Private vs Public Blockchain: How Do They Differ

Public vs. private blockchain has been a topic of discussion ever since the invention of blockchain technology. Understanding the key differences between these two in an enterprise setting is crucial.

Generally, firms searching for the ideal blockchain features type for their solutions heavily rely on public and private blockchain examples. You may question how you can identify the difference between the two. That is valid as many people are still confused and can't quickly identify one from the other.

Therefore, to make things easier for you, we will discuss in detail what public and private blockchains are all about. If you know their similarities and differences, selecting the right one for your needs will be easier.

What is Public Blockchain?

A public blockchain is also known as a permissionless blockchain mainly because this type of blockchain network is open to the public and allows anyone to join the core activities. This means that anyone within the public blockchain network can write, read and audit all ongoing activities. In addition, anyone can participate in the consensus process and see the ledger.

Public blockchain networks validate transactions using Proof of Work or Proof of Stake consensus algorithms. There is no doubt that it is a "Public" network in the true sense of the word.

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The public blockchains represent the ideal model that makes the technology industry profitable. Moreover, the public blockchain architecture makes it possible to download the protocol at any time without requiring permission from anyone.

There is no need for a third party with a public blockchain. As a result, the ecosystem of the network flows naturally. Everyone uses the flow path, yet no one controls it. The digital public ledger is self-governing, decentralized, and autonomous.

Advantages of Public Blockchain

Listed below are some of the main advantages of the public blockchain.

Transparency

Blockchain transactions are entirely transparent and verifiable since they are built using open-source programming codes. Users of the network share a common consensus.

Many consider blockchains the new monetization system because they are transparent, and no one controls them. And add to that, public blockchains are crucial to advancing the future of decentralized identity (DID).

Decentralized Structure

No central authority is involved in a public blockchain's network infrastructure. All nodes in the system will have their copies of the ledger. They can efficiently update the ledger using consensus algorithms.

Decentralized blockchains offer the actual benefits of being decentralized since there is no need for a central authority at any point.

Open-source Network

Anybody can join and contribute to public blockchain networks, as they are open-source. Rather than going through a central authority, you can handle transactions independently, which makes it much more democratic.

This characteristic is advantageous because it shows that the project has the support of a significant portion of the community. By adopting protocol changes, most community members will have an easier time deciding how to proceed.

Secured Network

Even though a public network is an open-source network, it is secured. The recording of transactions under the public blockchain is immutable. The term immutable refers to a transaction that cannot be changed or deleted; it can only be added to a chain. Because the majority rule ensures a transaction is valid, blockchain is resistant to outside interference.

The safer a blockchain is, the more decentralized it is. When there are more users on a network, hackers have a more challenging time organizing a group and compromising it.

Disadvantages of Public Blockchain

Power consumption

Public blockchains are generally disadvantageous due to the high energy consumption required to maintain them. Some algorithms function on a Proof-of-Work model on public blockchains such as Bitcoin.

Participants in the network compete to validate the information and receive a reward for allowing the network to use their processing power as part of a consensus mechanism. It is important to note that not all blockchain networks utilize an energy-intensive validation process, so they do not consume enormous amounts of electricity.

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Scalability

Public blockchains have scalability issues due to their transaction speed. Blockchain networks are burdened with more transactions as the number of users grows.

Privacy Issues

Anyone can view the amounts and addresses associated with transactions on public blockchains. As a result, there is a lack of complete privacy and anonymity.

The data is publicly available, which means anyone can read or view it. The public nature of all transactions compromises user privacy. The user's anonymity is compromised as soon as the address owners become known.

What is a Private Blockchain?

Private blockchains or also known as 'permissioned' blockchains, is usually run and operated by an entity (the "trusted intermediary"), unlike a public blockchain, which anybody can access; anyone can download the software, form a node, view the ledger, and interact with it.

Because an entity runs a private blockchain, someone is controlling the network. The network's private nature could control which users can execute the consensus protocol that decides mining rewards and rights.

Furthermore, a private blockchain may only be maintained by a small number of users. It is up to the owner or operator to override, edit, or delete the necessary entries on the blockchain.

Advantages of Private Blockchain

Full Privacy

As the term implies, private blockchains are concerned with privacy. With a private blockchain, you have a distributed ledger that's a closed database protected with cryptographic concepts and your company's needs.

Only if you have permission will it be possible to run a full node, make transactions, and validate or authenticate blockchain changes.

In a private blockchain, data is kept confidential, so the public cannot access it. Additionally, you can customize the consensus algorithm to suit your needs.

High-Level Security

As compared to public blockchains, private blockchains are more secure because they require authentication to read the information. In a private blockchain network, participants are only allowed to join after receiving an invitation that verifies their identity.

Better Transaction Speed

Transactions on the private blockchain are also faster than on the public blockchain. Having fewer nodes participate in the ledger but distributing them locally improves performance.

The maximum number of transactions a public blockchain can process is only seven per second. In contrast, a private blockchain can handle up to 100 transactions per second.

Integration

Integrating the private blockchain with other chains or databases is accessible without having to deal with complicated integration processes.

Integrating public blockchains with other systems is challenging even though they are fully decentralized. Third parties can audit private blockchains, making it a triple-entry accounting system.

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Disadvantages of Private Blockchain

Centralized System

As a result of the centralized system, third-party management systems are often over-relied on, and the same few industry players tend to dominate the landscape. Furthermore, you won't have the freedom of movement the public network offers.

Scalability

Similarly to public blockchains, private blockchains are limited in scalability since changes must be approved by the governing body, causing delays in transactions and consensus.

It is also important to note that there may not be any consensus on a private blockchain, only the immutability of entered data, unless an operator or administrator can make changes.

In Conclusion

Public and private blockchain systems are constantly improving and addressing their drawbacks. Because of this, selecting the ideal solution or even creating your blockchain-based platform might be challenging.

Choosing the suitable blockchain for a specific situation depends on knowing the difference between a private and public blockchain. Each has its own distinctive features, advantages, and disadvantages. It depends primarily on the application and its purpose, which suits you best.

Ideally, you should choose a public blockchain if your enterprise wants a decentralized, transparent, and immutable system to work with a larger community.

On the other hand, choosing a private blockchain is the best option if your company is concerned with security, cost efficiency, speed, confidentiality, and compliance.

Hopefully, this blog post will enable you to make an informed decision about how to approach blockchain technology for the specific purposes of your organization. But if you wish to know more about blockchain technology, you can check out the blockchain courses available in India.

Pixeltests is also offering blockchain courses here.

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