Comparing Private vs. Public Blockchain

Lauren Hendrickson
October 28, 2024

Table of Contents

The internet changed our world by breaking down barriers and making instant communication possible. Now, blockchain, built on the foundation of the internet, is taking things a step further, offering a more secure and decentralized digital landscape.

If the internet is like a global village—open to everyone, anytime, with no borders—blockchain acts as the security system protecting that village. It’s more than just a buzzword; blockchain is transforming industries around the world.

While the internet made online banking fast and convenient, blockchain is raising the bar for the financial sector and beyond. Today, around 40 million people are using blockchain technology, and by 2024, the market is expected to reach $19 billion USD, according to Imaginovation. This growth shows just how important blockchain is becoming as the foundation for a decentralized, secure system that puts users in control.

Before diving into the differences between private and public blockchains, let’s first answer a key question: What exactly is blockchain?

What Is Blockchain?

Blockchain is a revolutionary technology that functions as a decentralized digital ledger across interconnected computers, known as nodes. These nodes collaborate within a blockchain network, enabling the system to operate without central control. The blockchain maintains a continuously growing ledger of records, called blocks, which are linked together to form a secure and transparent chain of data.

As a type of distributed ledger technology (DLT), blockchain is highly resistant to tampering and hacking. Altering data on the blockchain is nearly impossible due to its decentralized structure and robust cryptographic mechanisms. Even the world’s most powerful supercomputers would struggle to compromise its security.

At its core, blockchain is a decentralized, transparent, and immutable digital ledger, where transactions and data are securely recorded. Unlike centralized systems controlled by a single authority, blockchain operates through a distributed network, ensuring trust and accountability.

Cryptography is the backbone of the blockchain, linking blocks in an unbreakable chain. Each block contains key information, including a cryptographic hash of the previous block, a timestamp, and transaction data. Before a new block is added, miners use their combined computational power to validate the information.

Once data is added to a block, it becomes immutable, meaning it cannot be altered, denied, or deleted. This immutability ensures the integrity and transparency of information, which are core features of both public and private blockchains.

What Is a Public Blockchain?

A public blockchain is an open and accessible network that upholds the core principles of blockchain technology: transparency, decentralization, and security. Anyone can participate in a public blockchain—whether by engaging in transactions or helping to validate them. All transactions are visible to the public, and the consensus process is managed by a global network of nodes, ensuring transparency and security.

Key Features of Public Blockchains

Public blockchains offer several key features, including:

  • Transparency: All transactions and records are publicly visible, allowing anyone to trace and verify activities. This transparency helps prevent fraudulent actions and promotes trust.
  • Permissionless Access: Public blockchains have no gatekeepers. Anyone can join, create a digital wallet, and participate in transactions or the consensus process without needing approval.
  • Decentralization: No single authority controls public blockchains. Their operations are governed by a global network of nodes that achieve consensus, ensuring true decentralization and resistance to censorship.
  • Censorship Resistance: Public blockchains are immune to censorship by any government, organization, or individual, providing users with unrestricted access and control over their data.
  • Global Availability: The decentralized structure makes public blockchains a universal infrastructure, supporting decentralized applications (DApps), smart contracts, and global development.
  • High Security: Public blockchains use cryptographic methods and consensus algorithms like Proof of Work (PoW) and Proof of Stake (PoS) to secure transactions. Mechanisms like the “51% rule” in PoW protect against malicious attacks.
  • Immutability: Once data is recorded on a public blockchain, it cannot be altered or deleted, providing a high level of trust and security.
  • Tokenization: Most public blockchains feature native cryptocurrencies or tokens, which facilitate transactions and empower participants in community governance.
  • Pseudonymity: Users on public blockchains are represented by cryptographic addresses—long character strings that don’t reveal personal information, preserving user privacy.

What Is a Private Blockchain?

Unlike its permissionless counterpart, a private blockchain operates on a permissioned basis, where access is managed by designated network administrators. These administrators control who can participate in the network, regulating access to transactions and data.

