Public vs. Private Blockchain for Businesses: Explained

Navigating the Blockchain Landscape: Choosing Between Public and Private Blockchains for Your Business in Today's Market

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Blockchain is a hot topic in technology. Although it has been around for ten years, Blockchain only recently became popular due to its potential application in solving real-world problems. Blockchain technology is distributed, which means it can be used on multiple computers simultaneously. All updates are replicated across these computers. Because the Blockchain is encrypted, data can't be altered. This makes it a popular choice for sensitive information such as financial transactions or medical records. The two most common types of Blockchain are public Blockchain and private Blockchain.

In the cryptocurrency community, there is much debate about whether private or public blockchains are better. This article will provide a quick overview of these two types and help you decide which one to use. Before we get into the details of private and public Blockchain differences, let's first review some basics of blockchain technology.

What is Blockchain?

Blockchain is a computerized ledger that keeps track of transactions. Over the computer network, blocks are created and distributed. The chain's blocks contain several transactions. This ledger is updated after every transaction. Hash is an unchangeable cryptographic electronic signature that is used to sign these transactions. Blockchain is a shared database that multiple users control. A different name for it is distributed ledger technology.

Blockchain technology allows for creation of a decentralized database that can track and record transactions. It is also transparent and not centralized. Removing data once it has been stored in the database is tough. This technology is believed to make it more resilient to fraud. This meant that hackers could hack into the system and corrupt the flow of blocks. They would need to modify every Block in the chain across all the verticals.

The Blockchain is decentralized and immutable, secure, anonymous and programmable. They can also be tracked in real time. The Blockchain is consensus in that all the participants agree to verify the transaction.

Blockchain has three significant characteristics:

  • It's decentralized.
  • It is distributed, i.e., no central point of control or jurisdiction exists.
  • It is public, meaning anyone can see it via an internet connection.

Blockchain technologies are leading the way in a significant transformation of distributed ledgers. They have moved away from complex consensus algorithms to more efficient cryptographic techniques. Numerous new blockchain platforms leverage data storage and messaging layers to give developers powerful tools to create applications far beyond financial transactions. These underlying technologies should be flexible enough to apply to various apps.

Legal Issues Associated with Blockchain

Blockchain can be used in almost every industry. Therefore, regulation of Blockchain is essential. However, there are no guidelines or directives that will help to regulate it. This raises many interesting questions. Below are some of the issues:

Privacy

Indian IT law, or any other privacy laws around the world, fails to protect the privacy of users of Blockchain. This technology has one of its most important features: other people can identify the transaction and the participants. These participants' IP addresses, digital IDs, and public keys can be used to identify them. Consider the Information Technology Act of 2000's Section 43A. "Wherever a body corporate holds, deals with, or handles any sensitive personal data or information, such body corporate shall be liable for paying damages to the person so affected any computer resource it controls, owns or operates." A single entity does not govern Blockchain. This technology is decentralized. Privacy to sensitive information, as described, does not apply to transactions made using Blockchain or the identifiers used by its participants.

Cybersecurity

Although blockchain technology has been acknowledged as robust and secure, it isn't impenetrable. For instance, private blockchains can have their private keys compromised, and data stolen. Many issues come with different types of blockchains. Private blockchains may have a centralized control unit. Public blockchains are decentralized ledgers, and the existing data protection standards may need to be revised. Cybersecurity is essential now that the advanced technology has been recognized across all industries, and high-end transactions can be entered using it.

Issue with Irreversibility

This technology makes transactions irreversible. It is challenging for courts and regulatory agencies to trace a criminal who intends to commit fraud by entering into transactions. It is difficult to track the criminal. Contrary to traditional ledgers, which can be accessed by the RBI, banks, tribunals, and courts, transactions on the Blockchain cannot be reversed by any central authority. This makes it extremely difficult to bring justice to the victim. Even if the wrongdoer has been identified, it can be challenging to execute the judgment. My next topic is pseudonymity.

