-friendly.
  • Cons: Less decentralization, trust relies on the controlling entity or group.

Canadian Angle:

  • The Bank of Canada tested a private blockchain under Project Jasper, working with banks like RBC and TD.
  • Major Canadian banks often leverage private ledgers to automate back-office processes.

C. Consortium Blockchains

  • Examples: EWF, B3i and Quorum

  • Definition: A middle-ground approach, where multiple organizations (often industry peers) govern the network collectively.
  • Shared Control: No single entity in full control; decisions are made by authorized participants.
  • Pros: Balances privacy and shared trust, can be more scalable than fully public networks.
  • Cons: Coordination overhead among different entities; must agree on governance, upgrades, etc.

Canadian Angle:

  • Canadian banks or trade finance companies can form consortia to streamline processes like KYC, cross-institution settlements, or trade documentation, ensuring everyone sees the same data in real time.

D. Hybrid Blockchains

  • Definition: A blend of public and private components, allowing certain data to be publicly accessible while keeping more sensitive information restricted.
  • How It Works: Core data might be stored on a private ledger. Some transactions or proofs could be anchored to a public chain for transparency or auditability.
  • Pros: Flexibility—organizations can keep sensitive data confidential while still benefiting from the security and transparency of a public network.
  • Cons: More complex architecture (managing two layers), and users must trust that the “private part” is accurately reflected in the public chain.

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Canadian Angle:

  • A financial services firm might keep detailed customer info in a private ledger while publishing cryptographic proofs to a public chain (e.g., Ethereum) to demonstrate compliance or transaction authenticity.
  • Potential to bridge enterprise privacy needs with the public chain’s broad trust model.


Source : CFTE - The 4 Types of Blockchain Networks


How They Achieve Consensus

Regardless of the type (public, private, consortium, or hybrid), blockchains use a consensus mechanism to validate transactions and maintain network integrity:

  1. Proof of Work (PoW) Nodes (miners) solve cryptographic puzzles—energy-intensive, but robust. Seen in Bitcoin, some older networks.
  2. Proof of Stake (PoS) Nodes must “stake” or lock up tokens, significantly reducing energy usage. Used by Ethereum (post-Merge) and many newer chains.
  3. Delegated or Authority-Based Mechanisms Common in private, consortium, or hybrid settings, where known entities can validate blocks quickly. Examples include Proof of Authority (PoA) and Byzantine Fault Tolerance variants.


Real-World Use Cases (Including Canadian Highlights)

Cross-Border Payments:

  • Public chains like Ripple or Stellar aim to slash fees and speed up remittances.
  • Shakepay (mentioned above) helps Canadians convert CAD to crypto and transfer funds globally, leveraging public networks.

Clearing & Settlement:

  • Banks use private or consortium ledgers to automate reconciliation, cutting operational costs.
  • Project Jasper showed how a distributed ledger could speed up inter-bank settlements in Canada.

Trade Finance Consortia:

  • Multi-bank networks digitize letters of credit and shipping docs, reducing paperwork.
  • Canadian banks are often part of global consortium ventures (e.g., R3, Marco Polo).

KYC & Identity :

  • Private or consortium ledgers can share verified ID data among financial institutions to simplify onboarding.
  • Hybrid solutions might combine private data storage with public proofs for added transparency.

Asset Tokenization:

  • Public chains enable fractional ownership of assets, like Toronto real estate.
  • Hybrid approach: private records of owners while providing a public token on Ethereum for open trading.


Challenges & Limitations

  • Scalability: Public networks can face congestion; private/consortium/hybrid may scale better but reduce some decentralization.
  • Regulatory Nuances: Canada’s province-by-province approach to securities can complicate deployments.
  • Complex Architecture: Hybrid blockchains require careful design to ensure data privacy on the private side while maintaining integrity on the public side.
  • Public Perception: Blockchain is still often seen as synonymous with crypto speculation; education helps clarify real enterprise and societal benefits.


In Conclusion

Blockchain’s many flavors—public, private, consortium, and hybrid—each come with unique strengths. The “right” choice depends on your goals: full transparency with public networks, tighter control with private ledgers, collaborative industry solutions with consortia, or a flexible balance of both worlds in a hybrid model. Here in Canada, we’re seeing all four approaches tested across banks, startups, and even government pilots.

If you found this post helpful, hit ‘like’ and share it with your network. Let’s keep the conversation rolling about Canada’s financial future!

Sources

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