All over the world, discussions about the various business applications of blockchain technology are gaining momentum.
It isn't all hype because of its transparency and real-time data about transactions and activities, including who was involved, when it occurred, and to whom.
Global investments in blockchain applications have reached $23.7 billion, which is no joke. Anyone who does not embrace this fourth industrial revolution technology, similar to Blackberry's global success in the mobile phone market, will be held accountable in the future.
We will now decide, based on the available information, whether you want to deploy a public or private blockchain.
An Overview Of Blockchain Technology
Blockchain implements a peer-to-peer topography, allowing data to be stored on millions of servers around the world. Blockchain is also known as peer-to-peer (P2P) or decentralized, distributed ledger technology. Unlike traditional banks, which rely on intermediaries, it does not involve any third-party intermediary or central authority. Blockchain is the most discussed technology right now because it provides greater security, transparency, and immutability. Blockchain developers are increasing in number due to their potential to transform the way businesses and industries operate. Let us now, without further ado, learn about the various types of blockchains.
DLTs vs Blockchain
Before we get into the specifics, it's important to distinguish between DLTs and blockchain. DLT (Distributed Ledger Technology) is a type of distributed database that can be managed by multiple participants on multiple nodes. It is the umbrella term for all decentralized database services managed by participants.
Blockchains can be thought of as a type of DLT. DLTs and Blockchains can both be described as digitalized logbooks of records that are distributed among networked users. However, this is the only point where they are comparable.
Blockchains are best known for their ability to string together time-stamped blocks or data. Users of the network must validate these blocks on a regular basis. This means that no new blocks can be added without the agreement of all users/nodes. Various distributed ledgers provide cryptographic validation for new data. Some DLTs give the administrator complete control over network administration, including goal setting, structure creation, and platform operation.
Using the Greek syllogism for logical argumentation, all blockchains can be described as DLTs. However, not all DLTs qualify as blockchains.
There Are Various Types of Blockchains:
Blockchains can be of various types, which brings us back to our original topic. There are four types - Public Blockchains, Private (or Managed) Blockchains, Consortium Blockchains, Hybrid blockchains, but we'll only cover two.
- Public blockchains like Bitcoin and Ethereum
- Private blockchains such as Hyperledger and R3 Corda
Public Blockchains: These open-source, decentralized platforms, also known as permissionless blockchains, allow anyone to join their network as a user, developer, miner, or community member. Transactions and activities are open and visible to all. At any time, anyone can access and manage data.
Private Blockchains: These are the polar opposite of public blockchains and are also known as permissioned or private blockchains. Only individuals with specific credentials/IDs have access to the network and can use its data.
What Exactly Is Public Blockchain?
Anyone can join a public blockchain network. There are no restrictions on public blockchains. Anyone can join the public blockchain and take part in data reading, writing, and sharing. Decentralized public blockchains exist. They are not controlled by a single entity. The data on a public blockchain is secure because it is impossible to alter or modify the data once it has been validated.
The Benefits And Drawbacks Of Public Blockchains
The originally distributed public ledger framework that underpins the development of blockchain technology is public blockchains. Anyone can send, receive, as well as verify transactions on public blockchains. They also permit auditing. To be validated on the network, each transaction must be approved by all computers or constituent nodes. Some of the most well-known public blockchains are Litecoin, Ethereum, and Bitcoin. Its advantages and features include:
- Open Access: On public Blockchains, all data submissions, usage, and governance are open to all.
- Distributed Ledger: Public blockchain databases, unlike client-server platforms, are not centralized. Every node on the Blockchain Platform keeps a master copy of the virtual databank and contributes to transaction validation. This eliminates the need for middlemen, who are frequently found in centralized transaction chains.
- Security: Because public blockchain ledgers are distributed and decentralized, there are very few opportunities for manipulation, hacking, and attacks. It is impossible to change or alter all copies of databases on every node at the same time. The Mining (51% rule) protects it.
