Blockchains are built on distributed ledgers that have been in place at the enterprise level for
years to manage data. However, they are only now becoming more popular and interesting due to
cryptocurrency's introduction.
Depending on how the blockchain configuration is set up, you can control the content and
activities stored in the blocks. Blockchains are generally designed to serve a specific purpose,
and users can be granted multiple accesses or tasks.
Anyone can access public blockchains; private blockchains are restricted to a select few, and
permissioned blockchains combine public and private blockchains. Anyone can access them as long
as they have permission from their administrators.
Let's look at some key differences between public, private, and permissioned blockchains.
Public Blockchain
A public blockchain is one that anyone can join and take part in core activities. Anybody
can view, audit, and write about the activities of a public blockchain network. This
helps to achieve the self-governed, distributed nature that is often praised when
blockchain is mentioned.
Advantages
Public networks are governed by an incentive scheme that encourages new members to join
the network and keeps it agile. The public blockchain is a valuable solution for a truly
decentralized, democratic, and autonomous operation.
Because they can be used as the backbone of almost any decentralized solution, public
blockchains are extremely valuable. In addition, a secured public blockchain is
protected from hacking attempts, data breaches, and other cybersecurity threats by many
participants.
Public blockchains are protected with automated validation methods and encryption. These
methods prevent single entities from altering information in the chain (like
cryptocurrency blockchains) or allowing anyone to make those changes.
Disadvantages
Secured public blockchains have one major drawback: They require a lot of energy to keep
them running. This is because consensus mechanisms require participants to compete to
validate the information and receive a reward for allowing the network to use its
processing power. Some blockchain networks do not use energy-intensive validation
processes.
Another issue is the inability to keep your identity and transactions private. Anyone can
view transaction amounts as well as the addresses in public blockchains. If address
owners are made public, users lose their anonymity.
Participants who are not honest with their intentions may also be attracted to public
blockchains. However, public blockchains are mostly designed for cryptocurrency, making
them prime targets for thieves and hackers.
Private Blockchain
Only authentic and verified invitations can be used to invite participants to join a
private blockchain network. Validation is performed by the network operator or by a
specified protocol that the network implements through smart contracts and other
automated approval methods.
Private blockchains can control who is allowed into the network. For example, if the
network can mine, its private nature might allow it to control who can execute the
consensus protocol that determines the mining rights or rewards. Only a few users might
maintain the shared ledger. The operator or owner can edit, delete, or override the
entries in the blockchain at their discretion.
Advantages
Private
blockchains are not distributed. Instead, it's a distributed ledger, which operates as a
closed database secured using cryptographic concepts according to the organization's needs.
Only those with permission can run a full node, make transactions, or validate/authenticate
the blockchain changes.
Private
blockchains place less emphasis on user identities and promote transparency. They
prioritize efficiency and immutability, which is the state that cannot be changed.
These features are critical in supply, logistics, and payroll. They also have financial
and accounting implications.
Disadvantages
Private blockchains are intended for enterprise applications but lack the benefits of
permissionless systems. Instead, they are designed to perform specific functions and
tasks.
Private blockchains can be vulnerable to security breaches and other threats. If there is
a consensus mechanism, there are usually only a few validators who can reach a consensus
on transactions and data.
A private blockchain may not have consensus, but it will guarantee the immutability and
integrity of data entered unless an administrator or operator can make changes.
Permissioned Block
Permissioned blockchains are a combination of private and public blockchains. They allow
for many customization options.
Advantages
Permitted blockchain benefits include the ability to allow anyone to join the network
after an appropriate identity verification process. Some grant specific permissions that
allow them to do only certain activities on the network. This permits participants to
perform certain functions, such as reading, accessing, or entering information on the
blockchain.
Permissioned blockchains allow for many functions, but one most interesting to businesses
is Blockchain-as-a-Service (blockchain designed to be scalable for the needs of many
companies or tasks that the providers rent out to other businesses.
Let's say, for example, that a company wants to increase transparency and accuracy in its
financial reporting and accounting processes. A BaaS provider could offer blockchain
accounting services to the business. Blockchain would allow users to enter data and then
automatically automate the rest of the accounting process.
Disadvantages
Permissioned blockchains have the same disadvantages as public or private blockchains,
depending on how they are set up. Permissioned blockchains are susceptible to hacking
because they require internet connectivity. Some might employ immutability techniques,
such as cryptographic security measures or validation through consensus mechanisms.
Although most blockchains can be hacked, there are still weaknesses. For example,
cryptocurrency theft can occur when a network is compromised, and private keys are
stolen. This weakness can also affect permissioned blockchains, as the networks
connecting users to the service depend on security measures that could be bypassed.
What are private blockchains?
Private blockchains are distributed ledgers that can only be accessed by those who have
been granted permission to access or perform specific functions on a blockchain.
Are permissioned blockchains available?
Permissioned blockchains have been a boon for many companies. Walmart, for example, uses
Hyperledger Fabric to track its food origins faster than ever before. This was an
open-source project created by IBM and the Linux Foundation.
What is the difference between permissioned and private
blockchains?
Private blockchains are those to which only a few users have access. They can only be
used by the entity they belong to. Permissioned blockchain combines private and public
blockchains to provide access and capabilities to multiple users.
Last but not least
The public vs. private blockchain comparison guide has reached its final point. There are
many differences between the two technologies. However, if you have the right features,
both private and public blockchains are suitable for enterprise environments.
The final decision is up to you. This guide should help you choose the right blockchain development
company.