Distinction Between Public and Private Blockchains

What's the Distinction Between Public and Private Blockchains?

December 06, 2022 16:21 PM

Public Blockchains vs Private Blockchains

Blockchains are built on distributed ledgers that have been in place at the enterprise level for years to manage data. However, they are only now becoming more popular and interesting due to cryptocurrency's introduction.

Depending on how the blockchain configuration is set up, you can control the content and activities stored in the blocks. Blockchains are generally designed to serve a specific purpose, and users can be granted multiple accesses or tasks.

Anyone can access public blockchains; private blockchains are restricted to a select few, and permissioned blockchains combine public and private blockchains. Anyone can access them as long as they have permission from their administrators.

Let's look at some key differences between public, private, and permissioned blockchains.

Public Blockchain

A public blockchain is one that anyone can join and take part in core activities. Anybody can view, audit, and write about the activities of a public blockchain network. This helps to achieve the self-governed, distributed nature that is often praised when blockchain is mentioned.

Advantages

Public networks are governed by an incentive scheme that encourages new members to join the network and keeps it agile. The public blockchain is a valuable solution for a truly decentralized, democratic, and autonomous operation.

Because they can be used as the backbone of almost any decentralized solution, public blockchains are extremely valuable. In addition, a secured public blockchain is protected from hacking attempts, data breaches, and other cybersecurity threats by many participants.

Public blockchains are protected with automated validation methods and encryption. These methods prevent single entities from altering information in the chain (like cryptocurrency blockchains) or allowing anyone to make those changes.

Disadvantages

Secured public blockchains have one major drawback: They require a lot of energy to keep them running. This is because consensus mechanisms require participants to compete to validate the information and receive a reward for allowing the network to use its processing power. Some blockchain networks do not use energy-intensive validation processes.

Another issue is the inability to keep your identity and transactions private. Anyone can view transaction amounts as well as the addresses in public blockchains. If address owners are made public, users lose their anonymity.

Participants who are not honest with their intentions may also be attracted to public blockchains. However, public blockchains are mostly designed for cryptocurrency, making them prime targets for thieves and hackers.

Private Blockchain

Only authentic and verified invitations can be used to invite participants to join a private blockchain network. Validation is performed by the network operator or by a specified protocol that the network implements through smart contracts and other automated approval methods.

Private blockchains can control who is allowed into the network. For example, if the network can mine, its private nature might allow it to control who can execute the consensus protocol that determines the mining rights or rewards. Only a few users might maintain the shared ledger. The operator or owner can edit, delete, or override the entries in the blockchain at their discretion.

Advantages

Private blockchains are not distributed. Instead, it's a distributed ledger, which operates as a closed database secured using cryptographic concepts according to the organization's needs. Only those with permission can run a full node, make transactions, or validate/authenticate the blockchain changes.

Private blockchains place less emphasis on user identities and promote transparency. They prioritize efficiency and immutability, which is the state that cannot be changed.

These features are critical in supply, logistics, and payroll. They also have financial and accounting implications.

Disadvantages

Private blockchains are intended for enterprise applications but lack the benefits of permissionless systems. Instead, they are designed to perform specific functions and tasks.

Private blockchains can be vulnerable to security breaches and other threats. If there is a consensus mechanism, there are usually only a few validators who can reach a consensus on transactions and data.

A private blockchain may not have consensus, but it will guarantee the immutability and integrity of data entered unless an administrator or operator can make changes.

Permissioned Block

Permissioned blockchains are a combination of private and public blockchains. They allow for many customization options.

Advantages

Permitted blockchain benefits include the ability to allow anyone to join the network after an appropriate identity verification process. Some grant specific permissions that allow them to do only certain activities on the network. This permits participants to perform certain functions, such as reading, accessing, or entering information on the blockchain.

Permissioned blockchains allow for many functions, but one most interesting to businesses is Blockchain-as-a-Service (blockchain designed to be scalable for the needs of many companies or tasks that the providers rent out to other businesses.

Let's say, for example, that a company wants to increase transparency and accuracy in its financial reporting and accounting processes. A BaaS provider could offer blockchain accounting services to the business. Blockchain would allow users to enter data and then automatically automate the rest of the accounting process.

Disadvantages

Permissioned blockchains have the same disadvantages as public or private blockchains, depending on how they are set up. Permissioned blockchains are susceptible to hacking because they require internet connectivity. Some might employ immutability techniques, such as cryptographic security measures or validation through consensus mechanisms.

Although most blockchains can be hacked, there are still weaknesses. For example, cryptocurrency theft can occur when a network is compromised, and private keys are stolen. This weakness can also affect permissioned blockchains, as the networks connecting users to the service depend on security measures that could be bypassed.

What are private blockchains?

Private blockchains are distributed ledgers that can only be accessed by those who have been granted permission to access or perform specific functions on a blockchain.

Are permissioned blockchains available?

Permissioned blockchains have been a boon for many companies. Walmart, for example, uses Hyperledger Fabric to track its food origins faster than ever before. This was an open-source project created by IBM and the Linux Foundation.

What is the difference between permissioned and private blockchains?

Private blockchains are those to which only a few users have access. They can only be used by the entity they belong to. Permissioned blockchain combines private and public blockchains to provide access and capabilities to multiple users.

Last but not least

The public vs. private blockchain comparison guide has reached its final point. There are many differences between the two technologies. However, if you have the right features, both private and public blockchains are suitable for enterprise environments.

The final decision is up to you. This guide should help you choose the right blockchain development company.

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