By Larry Wright
Companies and individuals looking to implement blockchain solutions often seem confused between private and public blockchains. In this article, we’ll provide you with an in-depth understanding of the features of both of these types of blockchains. With the knowledge you’ll gain from this article, you’ll be able to make better decisions between the two.
The topic of public vs. private blockchain is still debatable. Especially if you’re running a company, you must understand the big differences between the features of these blockchains. The best way to learn more about them is by taking a look at different examples. This enables business owners to choose the right type when the time finally comes.
If you end up selecting the wrong solution for your business, it won’t work at all. This increases the importance of learning the difference between these two even more.
Introduction to Public and Private Blockchains
Let’s start with the introduction of public and private blockchains. This is the best first step you can take on your journey to understanding both of them in depth.
In a public blockchain, you can join the system whenever you want to. There are no limits to taking part in the public blockchain ecosystem. You can also easily access the ledger and see every transaction going on in the blockchain. Ethereum is a good example of a public blockchain.
So, for companies and individuals looking for a completely decentralized system, the public blockchain is the right platform. However, this system won’t work for many companies.
A public blockchain is also known to be the first type of blockchain to ever exist. Bitcoin was the first-ever public blockchain, and it still exists.
Although the first blockchain has its own limitations, once the industry understood all the benefits of this technology, they started to make their own variations by eliminating all the shortcomings one by one. Public Blockchain provides all of its participants with equal rights no matter how large or small their shares might be in the network. You can easily access a public blockchain and make transactions with your friends and strangers alike.
Public blockchain offers a high level of security as well. The level of security in this type of blockchain is usually way higher as compared to private blockchains. This is made sure by making the ledger public. So, even if you are not a member of the blockchain, you can easily access the public ledger. This helps ensure transparency across-the-board on public blockchains.
However, public blockchains come with their own flaws. One of the biggest flaws of public blockchain systems is their slow speed. Moreover, since public blockchains provide their participants with anonymity, they can be used for illegal activities as well.
Features of Public Blockchain
Let’s start the discussion with some of the best features of a public blockchain.
- Open Nature
As we have already mentioned, a public blockchain can be easily accessed by anyone. All you need is a stable Internet connection and a device to access the Internet, and you will be all set to log into a public blockchain.
By using a public blockchain, you can access and utilize all the useful features without any restriction. You can also make transactions while being anonymous and without interference from any government body. Mining can also be used to win tokens, which you can exchange for fiat money. However, you should keep in mind that not all public blockchains allow mining.
- Zero Regulation
When you are on the public blockchain, there is no regulation you will have to follow. So, you can use these platforms in any way you want to for your benefit. However, this benefit proves to be a disadvantage for companies as they cannot operate in an environment without any regulation.
If there is no regulation, you can never meet all the requirements to complete a project. Therefore, public blockchains are limited in their application. They work extremely well in external systems. However, their usage in internal systems isn’t recommended.
- Fool-Proof Security
Public blockchains provide immaculate security to every participant. This is a good thing as most public and private platforms are always prone to hacks and attacks by cybercriminals. Because of this, companies and individuals lose billions of dollars to cybercriminals every year.
However, with the introduction of a public blockchain, everyone can now feel safe while using the Internet for their personal and business purposes, as the public blockchain is resistant to hacking. The quality of data for every project backed by public blockchain is also great.
While the protocols used for security in every public blockchain might be a bit different, they are usually of the same quality and are hack-proof.
- Fully Anonymous Nature
This is one of those important features which make public blockchain so desirable for people around the globe. This type of blockchain provides complete anonymity to every participant. You do not have to use any type of personal identification data in order to access the public blockchain. All of the activities you perform on the public block cannot be traced back to you, and you are completely safe.
The main purpose of all the anonymity public blockchain provides you with is to keep your data and personal assets safe. However, people with ill intentions use the public blockchain for illegal purposes as well. For example, a hacker can get payment for his illegal acts in the form of bitcoin, and no one will be able to track the transaction.
The same is the case for many criminal activities done on the dark web. So, this feature of public blockchain can prove to be counterproductive and can be labeled as a drawback as well.
But it isn’t the technology that is good or bad, but it is its use that makes it good or bad. So, you should not draw any conclusions about public blockchain and its anonymity feature based on how humans use it.
Reasons to Use Public Blockchain
Let’s discuss a few reasons why one should use a public blockchain.
It’s Transparent
One of the biggest reasons why you should use public blockchain is its transparency. Every company using the public Blockchain is ultimately trying to achieve full transparency in its operations.
Everyone can access the public ledger and see all the activity without any restrictions or exceptions. So, the public blockchain can be used to practically eradicate corruption and any type of illegal activity within a company. Everyone using the public blockchain has to participate in the consensus and has to keep the public ledger intact.
It Empowers You
When using any type of online platform to make transactions, users usually have to follow a lot of rules and regulations. Most of the rules even go against the interest of the users of a platform. However, this is not the case when you are using a public blockchain. Since the public blockchain is completely decentralized, there is no central authority enforcing any rules and regulations.
Because of the public ledger used in public blockchains, everyone can join the consensus and see what everyone else is doing.
This luxury is not available in private blockchain since rules and regulations can be enforced in them.
It’s Fully Decentralized
Public Blockchains have true decentralization applied to them. This feature is not available in private Blockchains. Decentralization is made sure by providing every participant with a copy of the public Blockchain ledger. This makes it practically impossible for any central authority to amend the blockchain or to control any of its features.
