Blockchain for Beginners: Discovering Public and Private Blockchains by EXOLO

By definition, blockchain is a ledger of all transactions that have been executed. It could be seen as a write-only platform, wherein transactions, once executed, cannot be modified later. This platform has been further divided into Public and Private blockchain. A hybrid mode such as a ‘Consortium blockchain’ as represented by Vitalik Buterin, founder of Ethereum, a decentralized web 3.0 publishing platform. Mr. Nakamoto https://www.xcritical.com/ developed blockchain as an acceptable solution to the game theory puzzle—Byzantine General’s Problem.

Downsides of Public Blockchains

Let’s start with the most commonly known Blockchain, i.e., public Blockchain. Private blockchains are distributed ledgers only available to those given express permission to have specific access levels or abilities on a blockchain. In public vs private blockchain this way, there would be fewer errors and no way for someone to alter financial data after it is entered. As a result, financial reports to management and executives become more accurate, and the blockchain is accessible for viewing and generating real-time financial reports.

• We recently collaborated on the blockchain-based Empire App, a mobile platform that offered guests a seamless and transparent hotel-booking experience.
• In reality, Hyperledger Fabric is full of features that anyone can use in any kind of industry.
• By definition, blockchain is a ledger of all transactions that have been executed.
• A consortium blockchain provides many of the same benefits affiliated with private blockchain like efficiency and transaction privacy.
• Numerous private blockchains allow collaborations with banks and financial institutions, making the technology more user-friendly.
• Another disadvantage is the voracious consumption of electricity that public blockchains consume as users mine for cryptocurrency on the network.

Our Response to Cited Disadvantages of Public Blockchains

In summary, public blockchains have better technology infrastructure, which makes them more scalable, interoperable, and widely used. This is especially important for businesses that want to issue digital assets like security tokens, NFTs, and crypto assets. With public blockchains, businesses have the opportunity to participate in a larger network of users and assets, leading to greater opportunities for growth and innovation. Unlike public blockchains that are open to everyone, private blockchains are restricted.

Blockchain architecture, taxonomy, challenges, and applications

The automation of business processes via smart contracts or their analogs further exemplifies blockchain’s potential to transform business operations. This automation ensures consistency, speed, and reliability across various business functions, from supply chain management to contractual obligations and beyond. Additionally, the immutable audit trails created by blockchain provide a constant validation of data changes, ensuring that every transaction or modification is transparent and verifiable. Furthermore, blockchain technology revolutionizes the way businesses approach transactional processes and tasks through tokenization. By digitizing assets and enabling their representation as tokens on a blockchain, businesses can unlock new efficiencies in asset management and transactions.

Public vs. Private vs. Permissioned: An Overview

These decentralized ledgers offer numerous benefits, allowing organizations to leverage blockchain technology while controlling their data and access. Furthermore, they provide enhanced security, privacy, efficiency, and cost savings, making them a valuable tool for driving innovation and unlocking new business opportunities. On the other hand, private blockchains prioritize data confidentiality and control. They are restricted to authorized participants, making them suitable for organizations that handle sensitive information, like banks and government agencies.

Classifications and Types of Blockchains

We have previously detailed diverse use cases a business could explore as they position for the future. We have also analyzed different blockchain platforms that could be utilized in building blockchain applications. Just as well, we’ve given insights on the cost implications of blockchain applications in business. We now proceed to help you make an informed choice between deploying a private or public blockchain. All over the world, conversations with respect to the multi-faceted prospects and use cases of the blockchain technology in business are trending. Consensys Codefi helps digitize financial assets, launch decentralized networks, optimize business processes, and deploy production-ready blockchain solutions.

Top Disadvantages Of Blockchain Technology

The consensus process used in consortium Blockchains is controlled and maintained by the initial group of nodes designated to control and maintain the Blockchain configuration [90]. Conversely, permissioned blockchains restrict access to the network to certain nodes and may also restrict the rights of those nodes on that network. The identities of the users of a permissioned blockchain are known to the other users of that permissioned blockchain. Consortium or federated blockchains operate with a particular group of participants who control the blockchain, rather than a single entity. This group sets the rules, edits or cancels incorrect transactions and solicits cooperation among its members, according to a Blockchain Council report. Private blockchains may also have an advantage of speed when processing transactions because they have a set of homogenous users who need to achieve consensus to validate transactions.