Pseudonymity

Although IP addresses can locate the location of the transaction, it doesn't identify who entered such a transaction. Regulators have difficulty holding participants accountable because the real identity of participants is not linked. It is difficult to enforce the law. Terrorist funding, money laundering, jurisdiction and tax obligations, and issues related to contractual and tax obligations are all problems. When the user's identity is stolen, it can become a problem.

Problem Regarding Jurisdiction

Blockchain is a wide range of distributed systems that makes it challenging to find the person. It is difficult to pinpoint the exact location of data that has been leaked because there is no standard storage system. A few countries have established a legal framework for internet law, such as storing localized data and limiting data. Similar regulations are required for the Blockchain. This is only possible if it is incorporated into international law. The data can be stored anywhere in the world until then. Thus, the jurisdiction question will always arise.

Enforcement From the Perspective of Contractual Obligation

Contracts are created and carried out using blockchain technology (smart contracts). The software establishes the obligation in the digital world, and the transaction is carried out when it is fulfilled. Many problems exist, including challenges with jurisdiction and regulation, pseudonymity, and a lack of regulation. It is essential to consider how transactions executed through Blockchain can be made available to contacts.

Can these contracts be treated the same as traditional ones, or are they still valid? Can these contracts be hacked and or kept confidential? Lawyers need to be able to understand the programming language of these AI-powered smart contracts. It is suggested that one language should govern them all. This would allow parties to settle disputes using their traditional mechanisms. To manage blockchain-driven contracts, it is necessary to legislate new laws.

Questions Relating to Autonomous Decentralized Organizations

Virtual autonomous organizations are known as DAOs. The software contains the organization's operations. Smart contracts are created and converted into smart contracts regulating the organization's operations. These smart contracts become enforceable automatically when certain conditions are met. DAOs can run themselves without the need for a central governing body. It isn't easy to have them questioned under any law or jurisdiction. Because it is an open-source structure, everyone is legally liable. Therefore, DAOs can be very flexible. The Association of Persons recognition means individuals who form DAOs are subject to severe gravity. They prevent DAOs' slipping under the radar' and being deemed nefarious.

These are some of the gray areas when adopting blockchain technology fully. Blockchain technology is revolutionary, but moral laws must be in place to regulate it. With the development of the Internet, these changes became especially obvious. We are gradually but inevitably able to control the Internet. Similar initiatives are required for blockchain regulation. Experts agree that incentives in the form of tokens or cryptocurrency are necessary to make blockchain technology a breakthrough. It is crucial to understand the risks associated with blockchain technology. The regulators and lawyers must be able to adapt to this technology to understand it and create laws to address them.

Different Types of Blockchain

Blockchain is a distributed ledger that records communications between participants as a chain. Each Block is connected using cryptography. The transactions are managed and regulated by a group of computers. This technology has many uses, so there are several types of blockchains. There are two main types of Blockchain.

  1. Private Blockchain.
  2. Public Blockchain.

Private Blockchain

To access a private blockchain, users must have permission. They are based on permissions, which limit participation in the network. Only those involved in transactions will be privy to it, and any third parties or stakeholders won't have access. A famous example of a private blockchain is Hyperledger Fabric. Access methods can Current participants may decide the future, or a governing body may grant licenses. An association makes the future choice tally.

A private Blockchain is a decentralized ledger with predefined conditions for data exchanges or participant transactions. Private blockchains differ from traditional databases with restricted access because they are distributed over several nodes. The consensus algorithm may vary depending on the purpose of the blockchain network. Features such as security, privacy and speed are prioritized. A private or public blockchain may be used depending on the company's business case, transparency requirements, and control level.

Why Use Private Blockchain?