In public block jeans, a central authority does not control the system, but all the nodes do. Specific algorithms are used to distribute the public ledger equally between all the participants to ensure decentralization. Since everyone has a copy of the ledger, no one can decide the fate of a public blockchain on their own.
It’s Irreversible
Once a block gets on the public blockchain, no one can remove it from there. This feature makes the public blockchain immune from hacking attempts. Since no one can edit any of the blocks on the chain, they cannot get out-of-proportion benefits.
Every company suffers from alteration issues. However, by using a public Blockchain, every company can make itself immune from alteration attempts.
Even if a person tries to alter the public ledger saved on their computer, it will cancel all the changes by looking at other copies of the same public ledger saved on other users’ computers when the person goes online.
Features of Private Blockchain
A private blockchain, while somewhat identical in name to a public blockchain, has lots of unique features of its own. For example, one of the biggest differences between a public and a private blockchain is that private blockchains can be controlled by individuals and organizations. So, not everyone can join a private blockchain.
A private blockchain always has authorization criteria that are used to give every single-user access to it. These blockchains are mostly used by companies looking to implement blockchain-based systems in their business.
Nodes are used to control this type of blockchain, and only the people authorized by the controlling entity are allowed to enter.
So, by its very definition, a private Blockchain is not completely decentralized. This type of blockchain uses partial decentralization for the benefit of both the controlling authority and the participants.
It is easy to implement rules and regulations in private Blockchains. Once specific rules are set, every note has to follow the same rules in order to stay within the network.
People using private blockchains have their own reservations about them. For example, they think that the central authority can easily reverse a transaction if they want to. However, this type of action is usually highly unlikely.
This type of blockchain is perfect for private companies since they need a certain level of privacy in their operations. Without reasonable privacy, their rivals will be able to easily access the blockchain and leak all the important information. This is the main reason why companies around the globe usually prefer using the private blockchain instead of its public version.
Let’s take a look at some of the best features of private blockchain.
- Privacy
The whole purpose of private blockchains is to provide organizations and individuals with complete privacy. If you are looking for a private technology, there is no better option for you than using a private blockchain.
A private blockchain is needed by companies around the globe because of the security and privacy concerns they face. All of the sensitive information being exchanged within the same organization needs to be kept away from unwanted eyes. If even a single piece of private information is leaked, it can bring massive losses for a company.
So, using a private blockchain is the best alternative to a public blockchain for companies. This is one of the main use cases for private blockchains as well.
- Fast Transactions
Since the volume of transactions done on private blockchains is much less compared to public blockchains, they are very stable, and you enjoy fast transactions. In every blockchain-based system, you have to pay a certain fee in order to complete the transaction. However, public Blockchains can increase the fee considerably because of the large number of transactions being carried out by the nodes.
It takes a lot of time to complete a large number of transactions at once. Therefore, public blockchains are usually slower compared to private blockchains. Moreover, you have to pay a much higher fee on public blockchains in order to complete every transaction. On the other hand, since not so many people use one private blockchain, there is almost no delay. This also means that it is the same for every transaction.
- Improved Efficiency
Public blockchains are usually less efficient as compared to private blockchains. This is because public blockchains allow everyone to assess them. When a lot of people try to use the features at once, it puts a lot of pressure on the platform, and the efficiency decreases.
On the other hand, private blockchains only allow a few people to access them. Moreover, many people have tasks already assigned to them on the private blockchain. This is the main reason why private blockchains do not slow down. Specific protocols are also used to reach agreements in less time.
- Better For Companies
Private blockchain systems are designed to benefit whole companies rather than a few individuals. This powerful technology can easily be used by businesses around the globe to make their processes more stable, secure, and private. So, a private blockchain is used in the internal systems of companies.
Enterprise use is one of the most desirable use cases for private blockchains. Therefore, you should also start shifting your business to a private blockchain-based system.
Reasons to Use Private Blockchain
Let’s discuss a few reasons why companies should use private blockchain.
It Saves Money
Using private blockchain can save your company lots of money. One of the main reasons for this is the low maintenance requirement of private blockchains. Since public blockchains have lots of participants, they take up lots of resources to maintain as well. On the other hand, private blockchains have way fewer users and can be maintained pretty easily.
However, this does not necessarily mean that private blockchain is a cheap solution for your company.
It Allows Regulation
If you want to regulate and keep a record of all the things happening in your company, then using a private blockchain is the best bet for you. You will always need regulations when managing your company with a private blockchain, as there can otherwise be serious consequences.
Before implementing a private blockchain, you can easily put all the rules and regulations in, and all of the participants/ employees will have to follow those rules.
It has Lower Fees
When compared to public blockchains, you’ll find out that private blockchains have much lower fees on every transaction. This is because the fees on private blockchains do not increase depending on the number of transaction requests being made at any particular time. So, no matter how many transaction requests are being made at a time, the fees will remain the same and low. There are no hidden charges as well.
It Avoids Illegal Activities
Since every member on a private blockchain has to go through a total identification process before gaining access to the platform, avoiding illegal activities is much easier. You can easily filter out any unwanted users from the network.
As already mentioned above, public blockchain doesn’t have a good history when it comes to protection from illegal activities. Since you won’t want any type of uncontrollable illegal activity in your company, a private blockchain is always a more secure option to opt for.
When everyone on the private blockchain has a hot unique identity, no one will be able to get away with an illegal act.
After going through all the features of a public and private blockchain, you should now be able to easily decide between the two.