- Anonymity: A public blockchain also offers a significant benefit in terms of user anonymity and security. Anonymity is provided by public blockchains. Users are kept anonymous by using cryptographic identities known as public keys. You are not required to reveal your true identity or name. Nothing will be revealed, and no one will be able to track you down.
- No Regulations: The regulations for public blockchains are not enforced on nodes. There are no restrictions on how this platform can be used for the benefit of others.
Public Blockchains Have Their Downsides
Despite all of the benefits of public blockchains, you should be aware of some of their limitations when incorporated into your business. These restrictions are as follows:
- Scalability: Every new transaction on a blockchain network must be validated by all blockchain users (called nodes). Slow transactions and low transaction throughput are the direct results of this. A public blockchain would be difficult for businesses that require instantaneous transaction confirmations, such as Visa or Paypal.
- Smart Contracts: Smart contract consequences are irreversible and immutable. Businesses cannot take the risk of deploying flawed smart contracts, which are immutable and have irreversible consequences.
- Storage constraints: In a blockchain network, each computer stores blocks as well as information indefinitely. As a result, heavy storage requirements are imposed, which are not feasible in the context of business applications.
- Power: Public blockchains necessitate an infinite amount of storage space. It necessitates a large amount of computing and energy power due to its reliance on consensus algorithms and mining. This high cost is unsustainable in the context of business integration.
- Privacy: Another significant disadvantage of public blockchains is their complete transparency. This means that transactions are completely unprotected.
Public Blockchain Uses
True Decentralization
A public blockchain allows for true decentralization. This is not available in private blockchain networks. Because everyone has a copy, nature becomes distributed.
There is no central entity in this type of blockchain. The nodes are solely responsible for maintaining the network. To promote fairness, they use a consensus algorithm to update the ledger.These features ensure that the system remains decentralized at all times.
Full Transparency
A fully transparent platform outperforms all others. Platforms that are transparent to everyone on the ledger are designed by public blockchain companies.
This means that you can access the ledger whenever you want. There is no room for inconsistency or corruption. Everyone must keep the ledger up to date and agree to disagree.This is what private blockchain platforms offer.
Immutability
The public blockchain network is unchangeable. What exactly does this mean? It means that once a block is added to the chain, it cannot be removed or changed. It means that anyone who modifies a block will not benefit from it.
Every organization must deal with issues of change. It can happen both offline and online. The greatest advantage of hash functions is that they can be used as security protocols.
If the blocks are changed, a new chain is formed that is distinct from the original. Any changes made will be undone.
Complete User Empowerment
In most cases, users must adhere to a variety of rules and regulations in order to access any network. Many times, the rules are unjust. Public blockchain networks are not the same. Users are empowered here because there is no central authority to oversee their actions.
Read More:- 6 Popular Tools Used in Testing Blockchain Applications
Because these platforms are open to all, you can download the nodes and join the consensus.
This is not possible on private blockchain platforms. You'll also notice that private blockchain users have limited freedom.
What Exactly is a Private Blockchain?
Network administrators manage private blockchains. To join the network, participants must give their permission. One or more entities control the network. This makes dealing with third parties difficult. Only one entity can participate in transactions on this type of blockchain. Others will not be able to view the private transaction data. Financial transactions are confidential.
The Benefits And Drawbacks of Private Blockchain
Private blockchains prosper in environments with limited access and permissioned relationships. New users are typically invited and validated by the platform's founder or an administrator. Enterprise blockchains are used by businesses for internal operations. Employees and company members have access only. Non-members may be granted access if they have a compelling reason to be a part of the chain. Some of the most well-known private blockchains are R3 Corda, Hyperledger Fabric, and Quorum. This blockchain variant has numerous advantages and features, including:
- Full Privacy: It is concerned with privacy issues. Private Blockchain is more centralized than public Blockchain.
- Controlled access: Private blockchains are distinguished by one feature. They enable the administrator to control who has access to the platform and who does not. New users must be validated by the business identity management system before they can access company information.
