Private vs Public Blockchain: What is the Difference?

One of the questions we hear most is about the differences between public, private, and permissioned blockchains. Cryptocurrencies like Bitcoin or Ethereum are built on public blockchains and understandably, that is what most people are thinking about when they talk about blockchain. But there are key distinctions between private, permissioned, and public blockchains. Understanding these differences is critical to appreciate how the technology can best be applied beyond crypto to real-world business applications. In public blockchains, anyone can freely access the chain and the entire ledger of transactions is transparent for all to see. A public blockchain is also fully decentralized – there is no single entity that controls the network. This wide decentralization and complete transparency mean a public blockchain is highly secure and fully immutable. Public blockchains are also anonymous. This adds inherent privacy for users, but it can also attract criminals who seek to hide their activities.

Most companies need a private (closed off to the organization only) or permissioned (outside users can be invited in) blockchain. It will technically mean slight security sacrifices – since it cannot be fully decentralized, nor fully transparent. But an enterprise needs control and privacy for its proprietary activities. A company needs to impose rules and structure that everyone participating in the blockchain must follow; it needs to limit roles, access and responsibilities.?

For example, on a public blockchain, anyone can buy and sell cryptocurrencies without having their identity revealed. In a permissioned, blockchain the business knows exactly who has what type of access to the blockchain and controls what they are allowed to do.??

As a result, private and permissioned blockchains do not need to utilize the scale of mining that a public blockchain does. The consensus protocols or data validation efforts are restricted to those who are allowed to participate in the network and help maintain the shared ledger. Consequently, they have a much lower energy consumption. The amount of power necessary to safeguard and maintain a public blockchain is a common criticism of the technology.?

At the end of the day, whether the blockchain is public, private or permissed, all variations provide a secure, trusted, shared digital ledger. Each type of blockchain can store information that is distributed across a network and allows transactions to be recorded and verified electronically.?

Permissioned blockchains give companies the best of both worlds. A stable, secure, trusted means of managing processes with a high degree of efficiency and privacy. As with any technology, public and private blockchains will continue to evolve and grow as more and more industries discover the power of blockchain to give their operations a zero-trust digital foundation.???