Private blockchains offer significant advantages over public ones. Private blockchains are more secure than public ones. Employees can also manage them within an organization. Smart contracts can also be programmed with certain conditions, making it easier for businesses to transact business without third-party supervision. They are also easier to implement than public blockchains. To run a game on Ethereum, you must create a game state. This is not possible with a public blockchain. Private Blockchain would lower transaction costs and allow developers to create large-scale Ethereum games.

Private blockchains can also facilitate cross-organizational or cross-border transactions even though participants may not know each other. In the case of agriculture, for example, farmers might sell their produce to buyers who then export to another country with a contract. Farmers and buyers would be able to track each step of the transaction on a separate blockchain. Private blockchains can be used in many areas that public blockchains cannot. It can transform businesses in many areas, including finance, banking industry and cyber security.

Public Blockchain

Public blockchains are open to everyone. Anybody can join the Blockchain and participate in the network. The network is not supervised or controlled by any authority. A public blockchain's data is safe because it is impossible to alter or modify it after being validated. A couple of instances of public blockchains are Bitcoin and Ethereum.

A distributed ledger needs a lot of processing power to operate on a broad scale, which is what a public blockchain can provide. Each node in a network must overcome a difficult, resource-intensive problem in order to get to a consensus (proof of work). Although transparency is a benefit, it also has drawbacks for the public Blockchain. Transactions are not confidential.

Both public and private blockchains function in an immutable fashion. Records can be added, but they cannot be changed or deleted. These types of Blockchain are distributed and decentralized and interact in a peer-to-peer manner. The record's validity is established. Participants agree to reach a consensus. It prevents the tampering of records. These two types of blockchains have many similarities, but the key difference is access to the Blockchain.

Why Use Public Blockchain?

Public Blockchain offers many benefits that will convince you to use it. A public blockchain has one of its core benefits: low fees. Transactions usually cost less than a penny. Because transactions are free of transaction fees, crypto digital currencies can be used to do business. Another advantage of a public blockchain is that anyone can utilize it anonymously. They are not required to share their personal information if they are unsure. Because there are no centralized servers needed to hold all the data, public blockchains are frequently less expensive to operate. This is achievable because the network's nodes support distributed architecture and maintain copies of all data.

Public blockchain platforms are also available 24/7 without any downtime. The system can be used at any hour of the day or night, and users can connect with others. The system is not down, and users don't have to worry about it. The public blockchain platform is transparent. All transactions on the Blockchain can be viewed by anyone who uses it. This makes transactions more transparent, trustworthy, and trustable.

Public blockchains can also be used anonymously. Public blockchain users do not need to disclose their personal information to use the digital platform. This provides some security founsureen't sure if they wish to share that information online. Public blockchains offer immutability as their last and most significant benefit. A transaction cannot be changed once it has been recorded. This creates record permanence that gives users security and allows them to use the technology.

Read More: Blockchain and its Impact on the Society

There is a Difference Between the Different Types of Blockchain

Access

A particular organization is in charge of a private blockchain. The general public cannot participate in it. Private blockchains have an authorization system in place to track platform users. Access to the network is restricted to specific users. A public blockchain system is the opposite. Anyone can join and participate. Anyone can view the ledger and read, write, and participate in the consensus process.

Consensus

A private blockchain determines who is eligible to join the consensus. Participants can join the consensus process in a public blockchain and are not restricted.

Transaction Speed

Only authorized participants have access to the transaction process and can take part. Speed is maintained. A public blockchain allows anyone to access the transaction/record and can request it. Because many people request multiple transactions, the platform takes time to process each request.

Transaction Cost

A private blockchain platform has minimal costs. It doesn't vary in cost depending on how many requests are made. The cost remains constant, exact, and low. The transaction costs for public blockchain platforms are generally higher than those of private ones. The platform has a lot of nodes, which can slow down its performance. It takes a long time to respond to requests. As a result, prices go up dramatically.

Data Handling

Only one organization can access and change a ledger in a private blockchain. A limited number of participants or users can also write on the ledger. They can delete blocks, depending on the constitution of the ledger. This Blockchain, as the name implies, is public. Anyone can access it and read or write on it. This type of digital ledger can't be modified or amended once it is finalized.

