Public Blockchain vs. Private Blockchain: What’s the Difference?

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Blockchain technology has taken the tech industry by storm during the past few years, offering businesses a brand-new, highly secure way of handling transactions. We’re bound to see more and more blockchain applications appearing all over the place across practically every industry. 

But since the blockchain ecosystem is developing at a rapid pace, sometimes it’s hard to keep up with the recent trends. In this article, we zoom in on two different types of blockchain that are essential to understanding what the technology can potentially offer to both businesses and consumers. 

Read on to find out everything you need to know about public and private blockchains and explore their key similarities and differences.

Let’s start with the basics: What is blockchain? 

Blockchain is a decentralized and distributed public ledger – a continuously growing list of records stored in the form of blocks. These blocks are connected to each other with the help of cryptography – that’s what keeps the security and confidentiality of the transactions. 

In the common understanding, a blockchain is a series of immutable and tamperproof records of data that aren’t managed by a central authority but by a cluster of computers. Every single copy of the data is shared through the network is visible to all the participants. That’s why users are accountable for their actions – a perfect reflection of the democratic system. 

This definition doesn’t account for the differences between the two key blockchain types: public and private.

What is public blockchain? 

First and foremost, a public blockchain is permissionless. Practically anyone can join the network and participate, read, or write within that blockchain. A public blockchain is also decentralized, which means that there isn’t a single entity that controls the entire network. 

All the data on a public blockchain are fully secure since it’s impossible to modify or alter it once validated on the blockchain. Some well-known examples of public blockchains are Bitcoin and Ethereum.

What is private blockchain? 

A private blockchain, on the other hand, is a permissioned blockchain. It works on the basis of access controls that restrict users who can participate in the network. Most of the time, there is one or more entities that have full control over the network. As a result, we need to rely on third parties to carry out transactions. 

In a private blockchain, only the entities that participate in the transaction will have any knowledge about it. Others simply won’t be able to access it. Examples of private blockchains are Hyperledger Fabric by the Linux Foundation, R3 Corda, and Quorum.

Public vs. private blockchain – Similarities

Over the years, many variations of blockchain have emerged, so keeping up with the terminology is hard – especially since public and private blockchains share many similarities. 

  • For starters, they’re both decentralized peer-to-peer networks where every single participant keeps a replica of the shared ledger of digitally signed transactions. Both public and private blockchain keep the replica synchronized through the protocol of consensus. 
  • They both provide guarantees on the immutability of the ledger, even if participants are malicious and manage to enter the blockchain. 
  • They both function as an append-only ledger where records can be added, but they can’t be altered or deleted. That’s why they’re called immutable records. 
  • Each network node in both private and public blockchain has a complete replica of the ledger because they’re both decentralized and distributed over a peer-to-peer network of computers. 
  • In both cases, a record’s validity is fully verified, preventing any tampering with the records. 
  • Both types of blockchain rely on users to authenticate edits to the distributed ledger and help to create a new master copy that can be accessed at all times.

Public vs. private blockchain – Key differences

Now that you know the fundamentals of these two blockchain variants, it’s time to take a look at how they differ from one another. 

Degree of control

When it comes to control and authority, these two types of blockchain are very different. While the public blockchain is decentralized and no authorities monitor the network, the same can’t be said about private blockchain. 

In a public blockchain, the power is distributed across all the users. In a private one, the control is partially decentralized because there exists a single authority that sits at the head of the network and manages everything happening within the system. This is something you’ll never see in a public blockchain.

Access

This is another point of difference that you should know. In a public blockchain, you won’t find any access restrictions. That’s why it’s such a good match for open-source platforms. It’s open to literally everyone – every user can check the ledger whenever they want and take part in the decision-making process. 

In a private blockchain, you’ll find many limitations related to access. This type of blockchain is usually reserved for people who are authorized to enter the network. It’s definitely not open to the public. 

Transaction speed

This is a critical issue in the debate around public vs. private blockchain. In a private blockchain, only certain nodes take part in transactions. This means that resources never get too tight and maintain a constant transaction speed. 

If you work with a public blockchain, you’ll find no limit to the number of nodes. So, if a user requests too many transactions, the process might slow down. However, initially you will find both networks operating at the same speed. 

Charges on transactions

This point is related to the previous one. Since in a public blockchain resources are allocated on the basis of user number, the excess number of nodes significantly slows down the performance. As a result, processing transactions takes much more time and raises its cost. 

This problem is resolved in private blockchains. Since it has a fixed number of resources for the user group, an increase in the number of transactions doesn’t lead to more expensive processes. 

Consensus

If full consensus is important to you, you better go to a public blockchain. Every user has equal rights when it comes to the network’s nodes and their permissions. And each user who joins the network can access the ledger and contribute to it. 

This isn’t true for a private blockchain where you find a central authority that decides who can join and who cannot. The same goes for consensus – it doesn’t play an important role in this partially decentralized blockchain. 

Control over data

Another point of difference is the data handling capabilities offered in public and private blockchains. In a public blockchain, you can read or write on the common ledger. And once data is written and documented, there is no way to undo that. You can’t alter the data either. 

This isn’t true for private change where the single governing entity can write on the ledger and use a limited set of nodes to do that. 

Immutability

Immutability is a critical requirement for blockchain systems. It’s what makes blockchain so special in terms of the security and authenticity of the data. 

It might seem that the open nature of public blockchain makes it less safe. But once a block has been written onto the blockchain or inserted into it, there’s no turning back. That’s why data breaches are much less likely to occur. After all, a copy of the data is stored in every single machine participating in the blockchain. 

On a private blockchain, data is partially immutable. The decentralized authority in charge of the change might have the right to add or remove blocks according to requirements. And it doesn’t need to achieve consensus about that among users. 

System efficiency

When it comes to system efficiency, you’ll find some critical differences between public and private blockchains. For starters, a private blockchain is more stable because it works with a limited number of nodes and transactions. 

In a public blockchain, all the nodes are available to all users. That’s why the number of processes can increase without any control and, as a result, slow down the entire network. This, in turn, might hamper the efficiency of the entire system. 

Conclusion

Public and private blockchains come with their distinguishing pros and cons. The type of blockchain you choose depends on many factors, from your application to business objectives. 

If your company is looking for a completely transparent, immutable, and decentralized system to work with larger communities, public blockchain is a sensible option. But if what matters most to you is transaction fees, security, speed, confidentiality, or compliance, then a private blockchain is a better pick. 

These technologies are constantly evolving and addressing their shortcomings, so keep a close eye on them, and you’re bound to find a way to build a blockchain-based platform that works perfectly for your business.

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