- Transactions are faster: Enterprise blockchains have fewer nodes than public blockchains. Because there are fewer users who must agree, private transactions and activities can be processed and validated more quickly. Faster transactions and increased efficiency When there are fewer nodes participating in the ledger, but they are distributed locally, the performance improves.
- Control and efficient governance: A central authority supervises the entire digital platform in private blockchains. The admin determines the processes, methods, and tools that will be employed to ensure the platform's day-to-day administration runs smoothly.
- Higher Scalability: A big advantage for an enterprise is the ability to add services and nodes on demand. This means that they can change their needs quickly, which can be very helpful.
Private Blockchains Have Their Downsides
- Insufficient trust: Private blockchains could indeed function without the need for a few trusted nodes that validate transactions. This means that all other users, except those with validation powers, cannot be trusted enough to be granted network governance rights.
- Security: Because private blockchains have fewer users, it is much easier for one entity to control or take over the private network for their own fraudulent purposes. It is more vulnerable to database hacks, attacks, and manipulation.
Private Blockchain Uses/Examples
Low Fees
Private blockchain platforms have very low transaction fees. Unlike public blockchain platforms, transaction fees do not increase with the number of requests. Transaction fees will remain low and precise regardless of the number of transactions requested. There are no hidden fees.
Saves You Money
A private blockchain can actually save a significant amount of money. A private blockchain is much easier to maintain than a public one. Private blockchain platforms consume very little energy. A public blockchain, on the other hand, requires significantly more resources to support its large user base. In the long run, it saves money.
However, this does not necessarily imply that it is extremely expensive or anything else.
There is no illegal activity
Before you can log into a private blockchain platform, authentication is necessary. This procedure is intended to filter out intruders who attempt to gain access to the system.
As I previously stated, public blockchain solutions are vulnerable to criminal activity. It is obvious that this is not something you would want in a business setting.
Only verified users can access the system and remove any illegal activities.
Regulations
Private blockchain technology may be the best solution for your company. Why? If you do not follow them, you may face serious consequences.
In a private blockchain, the theory works. It enables you to define all rules, which must be followed by your employees.
The technology can be used to improve efficiency in a wide range of business functions. Instead of dealing with inefficiency when businesses send messages back and forth and reconcile the information using other means, it is more efficient to have a shared look at transactions via blockchain to verify and secure the data.
Examples
Supply Chain And Logistics
Private blockchains improve the logistics industry's security and privacy. Asset tracking, record ownership, and shared record keeping benefit manufacturers, supply chain participants such as delivery companies, and customers. This enables them to track items from their point of origin to their final destination.
Financial Services
Financial services firms may be able to identify customers using the cryptography key or ledger of the blockchain. They can also demonstrate regulatory compliance through the automated use of smart contracts via an organization's central network.
Healthcare
Blockchain technology could be used to secure and track patient data in healthcare. It could be used to log patient claims and prevent duplication on the central network of a healthcare organization.
Industries Of Banking And Securities
Blockchain technology has the potential to help banks make faster payments and settle fund transfers. Institutions are considering stablecoins, which are cryptocurrencies linked to fiat currency and controlled by an investment bank or issuing bank as part of a central network.
Private Blockchain Projections In The Future
The distinguished analyst told Built In that only 14 percent of private projects and experiments have been completed in the last few years.
According to research, "those that went into production were distributed on a limited number of nodes on the public blockchain and had very little transaction volume, calling the necessity for distributed ledger technology into question." Private blockchain distributed ledger technology was not required for these projects. They could have used a centralized database or a distributed ledger instead.
According to experts, there are some critical questions to consider when deciding whether to use a public, private, or another type of blockchain.
A distinguished analyst stated that he does not use the terms private and public blockchain because he believes it limits his thinking to binary terms.
Public And Private Blockchains Have Some Similarities
Let's start with some similarities before delving into the differences between private and public blockchains.
Immutability: All blockchain technologies, public and private, are immutable. This means that no single person or group of people can change or delete authenticated data (called blocks).
