- Greater Privacy: Private blockchain networks are limited to specific individuals. This is beneficial for organizations that handle sensitive information.
- Scalable: There are fewer users on private blockchains, so a higher number of transactions can be processed. Therefore, private blockchains can be scaled more efficiently.
- Better Governance Control: Companies that use private blockchains have greater control over governance, operational activities, and data management on the network.
- Efficient: Private blockchains streamline workflows and reduce operational costs with smart contract automation.
On the other hand, private blockchains face several challenges:
- Centralization: Private blockchains are more centralized than public blockchains because access and validation are controlled by specific individuals.
- Interoperability: Interoperability between private blockchains and external systems or other blockchains is more complex.
- Security Risks: Private blockchains are still vulnerable to internal threats or attacks, or disputes between participants.
- More Complex: Launching and running a private blockchain requires a larger initial investment.
Public Blockchain
A public blockchain is a transparent, secure, and decentralized digital ledger. Well-known blockchains such as Bitcoin and Ethereum are examples of public blockchains.
The advantages of public blockchains include:
- Accessible: Anyone with an internet connection can use a public blockchain to create dApps (Decentralized Applications), view transaction data, and participate in validating transactions.
- Secure: Public blockchains use advanced cryptographic algorithms to secure and verify transactions, making them more resistant to attacks and preventing data manipulation.
- Innovative: Public blockchains facilitate the creation of new applications and services in various industries, ranging from digital identity to supply chain management.
- Transparent: Everyone can view and verify transactions that occur on the network.
Meanwhile, the disadvantages of public blockchains include:
- Scalability: The rapidly increasing number of users and transactions leads to scalability issues.
- Governance: Public blockchains generally utilize a decentralized governance model, where all decisions are made based on voting results. This can lead to debates and forking.
- Energy Consumption: Public blockchains with Proof-of-Work consensus consume a significant amount of computing energy.
- Privacy Concerns: All transactions on the network can be viewed by anyone. Although wallet addresses are pseudonymous, transactions can still be traced to identify the parties involved.
Also Read: Blockchain’s Scalability Problem: Causes & Solutions in the Industry
Private Blockchain vs Public Blockchain
In general, the differences between private blockchain vs public blockchain can be seen in this chart.
| Aspect | Private Blockchain | Public Blockchain |
| Accessibility | Limited to certain individuals | Open to everyone |
| Control | Centralized, controlled by a central entity or organization | Decentralized, no central authority |
| Transparency | Data is viewable to authorized participants | Data is viewable to everyone |
| Anonimity | User identities are known | User identities are anonymous |
| Access to Data | Access to transactions is limited | All transactions are visible |
| Security | Protected by cryptography | Protected by a decentralized model and cryptography |
Structure and Security of Private Blockchain vs Public Blockchain
What are the differences between private blockchains and public blockchains in terms of security and structure? Let's discuss the elements that make up the structure and security of a network.
Accessibility and Participation
- Public Blockchain: A network that is public and open to anyone. Anyone with an internet connection can verify transactions or participate in mining.
- Private Blockchain: A closed network that can only be accessed by authorized individuals. Access to nodes is controlled by a central authority.
Transparency and Privacy
- Public Blockchain: All transactions are public and cannot be manipulated, thereby building trust. User identities are pseudonymous and masked by cryptographic addresses.
- Private Blockchain: Transactions can only be viewed by authorized participants. Suitable for industries that manage sensitive data.
Consensus Mechanism
- Public Blockchain: Generally, the consensus mechanisms used are Proof-of-Work or Proof-of-Stake. PoW uses mining for transaction verification, while PoS requires staking digital assets.
- Private Blockchain: The consensus mechanism is more flexible, such as Proof-of-Authority (PoA), which grants authority to specific individuals, or Delegated Proof-of-Stake (DPoS), which is similar to PoS but limited to delegated individuals.
Security Model
- Public Blockchain: Uses cryptography, consensus mechanisms, and trustless models to maintain security.
- Private Blockchain: Sacrifices some aspects of decentralization to improve security in a more trusted ecosystem. Access is limited to a select group of people, making it more resistant to infiltration or Sybil attacks.
Scalability
- Public Blockchain: Faces scalability issues due to the ever-increasing number of transactions and users. In addition, the consensus mechanism on public blockchains requires all transactions to be verified, which affects processing speed.
- Private Blockchain: Fewer nodes, resulting in faster consensus and higher transaction throughput.
Use Case Examples of Private Blockchain vs Public Blockchain
Aside from their structure and security, the difference between private blockchain vs public blockchains also lies in their application in various sectors.
Use Cases of Private Blockchain
Private blockchains are often utilized in sectors that handle sensitive data, such as:
- Supply Chain Management: Data on products and materials, from procurement to distribution, can be monitored by authorized parties.
- Financial Services: Banks and financial institutions use private blockchains to process transactions more quickly and securely.
- Voting Systems: Private blockchains improve the security and transparency of voting processes. Only authorized people can participate in voting, while the secrecy of the vote itself remains guarded.
Use Cases of Public Blockchain
Public blockchains are often used for cryptocurrencies, but many are not yet familiar with their use in various other sectors. Here are examples of public blockchain implementation in various sectors.
- Healthcare: With public blockchains, sensitive medical data can be stored securely. Healthcare providers can access data while maintaining the patients’ privacy. Patients can also see who has accessed their data.
- Government: Citizen documents such as passports, driver's licenses, and identity cards can be stored and verified securely. Each person has full control over who can access their data.
- Identity Management: Public blockchains can be used to verify digital identities and enhance user data privacy.
Private Blockchain vs Public Blockchain: Which One is Better for Your Business?
The decision to choose a private blockchain vs public blockchain depends on your business needs, especially in terms of security, scalability, and cost.
- Public Blockchain: Suitable for applications that require decentralization and transparency. The initial cost is lower, but transaction fees are higher due to network congestion.
- Private Blockchain: Suitable for organizations that need control over data, scalability, data privacy, and faster transaction processing. Initial and maintenance costs are higher, but it has better scalability and control, making it more suitable for enterprise-level applications with high data volumes.
As an alternative to the private blockchain vs public blockchain dilemma, you can consider a hybrid blockchain. A hybrid blockchain combines the flexibility of a public blockchain and the data control of a private blockchain. Some data can be accessed publicly, but sensitive information is restricted to authorized individuals.
Conclusion
Blockchain is classified into two types: public and private blockchain. Each has its own uses, advantages, and disadvantages, so there is no clear winner in the private blockchain vs public blockchain comparison. Choose the type of blockchain that suits your needs.
Did you know these sectors have implemented blockchain? Find out how blockchain is used in various industries in the article 5 Applications of Blockchain in the Real World, From Business to Government!
