The differences in public vs private blockchains offer up some significant aspects that users should be aware of. While they have a lot in common, the two concepts can be applied in very different ways. Below, we examine both types of blockchain and what they offer.
Public vs private blockchains: the similarities
Before we go through what sets these two types of blockchain apart, it’s useful to establish what they have in common.
Both public and permissioned blockchain share these characteristics:
- Decentralised peer-to-peer network
- Consensus-reaching mechanism
- Uncompromised data integrity
A blockchain is the result of the combination of three separate technologies: cryptographic keys to ensure the security and privacy of users, a shared distributed ledger to guarantee full availability of data, and the network servicing protocol required to protect the accuracy and immutability of the data.
The difference between public and permissioned blockchains rests on how they employ distinct mechanisms while staying true to the characteristics described above.
What was the first public blockchain?
Bitcoin was the first blockchain to combine the three aspects outlined above. As a public blockchain, it is entirely open to any users who want to become nodes on its network.
These users can participate in Bitcoin mining by solving increasingly complex mathematical problems to certify the accuracy of Bitcoin transactions. Once a miner has found the solution, and it is accepted by the other nodes, that miner will receive a reward for their efforts. That is the consensus protocol at work.
That reward will also act as an incentive to entice more nodes to join the network which is necessary because miners are free to leave the network and come back at any point. However, this process consumes a lot of electricity and requires a great deal of computational power to match the increasing difficulty of the problems generated by the network’s consensus protocol. For businesses interested in adopting blockchain technology, that is a crucial factor to keep in mind.
Provided they follow the rules, anyone can join Bitcoin’s network where they’ll maintain the shared ledger by validating transactions. Due to this setup, it is also known as a permissionless blockchain. It is fully open, decentralised, and resistant to any attempts to falsify its data. For some, Bitcoin is the only genuinely public blockchain.
Permissioned (or private) blockchains
It’s easy to understand why a public blockchain might not be the best choice for any organisation that wants to keep its data private. It wouldn’t make sense to keep their information on an open network that anyone can join as it would no longer be secure.
But we can see that companies like IBM or JP Morgan are pouring millions into their R&D departments to develop blockchain solutions, which means they have found a way to make blockchain work for them. This is n the form of permissioned (or private) blockchains.
As the name indicates, this type of blockchain requires permission to access, write, and validate the data to be granted by either the entity that started the network or the set of rules built into the network.
Any participants will have to be invited, and each participant may have varying levels of access regarding how they’re allowed to view information and interact with the rest of the network. Once they’re part of the network, these nodes will work to maintain the integrity and immutability of the blockchain.
Ripple or IBM’s Hyperledger Fabric are great examples of this type of technology. It offers more flexibility than permissionless blockchains as developers can combine different types of permission to condition access to the information on the network, to serve their specific purposes.
It is also particularly relevant for industries where confidentiality is of particular importance, which is why several companies in the financial and healthcare sectors are analysing how to incorporate permissioned blockchains into their business model.
Public vs private blockchains: Is one better than the other?
While Bitcoin’s public access and intense resource consuming validation protocol form a compelling case for permissioned blockchains, its supporters argue that those characteristics are what defines a blockchain.
Since permissioned blockchains don’t rely on the traditional mining process employed by their public counterparts, the “blockchain purists” don’t consider those that depend on it to be real blockchain projects like Bitcoin. As they aren’t entirely open, they don’t respect the cornerstone principles of blockchain. This is more of a political disagreement than anything else.
Given that public and private organisations have an interest in keeping their information contained within their networks, they will invariably opt for permissioned ledgers but that doesn’t mean there is no use for public blockchains. Only time and the developers’ cumulative elbow grease will tell.
What next?
Want to know more about public vs private blockchains, the technology in general, or how it works? Read our definitive series to all things blockchain.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.