Public & Private Blockchains – Identifying the Divergence

Understanding the difference between a public blockchain and a private blockchain.
Public vs Private Blockchains

You cannot be a successful crypto investor or entrepreneur without acknowledging the differences between Public vs Private Blockchains and their implications.

Although they are based on similar principles, their operation is, in fact, distinct at all levels. Thus, the tokens supplied by these blockchains are measured in different ways.


What is a ‘Blockchain’?

A blockchain is a digitized, decentralized ledger where every cryptocurrency transaction is carried out. Continuously growing as ‘completed’ blocks (the most recent transactions) are documented and added to it in a sequential manner, it enables market members to monitor cryptocurrency transactions without third-party regulation.

Every node (a computer linked to the network) obtains a copy of the blockchain that can be downloaded automatically.

Initially created as the accounting technique for the digital currency Bitcoin, blockchains- which utilize a distributed ledger technology (DLT)- are applied in various commercial uses today.

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Currently, this technology is mainly employed to validate transactions, in virtual currencies although it is feasible to digitize, code and practically add any data into the blockchain.

Doing this establishes a permanent record that can’t be altered; besides, the record’s legitimacy can be substantiated by all participants of the blockchain instead of an exclusive centralized authority.

Centralized Authority

Many applications of blockchain have been developed in the recent past and the terminology is often misunderstood. This is easy to do since public and private blockchains share much in common:

  • Both are decentralized P2P systems, where every party retains a replica of a mutual append-only ledger of virtually signed dealings.
  • Both retain the copies in sync via a protocol known as consensus.
  • Both offer assurances on the immutability of the ledger, even when some parties are faulty or malicious.

What is a Public Blockchain?

The major difference between public and private blockchains is associated with who is permitted to take part in the network, perform the consensus protocol and retain the joint ledger.

Anyone can take part in a public blockchain since it is open-source, accessible to everyone and there is no central authority. Public blockchains characteristically have an incentivizing strategy to inspire more people to join it. They lack access or rights control and any person can transact.

Due to this, people can leave, read or edit the data stored in a public blockchain and the network will still be trustless. Trustless here implies you must create a trusted party to supervise its activities, though it will be censorship resistance.

The point is that this form of self-governance, decentralized yet trustless nature is guaranteed on the system by its form of decision making, which is quite challenging or nearly absurd to interfere.

Examples of common public blockchains are Bitcoin, Ethereum, and Litecoin.

One of the disadvantages of public blockchains is the extensive amount of computational power needed to uphold a distributed ledger at a large scale.

More categorically, to attain consensus, every node in a network must unravel an intricate, resource-intensive cryptographic issue known as proof-of-work to confirm all are in sync.

Another drawback of a public blockchain is its openness, which means little to no privacy for operations and just backs a feeble concept of security. These two points are essential considerations for business application cases of the blockchain.

Business

What is a Private Blockchain?

A private blockchain is a complete opposite of a public blockchain. This is because many operations which are open to everyone on a public blockchain are not open here.

A private blockchain demands an invitation that must be authorised by either the network starter or by a set of rules set up by the network starter. Usually, enterprises that create private blockchains create permissioned networks. This exerts limitations on who is permitted to be part of the network, and only in specific operations.

Partakers ought to acquire an invitation or permission to be part of it. The access control method differs: current participants can decide imminent participants; a management authority can give licenses for involvement, or a consortium can come up with the decisions instead. Once someone has been allowed to be part of the network, they can take part in maintaining the blockchain in a decentralized way.

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In a private blockchain, a person cannot read, write or change data unless they are permissions. Here, the owner of the blockchain is an exclusive party or a business that can execute commands when necessary.

This is the reason why in a real sense it is not decentralized but simply a distributed ledger using cryptography as security measures.

The Linux Foundation’s Hyperledger Fabric is the best illustration of a private blockchain framework application. It was categorically invented to cater for Linux business demands.

This form of private blockchain applications presents the capacity to leverage over thirty years of technical literature to attain significant achievements.

Specifically, the digital entity is essential for most business application cases, like controlling supply chain problems, altering the financial sector and enabling user data exchanges in hospitals.

The Layman Distinction between Public vs Private Blockchains

What does “public” ideally imply when talking about a blockchain network? Public or open or permissionless blockchains allow anyone to join. It can be likened to a public highway where any road user, whether a car driver, a cyclist, a bus driver or horse rider, can use.

A private blockchain can be likened to a railway that can only be used by a special group of users using special types of carriages.

A second way to distinguish between public and private blockchains is by likening them to public and private WIFI networks. Free WIFI spots permit anyone to log in, whether malicious individuals or law-abiding surfers, while private WIFI spots are only accessed by authorized individuals who own the WIFI password.

Public vs Private Blockchains – Conclusion

In conclusion, public blockchains experience restricted privacy and scaling problems, which bar mass scale approval. Private/permissioned blockchains, on the other hand, solve these issues by acting as hybrids of cloud computing and blockchain. From this viewpoint, private blockchains appear as the better option to embrace.

Image Credits
Feature Image Credit: shutterstock.com
In-Post Image: shutterstock.com, itsblockchain.com
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Disclaimer

The writer’s views are expressed as a personal opinion and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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Written by Reviewed by Coin Review Team
Published: Sep 4, 2018
Last Updated: Oct 17, 2018

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