Private Blockchain VS Public Blockchain

Blockchain is a digitally distributed ledger, which eases the process of tracking assets and recording transactions in a business network. In terms of accessibility, there are two general forms of blockchain networks; Public Blockchain and Private Blockchain. In a Public model of a Blockchain network, anyone can join and participate in the core activities of the network. While in a private blockchain, only a single organization has authority over the network and also, accessibility can be permission per participant. We will compare “Public Blockchain vs Private Blockchain” deeper in the following article.

Public Blockchain

A Public Blockchain is one with public accessibility. It means anyone can participate in the core activities of the network. One can read, write, and audit an ongoing activity of such network. Basically, there is absolutely no restriction on participation. This is what makes the self-governing, and fully decentralized nature of blockchain networks a possibility. This type of network was in fact, the first type of Blockchain network to come out of the hands of the authors of Bitcoin.

Once people found the benefits of the technology used in Bitcoin, they started to utilize it for various uses. Although as expected, they eventually found some issues and limitations depending on how they wanted to use it and where they wanted to implement it. This made them come up with new types of Blockchain networks, each to get rid of different issues.

In a Public Blockchain, all participants have equal rights; no matter what. They have the highest level of security and the highest level of transparency. Thus making them the most trustworthy type of network for what they are designed for.

Still, nothing is perfect and so are these kinds of networks. They have their own flaws. They are mostly slower than other networks. Also, one can use them for illegal activities and remain anonymous without even worrying about it.

Pro – High Security

Public Blockchain companies always design their platforms with maximum security in mind. Vulnerability against hacks is something every company and organization that does not use Blockchain networks suffers from. In some cases, it can cause billions of dollars of loss.

Security protocols used in these networks can easily secure such companies against hacks and prevent lots of losses. Each platform has different security protocols but one can say almost all of them are robust.

Pro – Open Environment

As the name says, a Public Blockchain is open to everyone. Meaning, you can enjoy all the benefits of these services, no matter when, and no matter where you are, and also no matter who you are. All you need is a computer with internet access. 

Pro – Full Decentralization

Putting public Blockchain VS private Blockchain, the first one wins here. Unlike the other ones, public ones are fully and truly decentralized. Considering that every participant has a copy of the ledger, the nature of the public Blockchain is distributed as well.

Basically, such Blockchains don’t have any centralized entity. So the network completely relies on the nodes for its maintenance. Thanks to consensus algorithms, ledgers will be updated in a fair way.

Pro – Immutability

Once someone adds a block to the network, it cannot be deleted nor can be edited/changed. Even if someone tries to change a block, they are in fact creating a separate chain different than the original one.

Pro – User Freedom

As there is no top authority, there is no set of rules for a user to follow. No one controls what a user does and no one can regulate their deeds. No organization can stop you from downloading a node. A user can join a consensus whenever they want.

Once again, putting public Blockchain VS private Blockchain, public ones are the only ones to allow users to have this much freedom. A private Blockchain user cannot say that they have the same amount of freedom in their network.

Pro/Con – Anonymous Nature

In a public Blockchain, despite being open and transparent, you can always keep your identity hidden. And no one can track you using that. Public access to these networks could otherwise leave participants vulnerable, Thus the main purpose of this nature in such networks is the safety of participants. But still, flaws are flaws.

This “Pro” could be considered a “Con” by some people in the past. Until recently, criminals abused this anonymousness to their advantage and to do their illegal activities using platforms utilizing such Blockchains. In the end, it can be considered a general problem for almost everything. Everything can be used for good, or abused for bad, depending on its user.

Pro/Con – No Regulation

Public Blockchains do not have any regulations for the nodes to follow. This means the users are open to using it in whatever way that is better for them. However, this makes it unusable for Enterprises as they need a regulated environment.

Enterprises need this because their projects have specific requirements which can be followed much better in a regulated network. Making such Blockchains a bad choice for their internal uses. Although it still can be used for their external affairs with their customers. So having no regulation can also be an issue.

Con – High Energy Consumption

Maintenance of highly secured Blockchains usually consumes a lot of power. That’s because their consensus mechanisms mostly require participants to compete in order to validate the information. And they will give the participants rewards for letting the network use their machines’ processing power. However not all public Blockchains have this problem. Some of them use different approaches which are more power efficient and don’t need energy-intensive validation processes.

Con: Data leak

This is a side effect of full transparency. The identity of participants is always hidden in the network. However, all records in the network, including transactions and the addresses involved, are visible to everyone. This means if someone somehow finds the network address of someone in real life, they can see all their transactions in that network. So even though the participant was completely anonymous until that moment, they may completely lose their anonymity at a glance. But the chances of such scenarios happening are justifiably low.

Con: Attracting Criminals

This one is a side effect of participant anonymity. If we consider that the possibility of a real-life data leak is low, then the anonymity of criminals can be the next problem. Public Blockchains are attractive for criminals as they can transfer money in a safe route without the fear of getting caught by authorities.

Private Blockchain

A private Blockchain, unlike its public counterpart, is not as fully decentralized. But it is still a distributed ledger and still considered decentralized. This type of network operates as a closed database. It is secured with cryptographic concepts depending on an organization’s needs.