Authentication: Both public and private blockchains rely on their members and users to authenticate and approve edits to the virtual ledger, such as the addition of new transactions and activities.
Ledger Replicate from Peer-to-Peer: Public and private blockchains both maintain and distribute real-time replicas (or blocks) of data and data to each computer/user on the network (referred to as a "node").
The Difference Between Public And Private Blockchain
Public vs private blockchains have different properties.
Authority
A public blockchain allows for true decentralization. This is not available in private blockchain networks. Because everyone has a copy, nature becomes distributed.
Private blockchain, on the other hand, is overseen by a large authority.
It may appear strange to consider that this could be decentralized. It isn't technically correct. Private blockchains are not as decentralized as public blockchains. It is less centralized.
In this regard, private and public blockchain appear to differ less. Although private blockchains can be decentralized, they are still best suited for enterprise environments.
Access
A single entity controls a private blockchain. It means that the network is not accessible to the general public.
Through some sort of authorization scheme, all private blockchain solutions will be able to identify who enters the platform. This network will be accessible only to a select few members.
Anyone can join a public blockchain network at any time. Everyone is welcome to participate. Furthermore, anyone with access to the ledger can participate in the consensus process.
Transaction cost
The transaction price on public blockchain platforms is higher than on private ones. A large number of nodes actually has an impact on platform performance. Requests take a long time to process. Prices rise dramatically as a result.
Transaction fees on private blockchain platforms are extremely low. Unlike public blockchain platforms, transaction fees do not increase with the number of requests. Transaction fees will remain low and precise regardless of the number of transactions requested.
Consensus
Nodes in a public blockchain can participate in the consensus process without restriction. Everyone can take part in the consensus process and benefit from the platform.
Private blockchain, on the other hand, decides who can and cannot join before reaching a consensus. Many nodes will be unable to take part in the consensus process.
Transaction Speed
To determine which blockchain is faster, we can compare transaction speeds between private and public blockchains. Both platforms can function reasonably well up to a point. However, after that point, transaction speeds can vary dramatically.
Anyone can request a transaction on a public blockchain. If there are too many requests, the transaction speed will slow down. Transactions can take a long time to process at times.
Private blockchain platforms are strictly prohibited. Transactions are restricted to a small number of nodes. At all times, speed is maintained.
Data Handling
Let's compare how these two technologies handle data to see how private and public blockchains differ. A public blockchain allows anyone to view and modify the ledger. However, once the ledger is on it, it cannot be changed.
Private blockchains allow only one entity to read and write to the ledger. Furthermore, only a few nodes are able to write to the ledger. They can even delete a block on occasion.
This is true for examples of both private and public blockchains.
Efficiency
This is the final section of the public vs private blockchain comparison. In reality, public blockchain platforms are less efficient than private blockchain platforms. How? How?
Private blockchain, on the other hand, has only a few nodes. They are always efficient, no matter what.
Immutability
The public blockchain network is unchangeable. What exactly does this mean? It means that once a block is added to the chain, it cannot be removed or changed. It means that anyone who modifies a block will not benefit from it.
In contrast, private blockchains are partially immutable. In certain circumstances, authorities may remove a roadblock if they believe it is necessary.
This is where public and private blockchains diverge significantly.
Conclusion
Private blockchains appear more feasible and promising for business adoption than public blockchains due to factors such as scalability and computing power, transaction validation speeds, security, and security. A closer look at private blockchains, however, reveals that they are fundamentally different from what makes Blockchain solutions appealing and promising, which is decentralization. Hybrid blockchains, which combine public and private blockchains, appear to be superior to only private blockchains.
Each business must make the final decision on which type of blockchain to use from the three options: public, private, and hybrid. Each organization must consider its corporate strengths and weaknesses, as well as its goals and objectives. There are numerous distinctions between the two technologies. Both private and public blockchains are suitable for enterprise environments if they have the right features. But, in the end, it is entirely up to you.This guide should assist you in selecting the best one for your business.
