Private vs. Public Blockchain or Permissioned vs Permissionless

Nena Vuckovic
theblockbox
5 min readSep 16, 2019

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Regardless of Bitcoin’s highly volatile cycles it has gone through since its birth in 2009, we can thank this digital asset as it shed the light on the most disruptive technology of the 21st century — Blockchain — which not only stayed within the field but also gained wider adoption across various industries.

It all started with the vision of putting the control back in the people’s hands in terms of digital currency. However, nowadays Blockchain is facilitating major centralized systems but has also automated numerous FinTech aspects such as transactions and the implementation of improved procedures.

Decentralization, which is the core concept of a blockchain, means that power is in the hands of the participating parties. Everyone in the network can exercise equal authority and can read and write transactions on it.

Nevertheless, this property didn’t get through to some organizations and enterprises that handle sensitive information. This has prevented them from using blockchain for a long time. But in the light of the huge benefits that blockchain may offer to these enterprises, industry stakeholders built a blockchain that functions with controlled decentralization, and they named it as private/permissioned blockchain.

Even though private blockchains marginally deviate from the true notion of blockchain, they have led to many conglomerates joining the blockchain bandwagon, thus sparking a wider adoption of the technology.

To better understand how private blockchains differ from the classical public blockchains, let’s dive into more details.

Spotting the Difference

Accessibility

Public blockchains, as the name suggests, are simply that. Public. All participants on a public blockchain system have access to the data stored on the blockchain. They also have an equal opportunity to become a node or a miner on the network in order to validate transactions.

In contrast, a private blockchain is a so-called “distributed ledger” with a central entity governing the power to control as to who can view or validate transactions on them. There are strictly defined criteria which an individual or an entity needs to obey in order to become a node on a private blockchain network. The process often comes with a KYC process that seeks complete validation of a node’s identity.

Transaction Speed

Another chief alteration between a private and a public blockchain is their scalability, often referred to as the transaction speed. Public blockchains usually have a relatively slow transaction speed in comparison to the private blockchains.

A blockchain has three major building blocks: security, decentralization, and scalability. Blockchain enduring the power in all three of these is yet to emerge. This creates a small paradox, as security is traditionally an integral part of a Blockchain due to its cryptographic design, so it’s either of the two remaining aspects that are fractionally compromised to leverage the other one.

To put this in perspective, consider the Bitcoin and Ethereum blockchain. These two are the most known public blockchains with utmost decentralization. But this decentralization results in transaction speed between seven to 14 transactions each second, which is extremely slow.

Now consider the Hyperledger Fabric, which is a private blockchain. It is said to deliver a transaction speed of over 3,500 per second.

What About Public Blockchains with a High Scalability?

It can be reasoned that there are also those public blockchains with a transaction speed of over 2,000 to 3,000 transactions per second. But these are only public in the sense that anyone can view the transactions recorded on the blocks while the power to validate those transactions are still concentrated in a smaller, selective group of nodes.

This is perfectly illustrated in the case of the EOS blockchain which uses a DPoS (Delegated Proof of Stake) consensus mechanism, where only 21 block producers/nodes represent a greater number of stakeholders and are responsible for validating transactions on the network.

What empowers the Public Blockchain to gain an edge?

Simply put, they’re the truest of blockchains. In any case, to sum it up precisely, here are the merits that public blockchains encompass:

· Readily available: As prior mentioned, anyone can participate in a public blockchain network to view and validate transactions

· Decentralized and Distributed: No central body controls the processes of a public blockchain, which makes it perfectly aligned with the ethos of a blockchain.

· Immutable and Secure: To validate a transaction on a blockchain, more than 51% of the nodes must approve and validate the transaction. These nodes are random individuals and entities spread across the globe. So, once a transaction is recorded, it becomes impossible for another 51% or more nodes to agree to alter the data of a particular block at the same time.

Enterprise-centric technology — Private Blockchain Advantages

As already mentioned, private blockchains have become the go-to blockchains for enterprises, especially those in the FinTech industry. Let’s see why:

· Private (of course): Especially in the past couple of years, enterprises took a big initiative in preventing public display of users’ personal data. This makes private, that is, permissioned blockchain a perfect fit for them.

· Highly Scalable: Private blockchain, owing to the use of only a few nodes, can handle a high number of transactions each second.

· Affordable: Unlike public blockchains, private blockchains mostly govern their own nodes and they do not have to pay out incentives to miners validating the transactions.

Final Note

Both private and public blockchains must be appraised as two different systems altogether, and yet their potential to disrupt a plethora of industries has started to take shape. Regardless of their strengths and weaknesses, private and public blockchain development is being continually fine-tuned to meet the demand of the industry leaders in order to put them in the right use.

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