What is the Difference Between Public and Private Blockchains?

A Quick Overview

Think about a public blockchain as a ripe, healthy marketplace. Manned vendors and stalls are scattered across the market square. Buyers and sellers can explore the streets to witness the excitement that a free square can offer that the private, invisible nature of a private blockchain doesn’t offer.

Now let’s compare this with a private chain.

Think about a fancy boutique. Its stock is well guarded by the owner. Transactions are exchanged to and fro but are hidden from the world. This is how you can easily explain private blockchains.

The only way that a buyer or seller is granted access is to and from the select group where transactions occur. Finance is privately exchanged around the area and outside it.

Both options have their strengths and use cases, but you need to understand the differences to know how and when to use each.

What is a Public Blockchain?

Public blockchains are open to everyone. Any user can participate in the network, read, write, and be a part of the process. Bitcoin and Ethereum are the most well-known built this way. A public blockchain is built on a decentralized architecture in which anyone who participates can read and write while also being able to compete in the validation process required to mine the next block. The most valuable thing about the nature of a blockchain is the transparency it offers. Every single user, with no exceptions, can see every single block, transaction, and data piece supported on the blockchain.

Because of this transparency, they become one of the most secure ways to operate a blockchain. Everyone involved can agree on what happened, where, when, and why it happened. The required trust amongst users can be maintained through this. However, this makes public blockchains less conducive to scalability. If too many are using the network at once, the increased number of users will also mean an increased amount of data to interact with. This doughnut often falls over when it becomes too heavy.

What is a Private Blockchain?

Private blockchains are quite the opposite in their manner of operation. As you can imagine by the name, they are private — meaning small and closed off in nature. This often includes the line-up of who can participate and what the blockchain may be storing.

Private chains are faster and more scalable, too. Because there are only a small number of users, the whole validation process will be easier to push through, too. This leads to another positive point regarding private blockchains. Players or members of the network will have limited access to the chain, and this tight control around who can and cannot see the data can cut down on the potential variables and risks that threaten the overall lifecycle of the chain.

Use Cases and Applications

When discussing private or public blockchains, it is always important to think about the main purpose of why you need a chain in the first place. Public chains are great for cryptocurrencies and social programs, while companies enjoy the simplicity that private chains can offer.

Private blockchains play to their respective strengths with respect to their usage in the industry. We see them deployed for supply chain management, financial services, and healthcare, where ownership and confidentiality are key requirements. For this case study, let us consider a hospital that uses a private permissioned blockchain to share patient information among a group of trusted doctors. The patient need not be granted access to the blockchain network.

Security and Privacy

When we come to security aspects, blockchains again find themselves to be the point of debate. From the context of public blockchains, they are open and, hence, secure, but there is a danger associated with them too, i.e., in case of high centralization of the network, it is subject to attacks. If one malicious participant owns >50% of the network, the history of the blockchain can be manipulated.

The Future of Blockchains

As the blockchain universe matures, the distinction between public and private blockchains could become less clear-cut. Hybrid blockchains are an example of this, fusing attributes from both options. Hybrid blockchain networks can give enterprises privacy, while still delivering public validation and transparency.

A guide from Chiliz, a blockchain-based platform for sports and entertainment institutions, presents ideas for how these benefits can be maximized for different sectors. With public and private blockchains combined, an organization can choose the characteristics that align with entity requirements.

‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎ ‎