Public And Private Blockchains: What Are The differences?

Blockchains are a distributed ledger system that is virtually impossible to alter. While it is used mainly to facilitate the issuing and transaction of cryptocurrency, its major purpose is to store data safely and securely.

Blockchain can increase the efficiency of various industries including supply chain, healthcare, and food safety to just name a few. So, blockchain can define the future of various industries around us. This is why it is important to understand technology better and keep yourself ahead of the evolution.

 Blockchains come in different shapes and forms, in this article we will be delving into the question that many individuals might have – “What is the difference between public and private blockchain?” if you are someone who needs an answer to this question, read on this comparative analysis of both. 

What is a Blockchain?

Before getting into the comparison, we need to have a better understanding of blockchain technology and how it functions to have a better understanding. Blockchain is a distributed database made with individual blocks.

In addition to the data that needs to be stored, each block of the chain will also have a hash to the previous block. This means that to alter an individual block in the chain, the perpetrator has to change the entire chain, additionally, since a copy of the blockchain is stored in various networks on the node, it is almost impossible to alter the contents of a blockchain. 

Blockchain can be used for various purposes and its governance and visibility can vary according to the purpose. Majoly there are four types of blockchain networks, namely private, public, consortium, and hybrid. Public and private blockchains are some of the most popular and widely used blockchains.  

Public Blockchain

As the name suggests, a public blockchain is a decentralized database, that is accessible to anyone. The public blockchain allows users to view, and contribute to the chain without needing permission from a central entity, making public blockchain decentralized. Usually, these kinds of blockchains utilize methods such as cryptography and consensus mechanisms to protect the data stored. 

Certain key characteristics make public blockchain unique such as:

Decentralization

One of the major uniqueness of the public blockchain is the decentralization. Here, users can contribute, access, and view the data of the blockchain, without having to take permission from a centralized authority.

Here, the governance of the blockchain is carried out through a P2P (peer-to-peer) network, where multiple individual nodes validate new blocks that are requested to be added to the blockchain using the consensus mechanism of the respected blockchain.

Transparency

All operations on an open blockchain are made public and anyone can view and audit the information stored on the blockchain.

Immutability

As the open blockchain is distributed with various nodes connected to the network, it is not easy to change its data or delete it altogether. At least not with the existing computational technology. This is one of the reasons why open blockchains are used for cryptocurrency transactions.

Private Blockchain 

A private blockchain or a permissioned blockchain is a blockchain that only “permissioned” nodes will have access to. In a private blockchain setting, you will have an in-charge who governs and oversees all the matters related to the blockchain.

This in-charge determines who is accepted to the network and who isn’t. Private blockchains are usually used for the safe storage and distribution of internal data, that shouldn’t be accessible to the general public.  

Here are some of the key characteristics of private blockchain: 

Complete privacy

Since every user needs permission to access a private blockchain, this enhances privacy. Here, the companies can store their data and assets without worrying about unauthorized access.

Centralized

Private blockchain has a centralized authority that controls the governance of the blockchain.

Faster transactions

Private blockchains have fewer nodes connecting to the network, and adding a new block to the chain only requires authentication from a few participants, making the overall transaction faster and more efficient. 

Public and Private Blockchains: Head to head comparison 

To further know the difference between a public and private network, let’s have a look at the below comparison table. 

Sl. No	Feature	Public Blockchain	Private Blockchain
1	Accessible to the general public	Yes	No
2	Decentralization	Yes	NO
3	Transaction speed	Slower	Faster
4	Privacy	No	Yes
5	Native crypto token	Yes	Maybe
6	Security	More secure	Less secure
7	Energy consumption	High	Low
8	Examples	Bitcoin, Ethereum, Solana	Hyperledger, Corda, Ripple
9	Use Cases	Crypto transactions  Decentralized Finance (DeFi) Representing the ownership of NFTs Securing voting process  Enhances traceability and transparency in the supply chain  Identity verification	Help healthcare organizations protect their patient data Securely storing the private data of a company  Provide transparency for transactions

Pros and Cons of Private and Public Blockchain 

Both public and private blockchains have their advantages and disadvantages that make them useful for different purposes. Let’s see what they are: 

Advantages of public blockchain

1. Decentralization: Public blockchain networks do not have a central entity that controls the network. Instead, it promotes a user-centric and democratic trustless environment.
2. Crypto Transactions: Public blockchain makes peer-to-peer cryptocurrency transactions possible without the need for a trustworthy third party. The blockchain also blocks double-spending.
3. Security: Usually, public blockchains have better security, due to their advanced encryption techniques. The encryption ensures the blockchain is resistant to hacking.
4. Universal Accessibility: The public blockchain is accessible to virtually anyone with an internet connection. You do not need permission to use it. 

Disadvantages of public blockchain

1. Lack of Scalability: As open blockchains have more networks connected to them, this makes the transactions slower. More nodes also make it hard for the blockchain to handle large volumes of transactions.
2. High Energy Consumption: Some of the most popular blockchains such as Bitcoin consume a lot of electrical energy for running the algorithms.
3. Network Vulnerabilities: The blockchain network is more secure than a normal computer network and it is a decentralized space that needs approval from more than 50% of the validators in the network to add a block. However, they are vulnerable to certain attacks such as the Sybil attack, where a single entity gets control of the majority of connected nodes in the blockchain network. 
4. Laws and Regulations: The decentralization and pseudonymity of blockchain pose a great challenge to the laws, government regulations, and financial policies. It has been reported that blockchain transactions are being utilized for illegal activities such as money laundering, and terrorism. 

Advantages of private blockchain

1. Better Security: Private blockchain is a more secure and safe way to store and share private data with trusted participants. Since access is limited there is less chance of cyber attacks and other similar threats.
2. Higher Performace: Since there are fewer nodes connecting to the private blockchain, it usually performs faster and more efficiently than public blockchains. A private blockchain can handle more transactions at a time.
3. Better Scalability: One of the biggest challenges of public networks is their limited scalability, majorly because of the vast number of connected devices on the network. On the other hand, the private blockchains are easy to scale and update.
4. Energy Efficiency: A private blockchain does not need the computational power of thousands of supercomputers to run, so naturally it will only consume a fraction of the electricity needed for running a public blockchain.
5. Collaboration: A “permissioned” private blockchain can make it possible for multiple businesses to connect and share their resources and data. This makes it easier for businesses to collaborate on a project. 

Disadvantages of private blockchain

1. Centralization: On private blockchains, only a limited number of nodes will have the authority to control the network, usually belonging to a single entity. Other participants of the network need to trust this entity without having control of the network.
2. Limited Participation: Private blockchains can be only accessed by certain users who have gained permission to use them. This limits the effects of the network and its overall potential compared to a public blockchain.
3. Prone to Hacking: Since there are fewer nodes in the network, it can be easier for a hacker to infiltrate the network and manipulate the data of the blockchain.
4. Interoperability Issues: It is usually harder for a private blockchain to interact with other blockchains such as the public blockchain. It may require complex and costly hardware and software tools to facilitate the bridging.
   

Also Read: Comparison Of Centralized Vs Decentralized Crypto Exchanges

Conclusion

Blockchain technology has become one of the most integral parts of storing and sharing digital data, and assets. While there are multiple types of blockchains, public and private blockchains are the most common and are used in various industries including finance, healthcare, supply chain, and more. 

In this article, we have explored the difference between private and public blockchains. While public blockchains can be more secure, decentralized, and transparent, private blockchains focus on privacy and efficiency.