Disadvantages of Private Blockchains

Consortium Blockchains — Consortium blockchains are hybrid networks where only pre-selected nodes can validate blocks. This allows a number of organizations to collaborate on transactions without having to sacrifice the security benefits of a private blockchain. Some examples of Consortium blockchain include Hyperledger, IEBC, and R3’Corda. Identity management is another one of the famous  private blockchain applications that has helped businesses streamline their conducts. Private blockchains make way for a secure digital identity verification that can reduce identity theft and fraud in online transactions. The transformative potential of private blockchains is undeniable, yet the intricacies of development can pose a significant challenge.

A public blockchain is decentralized and does not have a single entity which controls the network. Data on a public blockchain are secure as it is not possible to modify or alter data once they have been validated on the blockchain. There exist some partially private blockchains called consortium blockchains. While a fully private blockchain is controlled by a single company, consortium blockchains are governed by several institutions all of which directly participate in the consensus protocol [13]. These institutions are responsible for maintaining the regulations regarding how the users can participate in the consensus protocol. They also indicate the level of accessibility of different users to the ledger.

These examples highlight the diverse industry applications of private blockchains for secure, specific functions. We believe public blockchains are better for asset tokenization than private blockchains for several reasons. Furthermore, as private blockchains typically operate within a smaller network with fewer participants, they offer easier management and lower downtime. Private blockchains hold immense potential as they offer robust, scalable, and highly secure database services to various organizations.

Verifiable Credentials and decentralized identifiers (DIDs) are technological tools for digital identity management that are commonly backed by public blockchains. They enable individuals to control their own identity data while still being able to prove their identity and claims. There are several major providers of digital platforms based on their own version of blockchain technologies, including Ripple, R3’s Corda and Hyperledger Fabric.

This is the killer application for the security token industry bringing legal and compliant liquidity pools to any integrated digital asset. Public blockchains are immutable, meaning that once a transaction is added to the blockchain, it cannot be changed or deleted. This makes public blockchains an ideal platform for creating a tamper-proof ledger.

This process requires a lot of computational power, which makes it difficult for any one user to manipulate the system. De Beers has launched a ‘secure and immutable trail’ using a private blockchain called Tracr, to verify the authenticity and provenance of diamonds and ensure they are not “blood diamonds” from conflict zones. Walmart has developed a blockchain system based on Hyperledger Fabric to trace the provenance of their products.

Also, the cost of completing international payments will also lower down as well. But you have to ensure that your blockchain solution is capable of warding off hacking problems. I’ll briefly explain the main difference between public vs private blockchain. Many of you are often confused about the difference between these two types, so it’s better to get it cleared up. In a public blockchain, everyone and anyone can join the network, on the other hand, only selected nodes can enter private blockchains.

But it is evolving, so any company that is looking for ways to update their financing networking system can check out Corda. Also, Corda happens to offer the best possible firewall against any online attacks. Therefore, to safeguard a company’s sensitive information, using private blockchains is the perfect option. So, without proper authentication, no one can enter this type of network. To make sure that any company can use blockchain, there are many blockchain companies that are working towards bringing a private version just for the sake of secrecy.

One of the key advantages of public blockchains is their security, as the decentralized nature of the network makes it difficult for malicious actors to manipulate the data. Public blockchains are commonly used for cryptocurrencies like Bitcoin and Ethereum, but they also have applications in areas such as voting systems, supply chain management, and intellectual property protection. The decentralized and transparent nature of public blockchains makes them ideal for industries that require trust, security, and accountability. From finance to supply chain management and healthcare, public and private blockchains have found their applications in various industries. Public blockchains, such as Bitcoin and Ethereum, have transformed the world of cryptocurrencies. They offer transparency, security, and accountability, making them ideal for industries that require trust.

October 12, 2022