Public vs Private Blockchain

Blockchain is in the news a lot at the moment. The technology that brought us Bitcoin and Ethereum is being discussed everywhere, from the papers and economic forums through to street corners and casual blogs. People understand that blockchain is novel and disruptive, that it holds great potential. They might even understand a little of how it works.

If you want to review the basics of how blockchain’s unique strength as a solution lies in the way it simultaneously solves several problems at once: the problems of trust, transparency, and security, check out our overview of the blockchain essentials. If you want to dig a little deeper, read on.

Since the beginning of the Bitcoin Age (the first cryptocurrency was released in 2009), the industry has blossomed. New types of blockchain have followed, each serving its goals better than last. These different blockchains can be divided into two main, distinctive groups.

Public blockchains

The public blockchain is permissionless and open to everybody without exception. One can download it to his or her computer and view the entire history of the blockchain, send and receive money, store information, and even create smart contracts within the blockchain. Mining is also a feature of some public blockchains; this is used to reward users for maintaining the network.

The key advantage of distributed ledger technology lies in decentralization. Since each node is equal, the blockchain is immutable, DDoS resistant, and censorship free. There is no one point of attack and hackers cannot alter the information. It is encrypted and stored on thousands of devices that possess a copy of the blockchain. The more people join the blockchain, the more secure it is.

Traditional networks vs. distributed such as the blockchain.

Image source: CoinDesk.

Notably, its purpose reaches far beyond a cryptocurrency like Bitcoin or Monero. The public blockchain can help communities worldwide to share data securely and openly. Some obvious applications are an insurance pool for the unbanked population and a global ledger with school diplomas of a single standard which are impossible to fake.

The public approach does carry certain disadvantages though and these are also tied to their decentralized nature. Public blockchains set their rules at the very beginning and have few opportunities for later changes to be made. In order to adjust the rules even slightly, the community needs to convince every single participant to make an update or accept a bug fix. As a result, public blockchains are very slow and inefficient.

Private blockchain

Private blockchains are the total opposite as they give full control to their owners. Consequently, they enjoy a high level of flexibility and can adjust the rules as they see fit, including but not limited to:

• Different permission levels
• The level of public exposure
• Who can be members
• How often to implement updates
• Run blockchain as a stand-alone or integrate into the existing system

While public blockchains act in a trustless environment by default, private blockchains require a higher level of trust among their members. Hence, the latter can choose among various consensus protocols and benefit from much greater blockchain speeds. We have developed private blockchains for corporate clients many times and know that this is what they are looking for to ensure internal security for their company.

 

How the entire supply chain information can be controlled by the private blockchain.

Image source: Virtuart.me

A bright use case is a supply chain. For instance, a retailer company wants to ensure that its goods come from the original producer, no third party interfered along the way to counterfeit the products, as well as conditions such as temperature or humidity remained at an appropriate level. Another example is healthcare where private blockchain ensures the data is immutable but available for doctors and their patients only.

There is a special kind of private blockchain called “Consortium”. It empowers enterprises with an option to share particular data with another party. Media corporations Comcast, Disney, NBCUniversal, and others have already recognized the value of such systems and utilize this blockchain type to share advertising data with each other.

Summary

Understanding the basics of blockchain is a good first step. The second step is to distinguish between public and private blockchains. The first type serves as an instrument for decentralization and works in a trustless environment. The second type is aimed to help enterprises increase efficiency and security. Finally, consortium private blockchains permit several companies to share selected data with each other seamlessly and securely which dramatically cuts their costs, saves time, and increases trust among partners.