Public blockchain and Private blockchain: What are the Differences?

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Public blockchain and private blockchain: what are the differences?
Public blockchain and private blockchain: what are the differences?

As we have seen in the guide dedicated to the blockchain, there are different degrees of decentralisation, which explains the great diversity of distributed ledgers present in the ecosystem.

Originally, with the appearance of Bitcoin in January 2009, the blockchain was public. Every user can publicly verify the transaction ledger, and every miner with sufficient computing power can add transactions to it in exchange for a reward, which ensures the future-proofing of the system.

Nevertheless, with the success of Bitcoin and the first cryptocurrencies, certain systems called ” private blockchains ” have started to emerge. These affect the transparency and permissionlessness of public blockchains.

In this article, we will see the differences between these two types of distributed ledgers.

What is a Public Blockchain?

A public blockchain is a chain that is both publicly visible and editable by everyone. Anyone can observe the registry, particularly by downloading the corresponding open-source software. Moreover, by becoming a node in the network, the person will be able to check all historical transactions and new incoming transactions.

Similarly, anyone can become a validator provided they expend energy (proof-of-work, mining) or have escrow tokens (proof-of-stake, forging). This openness allows the resulting system to be robust, that is, to continue to operate even if one of the participants leaves the network. As Satoshi writes in the Bitcoin whitepaper, “ Nodes can leave and rejoin the network whenever they want.”

Public blockchains all involve cryptocurrency: they are indeed crypto-economic systems that rely on the valuation of a digital asset to function.

Among the public blockchains, we find:

  • Bitcoin: This is the first public blockchain, whether chronology or importance.
  • Ethereum: it is a platform of smart contracts whose operations are stored on a public blockchain validated by proof-of-stake.
  • Monero: special public blockchain, since it lists indecipherable transactions so that monero (XMR) is considered an anonymous cryptocurrency.
  • Tezos: Like Ethereum, Tezos is an autonomous contracts platform. What sets it apart is that it is a proof-of-stake (liquid) validated blockchain, unlike the three previously mentioned blockchains.
  • EOS: EOS is a blockchain dedicated to smart contracts validated by delegated proof of stake, i.e. validators are selected according to the number of EOS tokens they own and have been delegated to them. To ensure high performance, the system allows only 21 block producers, which puts it on the boundary between public blockchain and private blockchain.

What is a Private Blockchain?

A private or permissioned blockchain is a distributed ledger whose content is not publicly available and whose validation is subject to pre-established permissions by an authority (proof of authority). To put it better, the reading and writing of the string can be restricted: either only reading is restricted, or only writing is restricted, or both.

The private blockchain is more suitable for the business world, which is often afraid of transparency and the absence of permission. These systems do not necessarily require a digital token to operate. Most of the time, their uses revolve around traceability, the supply chain, and decentralised identity.

In the models used to build private blockchains, we find:

  • The Hyperledger Suite of tools, which provides ways to build your own blockchain quickly, including:
    • Hyperledger Fabric is the most popular framework in the suite.
    • Hyperledger BESU, which allows the deployment of private versions of Ethereum, including privacy, permissions and another consensus model (IBFT).
  • Corda, developed by the R3 company.

Many consortia of companies have developed their private blockchain. We can cite:

  • Ripple. It is a banking settlement protocol, hosting, in particular, a native digital currency: the ripple or XRP. While all XRP transactions are publicly accessible, validation is centralized since Ripple operates through a reduced set of nodes chosen by Ripple Labs.
  • IBM Food Trust, a write-and-read distributed ledger allowing food traceability. It brings together a consortium of companies including Walmart, Unilever, Nestlé and Carrefour.
  • Tradelens, a blockchain dedicated to the supply chain in the transport of goods, involves Maersk, Modern Terminals, PSA International, etc.
  • AURA, developed by Louis Vuitton.
  • Facebook’s libra currency is also a private blockchain project.

What are the similarities and differences between public blockchains and private blockchains?

In terms of similarities, we find:

  • Both types of blockchains are based on peer-to-peer networks of nodes.
  • In both cases, the nodes come to an agreement through a consensus algorithm.

The differences are:

  • A public blockchain is necessarily based on a cryptocurrency that has a market price, whereas the presence of a digital token is optional for a private blockchain.
  • A private blockchain can generally process many more transactions than a public blockchain: it is more scalable.
  • A private blockchain system is less robust than one based on the network of nodes of a public blockchain.
  • It is usually much easier to censor/tamper with a private blockchain than a public blockchain.