In a private blockchain, transactions and records are confidential, with only authorized participants having access to the details. This ensures that external parties, including the public, cannot view or interact with the network. Private blockchains are commonly used in controlled environments, particularly within organizations or business networks that prioritize privacy and efficiency.

Key Features of Private Blockchains

Private blockchains offer several key features, including:

  • Permissioned Access: In a private blockchain, administrators control who can participate in the network, deciding who can become a node and contribute to its operation. This controlled access ensures privacy and security.
  • Full Privacy: Private blockchains prioritize confidentiality, keeping transaction details and daily activities hidden from public view. This makes them ideal for businesses that need to protect sensitive information.
  • Centralized Control: Unlike decentralized public blockchains, private blockchains have centralized control. Administrators manage the network to ensure privacy and confidentiality, but it’s important to note that private blockchains differ from traditional centralized ledgers in terms of transparency and immutability.
  • Efficient Transactions: With fewer global nodes and more localized control, private blockchains can process transactions faster than public blockchains, offering increased efficiency.
  • Flexibility: Private blockchains provide organizations with greater flexibility, allowing them to modify permissions, features, and functionalities to meet specific business needs.
  • Energy-Efficient Consensus Mechanisms: While public blockchains use energy-intensive methods like Proof of Work (PoW) and Proof of Stake (PoS), private blockchains often rely on more energy-efficient consensus mechanisms, such as Proof of Authority (PoA) and Delegated Proof of Stake (DPoS).

What’s The Difference Between Public and Private Blockchains?

The main difference between private and public blockchains lies in their accessibility and permissioning. Public blockchains are open to anyone, while private blockchains restrict access to authorized entities. Both systems have their unique advantages, and the optimal choice depends on the specific needs of the business or organization. Here’s a comparison table highlighting the key differences:

 

S/N Features Public Blockchain Private Blockchain
1 Transparency Highly transparent with all transactions visible to everyone. Prioritizes privacy by keeping transactions confidential using technologies like zero-knowledge proofs.
2 Access Open to all (permissionless). Anyone can join and view transactions. Restricted access (permissioned). Access 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 by administrators. Nodes are usually within a confined group.
5 Censorship Resistant to censorship, appealing to a broad audience. Can include censorship mechanisms, allowing for transaction restrictions.
6 Global Availability Yes Limited to specific organizations, entities, or locations.
7 Flexibility Limited Customization Highly customizable to meet organizational needs.
8 Speed Generally slower due to the number of global nodes. Faster transaction speeds with higher throughput.
9 Security Highly secure due to decentralization and cryptographic validation from multiple nodes. Concentrated control can offer security, but fewer nodes may make it a target for attacks.
10 Tokenization Typically includes native cryptocurrencies or tokens. Tokenization is optional and often unnecessary.
11 Immutability Data is immutable once recorded Immutability varies. Some private blockchains may allow data modifications based on governance policies.
12 Energy Consumption Higher due to energy-intensive consensus mechanisms like Proof of Work (PoW). More energy-efficient, often using PoA or DPoS consensus mechanisms.

Conclusion

In the fast-paced world of blockchain technology, there’s no one-size-fits-all solution. Whether you value the openness and transparency of public blockchains or the privacy and efficiency of private blockchains, both offer unique advantages depending on your needs.

The key is understanding your objectives, business requirements, and long-term goals. With these insights, you can choose the blockchain solution that best fits your organization, ensuring both security and scalability for the future.

Identity.com

Blockchain is shaping the future, and Identity.com is playing a key role in this evolution through our work with various blockchains and related initiatives. As a proud member of the World Wide Web Consortium (W3C), the standards body for the World Wide Web, we are committed to contributing to the development of open standards and blockchain technologies.

The work of Identity.com as a future-oriented company is helping many businesses by giving their customers a hassle-free identity verification process. Identity.com is an open-source ecosystem providing access to on-chain and secure identity verification. Our solutions improve the user experience and reduce onboarding friction through reusable and interoperable Gateway Passes.

Please refer to our docs for more information about how we can help you with identity verification and general KYC processes.

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