Public and private blockchains are two distinct varieties of cryptocurrency platforms. A public blockchain allows all network members to view and validate its contents; its primary advantages being transparency, security and decentralization. Conversely, private blockchains only grant access to a limited set of users who have received permission to join.
Its characteristics are control and privacy but there may be potential operational costs, opaqueness or security breaches associated with them that need to be considered when choosing between public or private options.
In this post we'll go over the major differences between public and private blockchains and address common misconceptions surrounding them.
What Is A Blockchain And How Does It Work?
Blockchains are decentralized digital ledgers designed to securely record transactions. Because it operates across peer-to-peer computer networks without being controlled by one entity, its hashes act like digital fingerprints linking each block backwards preventing any tampering; as a result the chain remains immutable and secure.
Transactions made via blockchain are verified by its node network of computers, who then adds it as soon as it has been validated to its blockchain as a new block. Since each node in this network holds its own copy of it there's no single point of failure and everyone in it has access to all data simultaneously.
Blockchain's primary benefit lies in its security; any attempt at changing or manipulating transaction data without being detected would immediately alert the network as each block in the chain connects backwards; any attempt at fraud would also alert them, since cryptographic block codes wouldn't match, in this example:
Blockchain can address many of the difficulties inherent to conventional centralized digital databases and ledgers, including:
- Relying on centralized servers for information storage leaves it vulnerable to security breaches and data breach attacks.
- Reduced accountability and transparency due to central authority control of information
- Since information may be accessed and utilized by a central authority, user privacy could be at stake.
What Is A Public Blockchain?
Public blockchains offer an efficient, decentralized and transparent method for entering digital ledger transactions securely and transparently. Their use provides the basis for developing decentralized services and applications available to anyone with internet connectivity; anyone may join, access data stored on it and participate in transaction validation processes.
What Are The Advantages Of A Public Blockchain?
Accessibility: Public blockchains provide equal access to everyone who has internet connectivity - this creates an inclusive and open ecosystem where anyone can participate and reap the rewards from using its applications.
Innovation: Public blockchains foster innovation by giving programmers a platform on which to develop innovative services and apps that harness their strength - this has resulted in several decentralized apps being created like supply chain management systems or digital identification systems.
Security: Public blockchains operate on decentralized networks that utilize complex cryptographic algorithms to secure transactions and verify them, creating an extremely safe system that resists attacks by keeping track of every change to data on the network and alerting any node about any attempt at alteration or modification; making public blockchains extremely resilient against invasion attempts.
Blockchain networks become more secure with increased participation from its members, since more nodes confirm each transaction as more users join and increase security by making it harder for one actor to control all nodes at once and take over control. A successful assault requires taking control of over half the nodes for successful assault on an entire network.
Transparency: Transactions taking place on the network are visible to everyone and easily verifiable; when all parties involved can see all relevant data at once, an increased sense of trust and responsibility emerges among its participants.
Read More: Educational Blockchain: Unpacking Use Cases, Advantages and Risks
What Is A Private Blockchain? (Aka Permissioned Blockchain)
Private blockchains are decentralized ledgers accessible only to certain people or organizations and managed by one organization that controls it, producing data on it for all involved and giving people access to its network. Individuals seeking entry must first accept an invitation before providing confirmation of identity and necessary data submission in order to access such private networks.
Private blockchains distinguish themselves from public chains by knowing who their participants are; on public ones, user identities tend to remain anonymous. Hyperledger and Corda private chains provide two such examples where participants' identities may remain secret; the owner can add, modify or remove entries as appropriate but only authorized users are able to maintain this shared ledger.
Smart contracts or automated techniques used by network operator(s), protocols accepted by the network or both can be employed to authenticate and verify participant data. On private blockchains, transactions sent for verification by nodes may then be recorded into new blocks on the blockchain network as desired by participants.
Why Private Blockchains Are Used By Certain Organizations
Smart contracts and automated procedures used by network operator(s), or an accepted protocol, to authenticate and validate participant details are used by network operator(s), or protocol which has been accepted by all nodes on a private blockchain to authenticate and verify participant details. A transaction submitted for validation on private blockchain by any party wanting to make one is then included into a block once validated by all nodes of said blockchain network.
Disadvantages Of Private Blockchains
Security risks: Due to having fewer nodes (computers) within their controlled networks, private blockchains are much more prone to security risks than public ones (although still more secure than traditional databases). A hacker could gain entry and alter or stop transactions on such private chains if they gain entry; even without getting that far into one it remains dangerous.
Lack of transparency: Private blockchains tend to be opaque because their designs prioritize privacy over transparency; as a result, validating and verifying data on such blockchains may prove challenging.
Cost: Private blockchains require certain amounts of processing power and storage capacity for optimal functioning, making their establishment and maintenance costlier than public chains where all nodes share equal expenses covered by rewards.
Centralization: Private blockchains may often be managed centrally - which violates one of the core tenets of blockchain technology and could prove problematic.
Other Types Of Blockchains
Hybrid Blockchain
Hybrid blockchains combine elements from both public and private blockchains. Based on user needs and applications, hybrid blockchains enable open as well as controlled access to its network.
For example, to ensure confidentiality a business might store its data on a private blockchain and protect it with a digital fingerprint stored on a public blockchain. Should someone suspect data has been altered they can compare both blockchains against each other to investigate further if necessary.
Consortium Blockchain (AKA Federated Blockchain)
Consortium blockchains are an approach to blockchain that unites multiple institutions or organizations under one network structure, with each member responsible for recording and validating transactions on it. They differ from public blockchains where anyone may join, as well as private blockchains where one company controls all aspects of operation of its network.
Each member of a consortium blockchain holds equal voice in managing and steering it forward. Via an approval process, all participants must approve of each transaction that makes its way onto the ledger before adding it; this provides verification and recording services while safeguarding participants' control and privacy while guaranteeing network integrity, transparency, security, and imperviousness to manipulation.
Organizations which need interorganizational cooperation tend to use transparent blockchains; however, their anonymity cannot compare.
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Conclusion
Blockchain technology holds immense promise to revolutionize how sensitive information is transmitted and stored. Blockchains come in two varieties - public and private. While private ones allow greater control and privacy, public ones enable greater accessibility, innovation, security, and openness.
Public blockchains may be deployed for numerous applications in government, banking and healthcare; all sectors that have stringent data privacy requirements. With its use of verifiable credentials and sophisticated cryptography methods, public blockchains provide safe storage and transfer of sensitive information.
