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Public vs. Private Blockchain: What is the Difference?

The blockchain technology has transformed the world of data management and virtual transactions like never before. There are two main types of blockchain networks: public blockchains and private blockchains. 

Though both run on the similar blockchain technology, they are initiated for different functions and address various use cases. In this guide, we will explain the main differences between public and private blockchains.

What is a Public Blockchain?

Firstly, Public Blockchains are public and decentralized networks where everyone can participate, read, or write data to them. These networks are all permissionless, which basically means that anyone (who follows the rules of the network) can join them and access them.

What is a Private Blockchain?

Private blockchains are also another type of blockchain which refers to the closed network operates solely according to access granted only. In a sense, that is any network for which there are stakeholders who record the network or establish privacy.

Differences between Public and Private Blockchain

Access Control

  • Public Blockchains: Open and permissionless networks where anyone can join, participate and transact on the platform without needing approval, such as Bitcoin, Ethereum, etc.
  • Private Blockchains: Private blockchains work on strict access control. In fact, the network can be accessed primarily by authorized participants to validate transactions and participate in the consensus. Only certain entities, be it an organization or a business as per individual can access it.

Privacy

  • Public Blockchains: Transactions done on public blockchains are transparent and open to everyone who exists on the network. The transaction data is publicly viewable, but the identities of most involved parties are pseudonymous.
  • Private Blockchains: They allow access to a specific set of people, which provides more privacy than the above type because in this case, transactions are only visible to authorized participants. Keeps sensitive data private and off the public internet.

Decentralization:

  • Public Blockchains: As the name implies, public blockchains are decentralized networks that operate without a central authority. Transactions are validated by a distributed network of nodes to guarantee security and immutability.
  • Private Blockchains: Decentralized to some degree, however, the governance model tends to be more centralized. This results in centralization, as a single entity (or a consortium) is responsible for the network and may create rules in collaboration with users.

Governance

  • Public Blockchains: Governance in public blockchains is usually decentralized, where all decisions are made by the agreements of groups of independent participants. All updates and modifications to the protocol are processed according to consensus among the participants of a network.
  • Private Blockchains: These are controlled by a governing body or consortium that decides how the network operates, including administering updates, controlling access, and adhering to regulatory requirements.

Use Cases

  • Public Blockchains: Public blockchains are perfect infrastructure for the applications where balance of transparency, decentralization and censorship resistance is needed. Despite the inherent level of popularity, they are fairly widely used in cryptocurrencies, decentralized finance (DeFi), and open-source projects.
  • Private Blockchains: Private blockchains are suitable for use cases where privacy, control, and compliance are highly important. They are popularly used in finance, healthcare, supply chain management, and enterprise solutions.

Conclusion

Even though they have the same underlying technology, public and private blockchains have different access controls, privacy, decentralization, governance, and use cases. 

Due to the characteristics of openness, transparency, and decentralization that public blockchains have, some use-case scenarios can only be reached by using public blockchains. 

Private blockchains, on the other hand, place more emphasis on privacy, control, and compliance for a given set of industry requirements and business scenarios. 

It is important to know these disparities so that one can select the suitable blockchain depending on the application or business necessity.

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