Blockchain technology has been in the recent past a revolutionary technology that is capable of changing the majority of industries, from the banking sector to supply chain. Two competing models that there are under blockchain at its core level are public and private blockchains. The two models differ in their merits and demerits, and therefore companies are compelled to make well-informed decisions on which is best for their requirements. Here in this blog entry, we are going to discuss the difference between public and private blockchains and help you choose what is best for your business.
Learning about Public and Private Blockchains
Let’s first understand what a public and a private blockchain are.
- Public Blockchain: Public and decentralized, public blockchains are open to the world. Public blockchains rely on a peer-to-peer network where anyone can participate, append, and read the data. Bitcoin, Ethereum, and Litecoin are some of the most popular public blockchains. Consensus algorithms are often proof of work (PoW) or proof of stake (PoS), which authenticate the transactions via a node network in public blockchains.
- Private Blockchain: Private blockchains are permissioned blockchains. Trading and network use are only available to the individuals who are ready to do so. Private blockchains are controlled by a center authority that dictates the admittance, what data is publicly exchanged, and the way transactions obtain their authentications. Private blockchains have instances like Hyperledger Fabric and Ripple. Private blockchains are utilized by companies who are ready to have controlled access and enjoy some privacy.
Now let’s distinguish between the two blockchain types more closely so you can decide which is appropriate for your business.
1. Access Control: Who’s Invited?
The largest distinction between public and private blockchains is in the level of access control.
- Public Blockchain: A public blockchain is available for anyone to use and add to. This is one of the primary advantages of public blockchains, especially for cryptocurrencies or decentralized applications (dApps). However, because it is public, companies cannot exactly dictate who uses their network or data, which would be something that they would prefer to occur for those that deal with sensitive data, i.e., finance or health care.
- Private Blockchain: Private blockchains are permissioned and access is limited to only those who are permitted. This is good for the companies that receive full control over joiners into the network and also a benefit of increased security and privacy. For companies whose data must be kept confidential, a private blockchain could be just what they require.
2. Security: How Safe Is Your Data?
Both public and private blockchains are secured using proper security precautions, but both are utilized for different reasons.
- Public Blockchain: Since public blockchains are decentralized, the data is distributed across many nodes and hence it is virtually impossible for a single entity or an organization to alter the data. Public blockchains also use consensus algorithms like PoW and PoS to authenticate transactions, i.e., only legitimate transactions are added to the ledger. But since the network is open, anyone can access secret data and companies cannot restrict access to it.
- Private Blockchain: Private blockchains give organizations more control over security. The accredited parties only have the right to see the network in private blockchains, and that implies that companies have fewer restrictions in using security functionality. Private business information can be kept in a private blockchain as it can be seen by only identified and known users. Private blockchains employ more centralized consensus models such as PBFT that are more secure and faster to validate transactions.
3. Scalability: Does It Scale with Your Business?
The bigger your business is, the greater amount of work needs to be processed on your blockchain system. Scalability is an aspect that should be considered if a public or private blockchain needs to be selected.
- Public Blockchain: Public blockchains are slower and less scalable because they are decentralized. Because every node in the network has to verify transactions, time is lost, especially as the network grows. Additionally, public blockchains are congested and exorbitant fees are paid during high usage.
- Private Blockchain: Private blockchains are scalable due to the fact that they authenticate transactions with fewer nodes. Private blockchains are efficient and fast because they are centralized and thus optimized for business that requires high throughput. Private blockchain networks can be scaled by companies according to their own needs, which provides them with greater flexibility.
4. Transparency and Trust: What Level Do You Need
Both private and public blockchains are transparent, just to varying degrees, according to your firm.
- Public Blockchain: Public blockchain transparency is arguably the most dominating characteristic of it. Anybody can see its history of transactions, and every user can cross-check the data, so it’s an honest platform to users. It is especially necessary in business fields like cryptocurrency, where public verifiability is essential in dependency upon the system.
- Private Blockchain: Private blockchains are smaller in scale than public blockchains. While they enjoy high trust among authorized members, blocking access to general public information may make private blockchains less open than public blockchains. Such a trade-off will be tolerable to firms that must protect sensitive information but intolerable to sectors requiring full public openness.
5. Cost: What’s Your Budget?
In choosing to host a public or private blockchain, cost is always a factor.
- Public Blockchain: It is cheaper for companies to host and provide a public blockchain, especially if they plan to utilize an existing public blockchain like Ethereum. Transaction fees are expensive during times of high network usage because clients will need to pay miners or validators in order for their transactions to be executed.
- Private Blockchain: Private blockchains are more expensive to establish in the first place since they must be developed from scratch or in line with business needs. They even charge businesses maintenance, governance, and validation fees for the network. Private blockchains are inexpensive for transactions, but expensive to establish and maintain.
Which One Is Right for Your Business?
The choice between a public and a private blockchain therefore depends on your company requirements. If your company requires more transparency, decentralization, and public trust, then a public blockchain will be most appropriate. But if you require more control of the participants, more privacy, and better scalability, then a private blockchain will likely be most appropriate.
If you still have to be concerned with the appropriate blockchain model for your business, you can also leverage a blockchain development services company like Blockchain77 to assist you in choosing the right one and implement the right one for your business.
Last but not least, regardless of what you choose to use, a private or a public blockchain, both of them will alter the way your company gets done, in this case, more efficient, secure, and more room for future innovations.
Invest more on comparing public and private blockchain, and choose the best one for the future of your company.
Would you like to know how Blockchain77 assists you in your requirement for blockchain development? Feel free to contact us for more information!