What is the difference between a Private and Public Blockchain?
Distributed Ledger Technologies, specifically blockchains, are a branch of technology revolutionizing the way banks, hospitals, the government, the internet and even currency works. Since all these services operate on different levels of security, blockchains have been altered to fit their needs. This has resulted in the creation of private and public blockchains.
The easiest way to differentiate between them is to check whether new members are required to pass certain conditions to join the blockchain network. In most public blockchains, there are no conditions. Anyone is free to join the network, be a node, mine, and keep a copy of the blockchain’s data. Private blockchains, however, require all new participants to be invited into the network. After that, they must be verified and validated by the network owner or operator. The conditions do not stop there. Participants cannot automatically mine or work with the consensus protocol. The operator of the blockchain alone decides the abilities of each participant.
Secondly, in a private blockchain, the operator has the power to change or delete saved transactions in the blockchain and there is no anonymity of participants. For this reason, most private blockchains do not even require miners to solve a puzzle and execute the consensus protocol because the chain is closed to the outside world. The only threats that the chain faces are internal and since every participant has to be identified, the attacker can easily be located and reprimanded. Public blockchains do not have a single authority that can manipulate the contents of the chain. For an alteration in a public blockchain, 51% or more of the nodes participating in the network have to coordinate a malicious attack. Since this is practically impossible in large blockchains, it can be said that they are immutable. Additionally, public blockchains have consensus mechanisms in place that take various amounts of time or energy to be executed. Therefore, to successfully carry out an attack, these time and energy constraints would be impossible to overcome before the nodes of the blockchain catch on and rectify the error. These features are why blockchains are rightly-called the most secure record-keeping ledger technology ever created.
One of the main reasons cryptocurrencies like Bitcoin gained popularity is because of the incentive they offered users that mined for them. Miners were compensated with tokens that could eventually be exchanged for real capital. This is another characteristic of public blockchains as participants need incentives to continue using and working on the blockchain. Private blockchains are often used out of necessity and are not incentivized like their counterparts.
Finally, blockchains have a third level of privacy — permissioned. Since private and public blockchains have stark differences and strict sets of characteristics that are not all required for many services, there was a need for a blockchain that fell in the middle ground. One that allowed for customization of features, or in other words, one that allowed the creator to pick the features they want to implement in their blockchain from the array of features private and public blockchains offer. These types of blockchains are called permissioned.
Since the industry for blockchain applications is growing and there are so many fields where it can be implemented, it is important for blockchain developers to know which type would best fit their purpose — public, private, or permissioned.
