Public vs Private Blockchains

In the last few years, blockchain technology and ecosystem grew exponentially. We saw big players coming to this space as Microsoft and Amazon.

Every year we saw significant developments in the public and private blockchain space, seeing Ethereum 2.0 in the development and coming next year. Also, we saw from IBM new versions of Hyperledger Fabric, Hyperledger Sawtooth and others programs under Hyperldeger Foundation. All of these and other essential innovations are leading digital ledger technology towards broader adoption.

Ethereum and Hyperledger represent two fronts off an approach to a blockchain technology. Not only them but they are one of the leading examples. Those approaches divide blockchain into two categories, public and private blockchains. Let’s explore first one of them and explain what it is.

Public Blockchain

Public blockchains are not owned by anyone and are publicly open for anyone to participate in. Everyone can download a copy of a blockchain to their local computer and take part in a consensus mechanism. These blockchains are also known as permission-less ledgers.

Ethereum, Bitcoin represents the public blockchain approach. Every user can make transactions on those blockchain platforms, read every transaction that ever occurred on the network. On those platforms, every user is a pseudo-anonymous because by design those platforms protect anonymity. This is why we see cryptocurrencies based on public blockchain platforms because having that anonymity is important; it is one of the significant benefits of using cryptocurrencies.

But sometimes we may want a way of managing permissions, more role-based access and control what data our user may or may not read. In such a situation, permission blockchain comes to a play.

Private Blockchain

Private blockchains are private and are open only to a consortium or group of individuals or organizations that have decided to share the ledger (blockchain) among themselves.

Big difference between public blockchains and private ones is in the name; they’re private. Only specific, chosen entities, users have access to the network. Not everybody can read or make transactions on that blockchain as the access to the system is restricted. Private Blockchains have one or multiple entities that control the network, leading to the reliance on third-parties to transact.

This approach may seem as counter-intuitive to the original Bitcoin idea, but there are good reasons behind that. Not everyone wants to be open to the public to read all their transactions and data, but they want the main benefits of the technology. Blockchain offers much more than only a decentralisation, and it provides strong cryptography and a way of achieving consensus among many nodes, entities without the need for trust.

Enterprises od different businesses are more often relying on private solutions where they can control who has access to what resource.

Hyperledger Fabric and Corda represent blockchain solutions which can be used to create private blockchains.

Pros and Cons

Below I present the pros and cons of each of the approaches to the blockchain. There is no one perfect blockchain solution for everyone, but they may be scenarios where specific blockchain will fit perfectly.

Public Pros • Public blockchains are open; everyone can participate • Developers have little power of changing the rules of the application, self-governing Cons • High transactions fees • A probability of 51% attack • Lack of privacy/tough to achieve

Private Pros • The consortium can quickly change the rules of a blockchain, revert transactions, etc when A software bug is noticed. No need for a hard fork • Validators are known in the network • Transactions are cheap • Privacy • More suited for Enterprise applications Cons More centralized/concentrated • Requires trust in the validators • Can be potentially censored

That’s all! I hoped I brought you closer a concept of private and public blockchains.

You can find me on Instagram where I run BlockchainDojo initiative to bring an understanding of blockchain technology closer to as many people as possible. There’s nothing scarier than a new technology which many people do not understand and are afraid to ask.

You can find me on other social media just by looking @adrianhetman or @hetman_adrian on twitter.

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