Private blockchain or public blockchain? Analysis…

After having explained the distinction between Bitcoin and the blockchain many times, a question comes up very quickly: what is the difference between a public blockchain and a private blockchain?

iStock: kasezo

Many blockchains have emerged over time and the terminology is often opaque. This is partly due to the many similarities between private and public blockchains:

  • Both are decentralized peer-to-peer networks, where each participant holds a copy of the distributed ledger containing digitally signed transactions.
  • Both maintain synchronized copies through a protocol known as consensus.
  • Both offer a guarantee on the immutability of the distributed ledger, even when certain participants are clumsily at fault or willfully malicious.

Also Read: Hack This Bitcoin Wallet and Its Owner Will Give You $250,000.

The only difference between a private blockchain and a public blockchain is the answer to the following question: Who participates within the network, runs the consensus protocol, and maintains the distributed ledger?

public blockchains

A public blockchain is a network that is completely open and anyone can join the network and become active in it. The network usually has a mechanism that encourages more participants to become part of the network. Bitcoin is the largest public blockchain network in production today.

The main disadvantage of a public blockchain is the total amount of computing power required to distribute the shared ledger at scale. More particularly, in order to obtain a consensus, each node of the network must solve a highly complex cryptographic problem and therefore, very consuming of resources (in particular energy…).

This mechanism is called proof of work (Proof-of-Work Where PoW) and aims to validate the inter-node connection and synchronization.

Another disadvantage of a public blockchain is the level of transaction privacy. This one is weak because it only supports a slight level of security. Sorry to disappoint you but no… Bitcoin is not anonymous!

These two reasons are one of the sources of explanation for the number of companies using public blockchains… They very much prefer to move towards private blockchains.

Private blockchains

A private blockchain is a network which, to join it, requires an invitation to be validated: either by the creator of the network or because it respects a set of rules put in place by the creator.

Thus, private blockchains generally set up a “permitted” network. This therefore imposes restrictions on who is allowed to participate within this network.

Access control to this network can be done by the following methods: existing participants decide who will be future entrants; a regulatory authority issues licenses authorizing participation or a consortium is assigned this role.
Once an entity has joined the network, it plays a role in maintaining compliance with access conditions in a decentralized manner.

L’HyperLedger Fabric of the Linux Foundation is one of the many examples of “permissioned” blockchain implementations designed to meet professional needs.

This type of permissioned blockchain model offers the ability to leverage over 30 years of technical resources to gain competitive advantages. In particular, digital identity is worked on in different aspects in order to solve problems of logistical traceability, transparency and difficulty of exchanges in the financial world, transfer of patient-health care provider data, etc.

Indeed, only the entities concerned by the transaction will have access to the information concerning it. If: “private blockchains address problems not solved by public blockchains”. So the reverse is also true.

How to obtain a regional, national or even international consensus concerning a crypto-euro? What would be the applicable taxation(s)? Which organization(s) authorize(s) to bring in new participants? Why would only certain participants be allowed to join the network?

This is one of the main reasons why I think public blockchain applications are more disruptive than private blockchain applications. Bitcoin is the perfect example because Satoshi Nakamoto created the first public blockchain, which later led to the emergence of private blockchains.

Be careful, this does not mean that all public blockchains represent a real technological interest and that private blockchains are useless, far from it!

Today it is up to us to grasp this technology and give it the meaning we want to improve our digital exchanges.

And you? What type of blockchain do you prefer? For what reasons ?


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Private blockchain or public blockchain? Analysis…

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