There are two major types of blockchain technology, namely Public and Private. On the one hand, there is the public blockchain, which as the name suggests, anyone can take part in. On the other hand, we have the private blockchain that provides a more controlled and centralized network. In this blog post, we will explain these two blockchains in more detail and tell you about their key differences.
Table of Contents
What are Public Blockchains?
We are going to start by giving you a definition of public blockchains. A public blockchain is an open-source network that welcomes anyone to join and participate in its fundamental activities, such as validating transactions.
Transparency is at the core of this system, meaning that all transactions are visible to every participant on the network. The major feature of public blockchains is the absence of a central authority or organization controlling the network. Instead, the network relies on the collective effort of its participants to maintain security and process transactions.
Participants are often rewarded for their contributions to the network’s security and the ongoing validation of transactions. To give you an example of public blockchains, we can mention Bitcoin, Ethereum, Polygon, BASE, and many others.
These platforms embody the principles of decentralization and transparency and allow for a wide range of applications from cryptocurrency transactions to decentralized applications (dApps).
Key Features of Public Blockchains
Below we will take a look at several characteristics of public blockchains that you should know about.
Decentralization
Public blockchains operate without a central authority dictating the network’s rules. This decentralized governance ensures that no single entity can control or manipulate the blockchain.
Rather, a distributed network of independent nodes participates in maintaining the blockchain’s integrity. These nodes, using cryptographic algorithms, work together to reach a consensus on the state of the blockchain.
Anonymity
Public blockchains offer a high degree of anonymity. Users can interact with the blockchain without revealing their real-world identities. This anonymity is achieved through the use of pseudonyms and cryptographic techniques that allow users to keep their transactions and activities private.
Lack of Regulation
Public blockchains normally operate without formal regulatory frameworks. However, the absence of regulation can also raise concerns about potential misuse given that there are no established guidelines or oversight mechanisms in place.
Security
Public blockchains employ robust cryptographic techniques to guarantee the security and integrity of data. Once information is recorded on the blockchain, it becomes virtually impossible to alter or delete.
In addition to hashing algorithms and encryption methods that protect the confidentiality and authenticity of transactions, there are consensus mechanisms in place, such as Proof of Work (PoW) and Proof of Stake (PoS), that validate transactions and secure the network from malicious attacks.
Disadvantages of Public Blockchains
So far, all we have talked about were, one way or another, the advantages of public blockchains. This does not mean that public blockchains do not have any drawbacks. They come with a number of shortcomings that include:
- Security Concerns: When it comes to public blockchains, security is a significant concern. Although various solutions have been implemented, such as competitive, distributed validation and reward systems, or collateralized systems, vulnerabilities persist.
- Privacy and Anonymity Limitations: Furthermore, the promise of complete privacy and anonymity often falls short. While transactions on public blockchains are recorded with addresses rather than personal identities, the amounts and addresses involved are publicly viewable. Should the link between an address and its owner be discovered, anonymity is compromised.
- Scalability: Another challenge for public blockchains is their capacity to manage different levels of usage. Many blockchains have limits on the number of transactions they can process. High traffic can lead to congestion while low traffic can make the network less secure.
- Malicious Actors: Finally, the open nature of public blockchains can attract malicious actors. Because many public blockchains are associated with cryptocurrencies, their inherent monetary value makes them attractive targets for hackers and thieves.
What are Private Blockchains?
Now that we know what public blockchains are all about, we are moving on to a discussion of private blockchains. A private blockchain can be defined as a permissioned, distributed ledger where membership and data access are controlled by a central authority or a pre-defined set of rules.
In contrast to public blockchains, private blockchains require participants to be invited and vetted. This invitation process involves verifying the identity and other relevant information of potential participants, which is often carried out by the network operator(s) or through automated processes such as smart contracts.
Generally, the owner or operator of a private blockchain has complete control over who can join and what data is recorded, including the ability to modify or delete entries and alter the underlying programming as needed.
Key Features of Private Blockchains
Private blockchains have several important defining characteristics. These are:
Centralized Control
A fundamental aspect of private blockchain is its centralized nature. A single organization or a consortium of organizations manages the network and is in charge of establishing the rules for access.
This centralized control simplifies network management and allows for quicker transaction processing compared to the decentralized model of public blockchains.
Permissioned Access
Private blockchains operate under a permissioned structure. This means that potential participants must undergo a security vetting process conducted by the governing body before they are allowed to join the network.
Efficient Transaction Processing
Due to the smaller number of participants involved in the consensus process, private blockchains can achieve much faster transaction speeds than public blockchains. This efficiency is particularly advantageous for businesses that require rapid confirmation of transactions.
Customization and Flexibility
Organizations have the ability to customize various aspects of the blockchain, including its features, consensus mechanisms, and protocols. This tailored approach allows them to align the blockchain with their specific business requirements. Private blockchains can be configured to support unique use cases and to meet compliance obligations.
Disadvantages of Private Blockchains
Similar to public blockchains, private blockchains are subject to several limitations.
- Limited Applicability: Given that private blockchains are designed for specific enterprise needs, they lack the broad applicability of permissionless public blockchains. They are tailored to particular tasks and functions and thus are limited in terms of versatility.
- Security Risks: As private blockchain adoption grows, they become increasingly attractive targets for hackers and thieves. These blockchains may contain sensitive data, such as client information, intellectual property, or other valuable assets that require robust security.
- Lack of Transparency: Private blockchains prioritize privacy at the expense of transparency. This can hinder the verification of data accuracy and authenticity.
