Public vs Private Blockchains: Key Differences and Use Cases by Sophia Lopez Coinmonks

A blockchain is a time-stamped series of immutable (tamper-proof) record of data which is not managed by a central authority but managed by a cluster of computers. Each and every data shared on this network is visible to all participants and each and every one of them are accountable for their actions. While it’s not decentralized as blockchain technology originally intended to be, a private blockchain has one setback – it’s more susceptible to malicious attacks. In many cases, private blockchain networks are centralized and rely on very few nodes. This way, hackers can take over and gain control of the entire network more easily, putting a company at great risk. Another significant advantage of public blockchains is that they are compatible with https://www.xcritical.com/ any type of business application due to their open-source nature.

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Businesses are already using blockchain to store records public vs private blockchain of medical transactions, documentation, identity information, supply chain records, etc. Even more phenomenal is that anyone in any part of the world can access the blockchain. As long as they have internet access, anyone can easily access instant global transactions on the blockchain.

• This allows for faster validation times compared to PoW in public blockchains.
• Public blockchains allow anyone to view transaction amounts and the addresses involved.
• That said, a private blockchain network is excellent for businesses prioritizing scalability and control.
• You’ll discover their key differences with real-world examples and a clear breakdown of their advantages and disadvantages.
• Currently, cryptocurrency transactions are the primary use case for most public blockchains.

Public vs Private Blockchains: Challenges and Gaps

Instead, everyone who joins helps to keep the information accurate and secure. This was perceived as the solution to the “double spend” problem hindering the development of digital cash and served as the basis for the Bitcoin cryptocurrency. These are answers to some of the most commonly asked questions about public and private blockchains.

Private vs Public Blockchains, what is the difference ?

While there might be some ongoing development and upgrades to the core protocol, these changes typically require widespread consensus among users and miners on the network. The first miner to crack the code earns the right to add the block to the blockchain, receiving a reward in the process. This competition ensures the security of the network since any attempt to tamper with the blockchain would require immense computational power. Immutability in blockchain refers to the inherent characteristic of a blockchain ledger where once data is added, it cannot be altered or deleted. It’s kind of like a VIP entrance – only those who meet the criteria get to join the network.

Difference between Public and Private blockchain

The private blockchain vs. public blockchain exposition will best be understood with the analysis of the examples of both. This section will be dedicated to discussing the examples of these unique types of blockchain, and the companies that are utilizing them. All types of blockchains can be characterized as permissionless, permissioned, or both. Permissionless blockchains allow any user to pseudo-anonymously join the blockchain network (that is, to become “nodes” of the network) and do not restrict the rights of the nodes on the blockchain network. Blockchain technology has garnered significant attention over the past decade, thanks to its potential to revolutionize industries and processes across a wide range of sectors. At its core, blockchain is a distributed ledger technology that enables secure, transparent, and tamper-proof record-keeping.

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Since participation is restricted and the number of validators is limited, transactions zip through the system much faster. However, this rigorous verification process can lead to limitations in terms of efficiency. This approach offers greater security and privacy for sensitive data, making it valuable for businesses dealing with confidential information or intellectual property. However, it also raises concerns about the potential manipulation, as a limited group controls who sees the data. Let’s dig deeper into the discussion of public VS private blockchain and discover how they can empower your specific needs.

Do Organizations Need to Use Private Blockchains at All?

In the case of other hybrid solutions, using a combination of both public and private blockchains may represent viable solutions for businesses. Anyone can join the network and read, write, or participate within the blockchain. What is the most outstanding difference between public vs private blockchains? The most significant difference between them is their scalability, but in the end, deciding which one to use will depend on your particular use case and priorities. If you prefer complete control over your network and to process thousands of transactions in a matter of minutes, you might want to stick to a private blockchain. However, if you prefer an open-source environment and anonymity is a priority over scalability, your go-to option is a public blockchain.

Key Differences Between Private and Public Blockchains

Furthermore, this particular feature of the blockchain technically means that the blockchain is immutable. The only rare case that can change this occurs if a hacker gains a majority of the network’s “hash power” (51%). A private blockchain is managed by a network administrator and participants need consent to join the network i.e., a private blockchain is a permissioned blockchain. In this type of blockchain only entity participating in the transaction have knowledge about the transaction performed whereas others will not able to access it i.e. transactions are private.

Also, while more participants in the blockchain provide more security in the public blockchain vs private blockchain, it significantly slows down transaction time. Compared to private blockchains, the scalability issues with public blockchain burden the network with its many transactions. Finally, another appealing feature of a public blockchain vs private blockchain is anonymity. A public blockchain spreads a transaction across a public ledger as bits of data, so it’s impossible to trace the identity to just one user. The purpose-built and exclusive nature of private blockchains actually render them more insecure than the public blockchain.

Private blockchains are only partially decentralized because public access to these blockchains is restricted. Some examples of private blockchains are the business-to-business virtual currency exchange network Ripple and Hyperledger, an umbrella project of open-source blockchain applications. A consortium blockchain is a type of blockchain where multiple organizations or entities come together to form a network, and each participant has a role in verifying and recording transactions on the network.

To help you see the clearer picture, let’s check out into public blockchain examples first. Before joining the network, participants must pass a security check by the governing body. Continuing our exploration of public VS private blockchains, we now turn our attention to private blockchains. These types of blockchains offer a more controlled and restricted environment. Understanding the nuances of public VS private blockchains is crucial for appreciating the full potential of this technology.

In some cases, public is clearly better; in others, some degree of private control is simply necessary. While public blockchains offer transparency and immutability, they also raise privacy concerns as every transaction is recorded on a public ledger that is visible to all participants. While the pseudonymous nature of blockchain addresses provides a degree of privacy, it is still possible for sophisticated users to trace transactions and identify individuals or organizations involved. For example, blockchain analytics firms can analyze transaction patterns and link addresses to real-world identities, compromising user privacy.

Unfortunately, most discussions about public vs. private blockchain don’t get very far. However, the nexus of the argument that private blockchains are needed because “the public blockchain is public, duh! The consensus mechanism is a process through which all the nodes in a blockchain network agree on the ledger’s contents. It ensures the validity and security of transactions and prevents problems like double-spending. Public blockchains are transparent, meaning all transactions are visible to anyone on the network. Private blockchains offer more privacy because only authorized users can see the transactions.

She is genuinely interested in the tech industry and loves to bring value via content and storytelling. In her free time, Ksenia enjoys traveling, baking and studying medieval history. Resource-intensive and expensive proof-of-work consensus for transaction verification means that despite its popularity, bitcoin is still not a viable replacement for traditional currencies. If you’re a trader, you’ve probably already encountered these issues in one form or another, either because of network sluggishness or high fees accompanying trades. Amilcar has 10 years of FinTech, blockchain, and crypto startup experience and advises financial institutions, governments, regulators, and startups. If you like learning about blockchain technology and want to know how to make a Web3 website, among other projects, check out our Moralis Academy.

For example, a public blockchain could be used to track the movement of medical devices and medications from the manufacturer to the end user. Each step of the process could be recorded securely and transparently on the blockchain, enabling greater accountability and trust in the supply chain. Here is a comparison of how Dock differs from other blockchains that provide Verifiable Credential and digital identity services, some of which are private blockchains.