A private Blockchain requires an invitation for participants which must be validated. This validation should either be done by the network starter or the set of rules the starter made for the network. This is the case if the organization or the company sets up a permissioned network – which is the usual case – such as Hyperledger Fabric.

The access control mechanism can vary depending on the needs of the company or the organization. A regulatory authority can be the one to grant access to the new participants. A consortium can be the one to grant this access. Or the existing participants could decide the future entrants.

The aforementioned Hyperledger Fabric network is an example of the implementation of permissioned private Blockchain. This project is one of the Hyperledger projects hosted by the Linux Foundation. It has been designed as a solution for the requirements of enterprises that demand Blockchain networks. Particularly talking, digital identity, as a fundamental need for enterprises, is a good example of such needs. It can be used for handling supply chains challenges, facilitating security-rich provider/patient data exchanges in healthcare, or disrupting the financial industry.

Only the entities who are the participants of a specific transaction will have knowledge and access to it. Permissioned private networks allow the user to have much greater scalability in terms of transactional throughput.

Pro: Full Privacy

Unlike the counterpart Blockchain model, private Blockchain solutions have a serious focus on privacy concerns. It can easily be said that if someone wants the highest level of privacy, the perfect choice for them is would be private Blockchain. As privacy is one of the most important challenges for enterprises, this solution can solve a lot of their problems once and for all.

Pro: Empowering the Enterprise

Private blockchains, in contrast to public ones, work in a way to empower the enterprises as a whole instead of individual employees.

Pro: Stability

Private Blockchains are much more stable compared to public ones. This is because the number of participants is in a specific and expected range. This means the pressure on the network doesn’t fluctuate depending on the active participants and ongoing transactions. Simply, in every Blockchain platform, there is a fee for completing a transaction.  But if the Blockchain is public, this fee can increase and decrease due to the unpredictable nature of the number of active nodes.

In other words, when the number of transactions increases, the time it takes to process them increases as well. Which results in an increase in the fee. But this is only the case if the Blockchain is public. When utilizing a private Blockchain, only a limited group of people can request transactions. Thus there is not any form of delay or slowdown in the process. Keeping the fee in a stable range.

Pro: Low Fees

Private Blockchains have extremely low transaction fees. As mentioned above, and unlike their public counterpart, in private Blockchains, the transaction fee does not increase by the number of requests and remains the same all the time. It does not matter how many people request transactions, the fees always remain fairly low and accurate. Thus any hidden cost will be eliminated.

Pro: Economy Friendly

A private Blockchain can, in fact, save an enterprise a lot of money. Maintenance of such Blockchains is quite simple compared the public ones. Blockchain platforms that are private only take up a few resources. While on the other hand, the public ones demand a lot of resources to support the big crowd of participants they have. This alone can save up a lot of money. Even though it still does not mean that private Blockchains are hugely cheap.

Pro: Regulation

Enterprises have a lot of rules and regulations that need to be followed almost perfectly by every member. And if someone does not follow a rule, there will be consequences for them according to the same set of rules. The regulation needs to happen in their network as well. Which makes private Blockchain a perfect choice for enterprises. In a private Blockchain, the exact same thing is possible. It allows the regulator to outline all the rules, and the participants have to follow them accordingly.

Con: Security

Private Blockchain in contrast to their public counterpart, are susceptible to data breaches and other security threats. The concern comes from the fact that there are only a limited number of validators used to reach a consensus about data and transactions – if there is a consensus mechanism involved anyway-.

Conclusion

As we reach the ending point of “public blockchain vs private blockchain” we feel the need for a conclusion. With all the differences and similarities between the two, they are both suitable for enterprise use cases if the company or the organization estimates their needs correctly.

Concluding the comparison, a public blockchain is accessible by anyone while a private blockchain can be accessed from inside the organization. The same goes for their read/write access. While it is true that both types are decentralized, there is still a difference between them in this regard. Public ones are fully decentralized, but private ones are only partially decentralized. The same goes for their immutability.

Public implementations of blockchain, while having high costs for transactions, are slow in terms of processing speed. While on the other hand, private implementations are the exact opposite; Fast and cheap.

In the end, by finding the right requirements of your company, and considering this comparison, you can choose the right type of blockchain for your company. Thus getting the most out of the features of your chosen blockchain. However, if your company needs a private blockchain, you can use Green Plus services, just contact us.

FAQ

  • What is an example of a public blockchain?
    1. Bitcoin, Ethereum, Litecoin, etc.
  • What is an example of a private blockchain?
    1. Quorum, Hyperledger Fabric, R3, Corda, …
  • Who uses a private blockchain?
    1. Businesses across several sectors, such as retail, healthcare, insurance, financial services, and even governments.
  • How do private Blockchains make money?
    1. Transactional fees. Institutions or businesses that use blockchain infrastructure have to pay a subscription fee and transaction fee to the developers.
  • Can blockchain be hacked?
    1. An attacker—or group of attackers—could take over a blockchain by controlling a majority of the blockchain’s computational power, called its hashrate.
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