- High Costs: Setting up and maintaining private blockchains is an expensive process due to computing power and data storage requirements. Unlike public blockchains, where costs are distributed among node operators and offset by rewards, private blockchain costs are typically borne by the organization.
Main Differences Between Private and Public Blockchains
We have come to the main part of this blog post where we will discuss the major differences between public and private blockchains. The table below provides you with an overview of 5 main comparison points.
| FEATURES | PUBLIC BLOCKCHAINS | PRIVATE BLOCKCHAINS |
| ACCESSIBILITY | Open to anyone | Restricted to authorized users |
| TRANSPARENCY | All transactions publicly visible | Access restricted to authorized users |
| SECURITY | Lower inherent security due to open access | Higher due to restricted access and customizable security features |
| EFFICIENCY | Lower transaction speed | Higher transaction speed |
| IMMUTABILITY | Virtually impossible to alter transactions | Modifications possible under specific circumstances |
Accessibility
Public blockchains are open networks, allowing anyone with an internet connection to participate in transactions and view the complete transaction history. This permissionless structure promotes transparency and inclusivity.
Conversely, private blockchains operate as closed networks which restrict participation to authorized users. Their permissioned approach gives organizations greater control over data visibility and network participation. One more point to mention is that the smaller number of participants in private blockchains is more likely to lead to faster transaction validation.
Transparency
Public blockchains offer high transparency. Every transaction is publicly broadcast and permanently recorded on a distributed ledger which is accessible to anyone.
Private blockchains, in contrast, prioritize confidentiality. While transactions are recorded, access is limited to authorized users. This provides greater security and privacy for sensitive data but raises concerns about potential manipulation due to the limited oversight.
Security
Private blockchains, generally speaking, provide a greater level of security compared to public blockchains. This is due to the private blockchains’ restricted network access and their ability to implement specific security features like access control and encryption. Moreover, limiting participation to trusted entities reduces the risk of malicious attacks.
Efficiency
Public blockchains, while prioritizing security and decentralization, may experience limitations in efficiency. The validation process and data volume can restrict transaction processing speed and lead to higher fees during peak usage.
However, private blockchains, with their controlled environment and limited number of validators, generally offer faster transaction processing due to a streamlined verification process. They also have more flexibility in choosing efficient consensus mechanisms.
Immutability
Immutability refers to the inability to alter or delete data once it is recorded on the blockchain. In public blockchains, cryptographic security and a distributed network of validators make altering transactions computationally infeasible.
Having a central controlling authority, private blockchains may allow for ledger modifications under specific circumstances, such as correcting critical errors.
Use Case Considerations of Private and Public Blockchains
Choosing between a public and private blockchain depends heavily on the specific application and its requirements. Each blockchain offers certain advantages and disadvantages that make them suitable for different scenarios.
Public Blockchain Use Cases
Public blockchains are ideal in situations that demand transparency, open access, and trust without a central authority. Here are some specific examples:
- Electronic Health Records: Public blockchains allow patients to securely share their electronic health records with healthcare providers while maintaining control over their data. Patients can track who accessed their information and for what purpose.
- Digital Identity Verification: Public blockchains offer a secure and transparent platform for digital identity verification. Storing customer Decentralized Identifiers (DIDs) on the blockchain enables instant verification of digital identity documents, such as driver’s licenses and government-issued IDs, issued as Verifiable Credentials.
- Identity Documents: Public blockchains are utilized to securely issue and verify identity documents such as passports and driver’s licenses. Verifiable Credentials and DIDs give individuals complete control over when and with whom they share their information.
- Public Records: Governments can make use of public blockchains to issue public records, such as property deeds, identity documents, and birth certificates, as Verifiable Credentials. For instance, during a real estate transaction, a bank can request specific credentials (name, date of birth, salary) via a QR code, and the borrower can grant permission to share the relevant information through their digital wallet app.
Private Blockchain Use Cases
Private blockchains are better suited for applications where control, privacy, and efficiency are prioritized. Their permissioned nature allows organizations to manage access and tailor the blockchain to their specific needs. Let’s take a look at several examples:
- Supply Chain Management: Private blockchains enhance transparency and security in supply chain management. Tracking products from origin to consumer, as in the food or fashion industries, helps verify authenticity and combat counterfeiting. This improves product traceability and builds trust among stakeholders.
- Finance: Private blockchains streamline various financial applications, including cross-border payments, trade finance, and settlement systems. They enable faster and cheaper international money transfers, reduce risks in trade finance through secure transaction records, and improve the efficiency and accuracy of settlement systems.
- Healthcare: Private blockchains facilitate secure storage and sharing of patient data among authorized healthcare providers. Restricting access to medical histories ensures patient privacy. It also allows doctors and specialists to readily access necessary information.
- Government: Governments can employ private blockchains for a variety of applications, such as voting systems, identity verification, and land registries. Moreover, private blockchains enable governments to enhance the security and integrity of voting processes, protect sensitive government data, and create transparent and reliable land registries.
Final Words
Public blockchains, as we talked about, prioritize openness, transparency, and security through decentralization. However, private blockchains offer a contrasting approach, excelling in controlled environments with permissioned access and streamlined validation.
While public blockchains provide robust security and open participation, private blockchains offer enhanced control, security, and efficiency. At the end of the day, the right choice depends on whether an organization values maximum transparency and decentralization or prioritizes speed, control, and enhanced internal security.
