Public vs Private Blockchains: What’s the Difference?

Blockchain, the underlying technology behind cryptocurrencies like Bitcoin, is quickly gaining popularity in the digital space. More and more companies are recognizing its revolutionary potential and are choosing to adopt this new technology for their daily operations, making blockchain less of a buzzword and more of a forward-thinking mantra.

In short, a blockchain is a continuously growing list of public records broken up into “blocks” based on specific windows of time. A community of users controls how this information is edited and updated, and all blocks are chained together chronologically.

While more organizations are becoming aware of the applications for blockchain in the enterprise, there is less familiarity with the differences between public and private blockchains.

The Similarities of Public and Private Blockchains

Before we touch on the differences, it is important to understand the similarities between public and private blockchains. Both of them:

• Are decentralized peer-to-peer networks built on a community of users, meaning that no one entity (like a bank or broker) is in charge of authorizing transactions
• Rely on numerous users to authenticate edits to the distributed ledger, thereby creating a new master copy that is accessible to everyone at all times
• Are completely immutable, meaning the verified block can never be erased or modified once it is authenticated by users

So, how are they different?

Public Blockchain

Public blockchain is the model of Bitcoin, Ethereum, and Litecoin and is essentially considered to be the original distributed ledger structure.

This type of blockchain is completely open and anyone can join and participate in the network. It can receive and send transactions from anybody in the world, and can also be audited by anyone who is in the system.

Each node (a computer connected to the network) has as much transmission and power as any other, making public blockchains not only decentralized, but fully distributed, as well.

In order for a transaction to be considered valid, it must be authorized by each of its constituent nodes through the consensus process. Once this authorization takes place, the record is added to the chain. Public blockchains typically have incentives to encourage people to join the network as well as to authenticate transactions.

One of the biggest disadvantages of a public blockchain is its complete openness. This type of transparency implies little to no privacy for transactions and supports a weak concept of security. Another drawback is the substantial amount of computing power that is necessary for the maintenance of the ledger. With so many nodes and transactions as part of the network, this type of scale requires extensive effort to achieve consensus.