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The internet revolutionized our world, breaking down barriers and enabling instant communication. Similarly, blockchain, built on the power of the internet, offers a more secure and decentralized digital landscape.
Think of the internet as a global village, open to everyone, anytime, without borders. Now, envision blockchain as the robust security system safeguarding this village. It’s more than just a trending term; it is reshaping industries.
While the internet brought swift online banking solutions, blockchain is setting new standards for the financial sector and beyond. Currently, around 40 million people worldwide utilize blockchain technology. By 2024, its market value is projected to reach 19 billion USD, as per Imaginovation. It’s the cornerstone of a decentralized, secure system that puts users at the forefront.
To understand “private vs. public blockchain” and their differences, it’s important to first grasp the basic question: “What is blockchain?”
What Is Blockchain?
Blockchain is a revolutionary technology that operates as a decentralized ledger across interconnected computers. These computers, collectively known as nodes, collaborate within the framework of a blockchain network to make this groundbreaking system possible. Blockchain maintains an ever-expanding ledger of records, aptly referred to as “blocks”.
Blockchain is a distributed ledger technology (DLT) set apart by its remarkable resistance to tampering and hacking. In fact, attempting to alter data stored on the blockchain is a virtually impossible challenge. Even the world’s most powerful supercomputers would fail in their attempts to compromise a blockchain system.
The simplest way to explain blockchain is as a decentralized, transparent, and unchangeable digital ledger. Blockchain securely records transactions and data, unlike centralized systems controlled by a single authority.
At it’s core, Cryptography serves as the backbone of the blockchain system, intricately linking its ever-growing blocks. Each block contains crucial information, including a cryptographic hash of the previous block, a timestamp, and transaction data.
Before adding a new block to the chain, miners carefully check the information using their combined computing power. The continuous addition of new blocks to the pre-existing ones creates an unbroken chain of blocks, hence the term “blockchain”.
Once these blocks store data, it becomes immutable; it cannot be retroactively altered, denied, or destroyed. This inherent feature ensures the integrity and transparency of the information contained within the blockchain.
What is Public Blockchain?
A “public” blockchain, as the name suggests, is open and accessible to all. It keeps the basic elements of blockchain and works openly, so anyone can see and use it.
Such public blockchains are truly decentralized, inviting anyone to participate without restrictions. Every transaction is visible, and the consensus process is inclusive. A global network of nodes (computers) typically maintains and validates transactions on the blockchain.
Key Features of Public Blockchain
- Transparency: Public blockchains are transparent platforms where all transactions and records are visible to anyone. This openness prevents fraudulent activities, as we can quickly identify and trace any discrepancies.
- Permissionless Access: There’s no gatekeeper in a public blockchain. Anyone can join, create a digital wallet, and engage in transactions or consensus processes without seeking permission.
- Decentralization: No central authority controls public blockchains. Nodes (computers) from all over the world, numbering in the thousands and millions, determine their operations through consensus, ensuring they remain distributed and fully decentralized.
- Censorship Resistance: Data on public blockchains remains free from censorship by any individual, organization, or government. This freedom empowers users to operate without fear of external control.
- Global Availability: The decentralized nature of public blockchains makes them a universal infrastructure. They provide a foundation for DApps, smart contracts, and other applications, allowing developers worldwide to build upon them.
- High Security: Public blockchains employ cryptographic techniques and consensus mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) to safeguard transactions. The “51% rule” in PoW consensus makes it challenging for malicious actors to compromise the system.
- Immutability: Once data is added to a public blockchain, it becomes permanent. This unchangeable nature instills trust in the system.
- Tokenization: Most public blockchains have native cryptocurrencies or tokens, facilitating payments or participation in community governance.
- Anonymity: Cryptographic addresses, not personal names, represent users on public blockchains. These addresses are long strings of characters and do not directly link to real-world personal information.
What is Private Blockchain?
While its counterpart is permissionless, a private blockchain operates on a permissioned basis. Designated network administrators oversee it and grant access to participants wishing to join. This means that specific entities or administrators manage and regulate the network.
