Public, Private and Permissioned Blockchains
Basic Q&A With the help of Mirko Alic, one of our Blockchain specialists
- What are public, private and permissioned blockchains
We can separate this categorization in two: private vs public and permissioned vs permissionless.
A public or open blockchain it’s the one in which a person can be part of, for example, by downloading and running a node.
In a private blockchain, we are still talking about a ledger. But in this case, Owners of the blockchain decide who will be part of the network. In this case, if I am part of a federation or a group of companies and we decided to create our own blockchain, We are the one who verify and confirm new members that can participate in our network.
The other variable defines the accessibility level. In a permissionless blockchain anyone can read the state or perform modifications. Every participant can take care of these tasks, following a certain set of rules defined by the network protocol. Also anyone can be involved in the protocol evolution. We could say that this type of blockchain it’s self-governed by its users.
A permissioned blockchain is a kind of network where there are roles and certain rules, so all members can access but not anyone can participate. For example, anyone can audit but only a selected group of users are allowed to write new data or to validate transactions.
2. How does each of these blockchains work?
In the case of the public and permissionless blockchain we can use an example: Bitcoin. This is a public network that basically allows a free flow of money and eliminates all kinds of intermediaries, because by being self-governing it does not need intermediaries.
An example of a private and permissioned blockchain is IBM Food Trust, which allows different participants of the supply chain to share information about food from farm to shelves. Companies can have their own node if they want and information is stored in the network so members can share information ownership but without losing confidentiality.
In public and permissioned blockchains we can put Cardano as an example. Where anyone can own and transact ADAs (Cardano’s cryptocurrency) but, up to today, there is a federated group of nodes that are in charge of validating all transactions.
A network can be private at first, then permissioned and gradually grant more and more powers until it becomes a public network or can be always private. It depends on business needs.
3. Benefits and disadvantages
The greatest benefit of a public blockchain is to aim to be decentralized, operating with democratization without an authority figure or the need for third parties. It is also important to see its disadvantages. Maintaining a public network is very complex in terms of governance and could be very expensive in terms of computing energy expense and is generally the focus of attacks or counterfeiting. Having a public network is not particularly easy.
On the other hand, the private blockchain is a controlled environment that allows innovation without the risk of network attacks, since it ‘s up to the creator to design and apply the rules. It is cheaper to manage compared to a public one. Its major disadvantage is that it is not accessible to the general public, although this is a benefit for companies wishing to work with this structure.
Permissioned blockchains can be especially useful in the case of consortiums, where participants can validate information: hospitals validating medical records, universities validating degrees, and supply chain models are some examples.
4. To implement a blockchain solution, when would you choose a public blockchain and when a private one?
It always depends on the business model and the value you are looking for introducing blockchain technology.
If you want to put focus on transparency, you should probably go for a public blockchain, for example, to store evidence that anyone can audit.
If you want to control your operational costs, you will need to go for a private implementation.
If you want to reinforce security and immutability, a permissionless blockchain like bitcoin is more secure than a permissioned one where the network control relies on a few nodes.
