Public vs. Private Blockchains

"Private chains fundamentally misunderstand the value of open, decentralized, permissionless, borderless blockchains..."

Do you know the difference between a public blockchain vs. a private blockchain? Yes? No? Does it matter? This post will dive into the differences between the two and why BlockEra believes public blockchains have a clear advantage over private blockchains long-term.

Public blockchains are just that, public. Anyone who wishes to read, write, or participate with a public blockchain can do so. Public chains are decentralized which means that no one entity has control over the network and they are secure in that the data can't be changed once validated on the blockchain. Put simply, anyone, anywhere, can use a public blockchain to submit transactions and data as long as they are connected to the network. Bitcoin was the first example of a public blockchain when it was created in 2008 and proved that money could be moved across the globe without third-parties like banks or money transmitters.

Public Blockchain Examples

  • Bitcoin
  • Ethereum

Private or permissioned blockchains operate similarly to public blockchains but have access controls that limit who can participate in the network. This means that it operates like centralized database systems of today that restrict access to certain users. In a private blockchain, one or multiple entities control the network. This causes you to still have to rely on third-parties to transact.

Private Blockchain Examples

  • Ripple
  • Hyperledger

Now, the question is why have two different approaches? Well, to be frank, public blockchains still have a lot of hard technological problems that need to be solved. First and foremost is privacy. Transactions that take place on a public blockchain are public. This means that anyone can see them take place. This is very much in opposition to how society and traditional enterprises have operated. Private blockchains solve this by adding privacy controls at the detriment of security. In practice, private blockchains act as a middle ground between traditional cloud computing and decentralized public blockchains.

Another hard technological problem that public blockchains have is scaling.  Public blockchains can't handle large quantities of transactions currently. It's like the dial-up era of internet for public blockchains. On the flip side, private blockchains have many of the scaling capabilities we expect of our cloud computing today.

To summarize, public blockchains have limited privacy and scaling issues that prevent mass scale adoption. Private blockchains solve these problems by being a hybrid of cloud computing and blockchain rolled into one. At first glance, private blockchains may seem like the way to go to implement blockchain technology. But, as they say, you can't have your cake and eat it too.

The debate between public vs. private blockchains is analogous to that of the internet vs. the intranet back in the late 80s and early 90s. At the time, many believed that there were too many technological hurdles to accessing the internet and no reason an enterprise would need to be connected externally. So, enterprises built intranets. Eventually, it become quite obvious that intranet networks were not the future and everyone had to connect to the internet.

BlockEra believes this is the case today. Private blockchains are easier to implement and fit within the current structures of society and enterprises. They allow enterprises to say they are using blockchain while completely missing the power of a global public blockchain. Private chains are really only a quick fix for impatience until public blockchains have the necessary functions for mass adoption. As public blockchains introduce privacy measures and scaling solutions, the value proposition of public blockchains will become apparent and turn the majority of today's private chains obsolete.

 

Kyle Tut