Not to confuse anyone, but what if we said that not all blockchains are decentralised? In fact, some blockchains have more differences than you’d think. We’re going to compare two major types, and see just how they differ.

Just when you think you’ve got a handle on something, there’s another twist that seems to confuse things again. Well, not to worry. We’re here to make sure that any new information about the blockchain you learn is easy to understand. This time, we’re looking at the differences between a private blockchain and a public one.

If you’re completely unfamiliar with blockchain technology, we suggest checking out the linked article in the above paragraph first. Otherwise, we can’t guarantee that a lot of this won’t go straight over your head!

Table of Contents

Public Blockchain
Pros of a Public Blockchain
Cons of a Public Blockchain
Private Blockchain
Pros of a Private Blockchain
Cons of a Private Blockchain
To Recap

Public Blockchain

A public blockchain is the type that anyone can join. Anybody can hop onto the network and read, write, or participate in activity. Because of this, public blockchains are permissionless. This is a key feature, since it means that public blockchains are the basis of all decentralised applications and platforms.

Examples of public blockchains include Ethereum, Bitcoin, and Solana.

Take a look at the key features of a public blockchain:

  • Decentralised – Briefly touched on above, public blockchains are decentralised. This means that there isn’t one or more bodies at the top controlling everything.
  • Highly secure – Public blockchains tend to be more secure because there are more nodes on the network. In order for bad actors to take control, they must trick over 50% of the network. The more nodes there are, the more difficult this gets.
  • Pseudonymous – Your identity is kept secret on a public blockchain. It is pseudonymous because only your wallet’s public key will be visible, not your personal details.
  • Immutable – You can’t go back and change things on a public blockchain, making it immutable.
  • Unregulated – Because public blockchains are decentralised, standard regulations don’t apply to them. This has both advantages and disadvantages.
  • Distributed – Nodes across the network participate in the validation of transactions, and a copy of the updated ledger is visible to all participants.

Pros of a Public Blockchain

For any fans of web3 and the idea of a more transparent internet, public blockchains are a great solution. The decentralised nature means that power and decision-making is in the hands of the users. This means that any applications built on public blockchains tend to meet the wants and needs of its users, rather than having sweeping changes thrust upon them with no say in the matter.

Public blockchains use incentivised approaches to attract new users and nodes. In doing so, networks are kept populated and secure. Any attacks like data breaches, hijacking, or hacking are less likely, since a larger network is more equipped to protect itself. Much of blockchain technology is a numbers game and, just like a real attack, it’s harder for one bad actor to take on a whole army.

A lack of regulations means users of a public blockchain can enjoy more freedom. Usually, users would have to follow rules and regulations when using a network – often not to their benefit. Public blockchains have no central authority to impose regulations, meaning things are kept fair and users are empowered.

Cons of a Public Blockchain

The energy consumption of a public blockchain massively depends on the consensus mechanism it utilises. If a blockchain requires users to compete with one another to validate transactions (proof of work), the energy consumption is incredibly high. Of course, this has a negative impact on the environment. These days, the larger blockchain companies aim for more environmentally protocols, such as proof of stake.

Public blockchains are pseudonymous, and not totally anonymous. What does this mean? Your name won’t be displayed on the network, but your public address (of your wallet, not house!) will be. Transactions that you’re involved in will be completely visible, and so if someone ever links you to your public address your identity will no longer be a secret.

Many public blockchains are used for things like cryptocurrencies and investment. Although public networks are more secure, the things they are used for tend to make them a prime target for dishonest participants. Since they’re permissionless, these bad actors can easily join the network and attempt dishonest activity, such as hacking and stealing.

Private Blockchain

As you’d imagine, activity on a private blockchain happens behind closed doors, so to speak. Private blockchains are owned and operated by an authorised body, and participants can only join the network if they have been invited. In order to join, users may need to have their identity and other required information verified. This can be done either by the network operator, or via predefined protocols executed through smart contracts.

The key features of a private blockchain are:

  • Private – Of course, a private blockchain offers full privacy. Not just anyone can view the ledger and see what transactions have been executed.
  • Centralised – Because private blockchains are controlled by an authorised body, power is not in the hands of its users, making it centralised.
  • Efficient – Since participants can only join by invitation, there are usually fewer participants. This means less time required for the validation of transactions, making the process much more efficient and fast.
  • Scalable – Due to their ability to process transactions quickly, private blockchains are more scalable. This suits the needs of enterprises much better.

Pros of a Private Blockchain

As with anything, it’s all about perspective. Some things that are advantageous about a private blockchain might not sound so great to some people. If you thought all blockchains were decentralised and empowered its users, then think again. Although this sounds bad, if you’re a large enterprise or business, this might be ideal.

An organisation with particular needs will benefit from the centralised nature of private blockchains. By choosing who can and can’t run full nodes and participate in transactions, things can be done in the exact way that organisation requires. The smaller number of participants makes transactions much faster, which is perfect for a growing business. Rather than using these sorts of blockchains for cryptocurrencies, operations like logistics and supply chain can be run much more efficiently.

Sacrificing transparency and the protection of identities helps to prioritise immutability too. This is the state of things not being changed. As a result, there’s less chance for discrepancies, be it logistics, payroll, accounting or other business activity.

Cons of a Private Blockchain

Private blockchains don’t enjoy the perks of being permissionless like public ones. Mainly, this is due to them being designed for a specific use or function. Some of the attributes of permissionless systems, like decentralisation and transparency, may be sorely missed by some users.

The fact that private blockchains have fewer participants makes them much more vulnerable to attack. Whilst the desire for someone to hijack a private blockchain is comparably diminished (since it tends not to just deal in crypto and investment), there is still a risk.

We know we quoted the focus on being immutable as a pro for private blockchains, but there can also be a con surrounding this. Because these sorts of blockchains are run by a central authority, they can decide whether to alter or remove previous transactions from the ledger. This means that it’s up to whoever is running the network to decide just how immutable it really is.

To Recap

A private blockchain is a good choice if you’re an enterprise or organisation looking to solve specific problems. If you have particular needs and requirements, you can use the centralised nature of a private blockchain to ensure these are met. Thanks to network efficiency, transactions can be processed quickly en masse, allowing for greater scalability down the line.

However, some users may miss the trust that comes with making a ledger transparent and distributed across the network. For creators of web3 platforms and dapps, a public blockchain caters to the ideals that the majority of users will be motivated by.

For those looking to invest in crypto or carry out financial transactions, public blockchains are more suitable. There is far more validity in transactions on these blockchains, since so many nodes have to agree and vote on a transaction before it can be fully processed. It’s very much a case of safety in numbers, as public networks offer greater protection against users with nefarious intentions.