In a private blockchain, transactions and records remain confidential. Only involved participants are aware of the details of a transaction, ensuring that external parties, including the general public, don’t have access. Such blockchains are mostly used in more controlled environments, often within organizations.
Key Features of Private Blockchain:
- Permissioned: In a private blockchain, the administrators determine who can participate in the operation of the network, that is, who can become a node.
- Full Privacy: While blockchain technology offers numerous advantages, from speed to governance, private blockchains emphasize confidentiality, keeping daily activities shielded from public view.
- Centralized Control: The power is usually centralized, which brings the need for administrators, making the privacy and confidentiality feature achievable. Note that private blockchain differs from centralized ledgers.
- Efficient Transactions: With fewer global nodes and more localized distribution, private blockchains can process transactions faster than their public counterparts.
- Flexibility: They offer more flexibility, allowing organizations to modify permissions and features to align with their specific needs.
- Consensus Mechanisms: While public blockchains rely on energy-intensive mechanisms like PoW and PoS, private blockchains utilize less energy-consuming consensus methods such as Proof of Authority (PoA) and Delegated Proof of Stake (DPoS).
Public Vs. Private Blockchain Comparison
In this article, we’re not here to label one blockchain as “superior” to the other. Instead, we believe the right blockchain solution should align with individual user needs. Picture this comparison as a friendly face-off between public and private blockchains, each with its unique strengths. Note that this list isn’t exhaustive, but it gives you all the foundational knowledge you need to make an informed decision for your business, team, and organization.
|S/N||Features||Public Blockchain||Private Blockchain|
|1||Transparency||Highly transparent with all transactions visible to everyone. Less emphasis on privacy.||More privacy-focused by keeping transactions confidential using technology such as zero-knowledge proofs to protect sensitive information.|
|2||Access||Open to all (permissionless). Anyone can join and view transactions.||Restricted access (permissioned). Joining requires an invitation or approval.|
|3||Nodes||Anonymous and don’t know each other.||Familiar with each other and are typically limited in number.|
|4||Decentralization||Fully decentralized. No central authority, and nodes are distributed worldwide.||Centralized control. Managed by specific administrators, with nodes usually within a confined space.|
|5||Censorship||Resistant to censorship, appealing to a broad audience.||Can be designed with censorship capabilities, allowing for content or transaction restrictions.|
|6||Global Availability||Yes||Limited to entities, organizations, and/or locations.|
|7||Flexibility||Customization is limited.||Highly customizable to meet specific organizational needs.|
|8||Speed||Generally slower transaction speeds due to global node distribution.||Faster transaction speeds, enabling a higher number of transactions per second.|
|9||Security||More secure due to true decentralization and participation of multiple nodes.||Concentrated node control can be both an advantage and a potential security risk. Fewer nodes mean a potential target for malicious actors.|
|11||Immutability||Data is immutable and cannot be altered.||Immutability varies based on the blockchain’s design and governance. Some private blockchains may allow for data changes based on pre-set agreements.|
|12||Energy Consumption||Higher energy consumption due to the extensive node network and consensus mechanisms like Proof of Work (PoW).||More energy-efficient, especially with consensus mechanisms that require less computational power.|
As we navigate the 21st century, the pace of innovation is relentless. Every technological advancement brings its own set of tools and considerations. When it comes to blockchain, there’s no universal solution. Both public and private blockchains offer distinct advantages tailored to specific needs.
The key is to assess your objectives, your team’s requirements, and your long-term goals. In this blockchain showdown, the real winner is you—armed with the insights to select the best fit for your business and organization.
Blockchain is the foundation on which we build all our products. Until now, Identity.com hasn’t taken a back seat in contributing to the growth of blockchain, and one way we do that is via identity management systems and protocols as it cuts across Web 3, the financial sector, etc. In fact, we are a part of the World Wide Web Consortium (W3C), the standards body for the World Wide Web.
Through our work, Identity.com is helping many businesses by giving their customers a hassle-free identity verification process. Our open-source ecosystem provides access to on-chain and secure identity verification solutions that improve the user experience and reduce onboarding friction through reusable and interoperable Gateway Passes. Therefore, if you’re interested in learning more about how we can help you with identity verification and general KYC processes, please don’t hesitate to get in touch.