Efficiency

Becausfewnumber of nodes have access to the ledger; private blockchains are virtually always effective. Public blockchain technologies alleviate scale difficulties but are slower because many users can access the ledger in real time. As a result, private blockchain platforms are more effective than public platforms.

Impermanence

As mentioned above, there are certain circumstances in which blocks can be removed from the ledger. Private Blockchain (partially) is, therefore, immutable. As we all know, once a block is added to the chain, it cannot be changed or deleted. A public blockchain network is, therefore, completely immutable.

There are Advantages and Disadvantages to Each Type of Blockchain

Private Blockchain

Advantages

Because there are fewer participants in the network, access is restricted. This means that consensus can be reached faster and more efficiently. A private blockchain can process more transactions per second than public blockchains. A public blockchain is decentralized, meaning consensus building can take time. However, a private network is more centralized, which speeds up decision-making. A private blockchain requires substantially less energy and material resources than a public one. It can come to a consensus much faster.

There is no ongoing alert system or confidence issue with a private blockchain. The records cannot be independently verified because the network's integrity depends on the dependability and human involvement of authorized participants. Therefore, it is impossible to identify the responsible party. Each participant in a private blockchain network is identified and has the credentials to be granted access. There is, therefore, no potential for any adverse impact.

Disadvantages

The integrity of the private Blockchain depends on the standing of authorized members. Because they are in charge of confirming and certifying transactions, trust is crucial. Actors outside this private Blockchain must have faith in the participants because they have no control over verifying the data being sent. With fewer users, hackers can control the network, change the data, and destroy the blockchain system.

This system has partially undercut the goal of the Blockchain. The entire purpose of the Blockchain was to establish a decentralized ledger that many individuals could manage. A private blockchain is established and managed by a company or group of companies. Centralization results from this, which undermines the goal of blockchain technology.

Public Blockchain

Advantages

Public blockchains have all the data that is available to the public. Participants/users can access the Blockchain for many purposes, including verifying transactions and securing financial information. One of the most promising aspects of a public Blockchain is transparency.

Public blockchains are decentralized ledgers. Multiple nodes are created within the network. Hackers cannot crack these nodes to corrupt transactions or steal data. The system will be safer because anyone can participate in the security and maintenance of the public Blockchain. There are no regulations for public blockchain networks. All participants/users have the right to participate in the validation process of truncations and are empowered to work on it. There is no central authority that can overrule their actions.

Disadvantages

Public blockchains pose a greater danger in knowing who verifies transactions are impossible and data. The speed of public blockchains might vary. It takes time for the entire network to reach a joint agreement. There are restrictions/limitations on the number of transactions that may be fed in a block, so processing all the transactions in the network takes time. It takes a lot of electricity, which is a disadvantage to a public blockchain network. Public Blockchain is slower than its counterpart in terms of scalability.

Conclusion

There are many differences between the two types of blockchain networks. In reality, both types of blockchain networks can be used together. Permissioned blockchain are a third type. This middleware allows you to mix private and public blockchains. It also supports customization. Everyone can use this kind of Blockchain only after confirming their identity and receiving the proper rights, and only to carry out specific tasks on the network. Both public and private blockchains can be employed in a corporate setting if valuable features are chosen.

The participant alone has the authority to make the final decision. Blockchain technology offers tremendous potential and is often called the "edge of digital disruption". It is possible to strengthen the economy by addressing the problems quickly and early. What type of blockchain should you use-private or public? It all depends on what your business needs are, as well as the culture of transparency and confidentiality within your company.

You may hire consultants for blockchain technology and learn more about the advantages and disadvantages of both public and private blockchains from this article on errna. Private blockchains can be a fantastic choice for businesses with stringent privacy requirements. On the other hand, anyone can join and participate in transactions on public blockchain networks.