Private blockchain vs public blockchain
Private blockchain has yet to hit it big like public blockchain — and some experts question whether it ever will.
Over a seven-year period, blockchain is expected to grow from an estimated $4.3 billion industry to a whopping $228 billion industry by 2028, according to a report by Insight Partners. This number includes both public and private, as well as consortium, blockchains.
What is a private blockchain?
A private blockchain is controlled by a single organization that only allows verified members to join the network. These members can be given different levels of access to the blockchain.
What is a private blockchain
Private blockchain, which is also called permissioned blockchain, has a single operator or entity that limits who can access the network and whether they will be able to see and create data on the blockchain, said Elias Strehle, chief technology officer at CircularTree and former researcher. at the Blockchain Research Lab and author of “Public Versus Private Blockchains” report.
The limited access, or “trusted” blockchain system, tends to make this more attractive to businesses that want to keep some or all transaction information private.
Private blockchains also have the same core attributes as all types of blockchains. It uses a digital ledger to store content in the blocks that make up the chain, hence the name blockchain. The first block created is called a Genesis block, and each block added thereafter will have a cryptographic hash that references the previous block, allowing users to track transactions and changes to information going back to the Genesis block.
Public vs Private Blockchain
Public blockchain
Public blockchain is decentralized, with no organization or individual controlling it, and users can remain anonymous. Cryptocurrencies and NFTs are among the most popular use cases, Blockchain experts said.
Because it is decentralized, public blockchains are called “permissionless” and also “trustless” with their anonymous users.
There are several advantages to a public blockchain. Anyone with an Internet connection can use it. All transactions are recorded and cannot be changed. In addition, the network is highly secure – there are just too many nodes for a cyber attacker to take control of the decentralized network.
Slow network speed is one of the biggest drawbacks. This is caused by trying to reach consensus with a heterogeneous group of users. Another drawback is the voracious consumption of electricity that public blockchains consume when users mine cryptocurrency on the network.
Private blockchain
A private blockchain requires users on the system to be verified, which is a key difference from a public blockchain, said Ahmed Amer, associate professor of computer science and engineering at Santa Clara University. It is also centralized or partially decentralized, and the users can be identified, otherwise known as “trusted”.
Private blockchains can also have a speed advantage when processing transactions because they have a set of homogeneous users who need to reach consensus to validate transactions.
Additionally, private blockchains tend to have fewer hoops to jump through to achieve consensus. Most do not offer incentives such as cryptocurrency to entice participation in the private blockchain. In turn, private blockchains run more efficiently and faster.
Despite these advantages of a faster, more efficient and reliable system, private blockchains also have disadvantages. The primary concern is that private blockchains may be less secure. It is a result of it being a centralized system with fewer nodes, reports Geeks for Geeks.
Private blockchain records can be edited, overridden or deleted by the operator of the network, according to Investopedia. Users may also find this feature a disadvantage.
Future Forecasts for Private Blockchain
Over the past few years, only 14 percent of private blockchain projects or experiments have gone into production, Avivah Litan, vice president and principal analyst at Gartner and the report’s author, told Built In.
“Those that went into production were distributed to a limited number of nodes on the private blockchain and had very low transaction volume, which seriously calls into question the need for distributed ledger technology,” Litan said. “These projects did not need to use a private blockchain distributed ledger technology. Instead, they could have used a centralized ledger or even a regular database.”
When debating whether to use a private, public or other form of blockchain, there are important questions to ask yourself, experts say.
“What you want to do is set up the functionality, the expectations, the rules, the governance and the technical capabilities of what you want to build, and then build a system that can match those requirements,” Treat said, noting that he avoids use the terms private or public blockchain because he finds it woefully inadequate to limit thinking to binary terms.
Building a private blockchain faces challenges, and one of the biggest hurdles is creating an ecosystem around the blockchain, Litan said.
It’s very expensive to build an ecosystem and nobody wants to spend a lot of money on it because there hasn’t been a proven ROI, so management doesn’t want to approve it,” Litan told Built In.
“Standalone private blockchains will disappear… But smaller, niche private blockchains that link to public blockchains are more likely to remain.”
Other concerns may revolve around the entity operating or sponsoring the private blockchain. This device is taking action, potentially leaving some users on the private blockchain network wondering if their organization’s needs will be met before theirs, she added.
Questions like these raise questions about whether private blockchains will remain part of the blockchain landscape in the future.
“Independent private blockchains will disappear,” Litan predicted. “However, smaller, niche private blockchains that link to public blockchains are more likely to remain.”
Other types of blockchain
Four main blockchain categories exist, including private, public, hybrid, and consortium (also known as federated) blockchains.
Hybrid blockchains
Hybrid blockchains use both private and public blockchains, rather than being a standalone solution.
“In the end, it’s just a private blockchain plus a public blockchain,” Strehle said.
With hybrid blockchains, a company can put its data or transactions on a private blockchain to keep the information confidential, but put a digital fingerprint of the data on a public blockchain to secure it, Strehle said. If a company suspects that the data may have been altered, it can compare the information on the private blockchain with the reconstructed information captured by the public blockchain’s fingerprint, he added.
Consortium or Federated Blockchains
Consortium or federated blockchains operate with a specific group of participants controlling the blockchain, rather than a single entity. This group sets the rules, edits or cancels improper transactions and requests cooperation among its members, according to a Blockchain Council report.
Here are other areas private and public blockchains differ, according to a diagram by 101 blockchains.
Private Blockchain Uses/Examples
“There is a huge range of business functions … that can benefit from blockchain,” said David Treat, CEO and co-head of Accenture’s blockchain business entity. “We have work in progress in all industries.”
Instead of dealing with the inefficiencies of businesses sending messages back and forth and reconciling the information in other ways such as invoices, receipts or spreadsheets, it is more efficient to have a shared view and access to transactions via blockchain to verify the data and ensure that they are safe. and safe, Treat told Built In.
Logistics and supply chain
Private blockchains allow for more security and privacy in the logistics industry. Asset tracking, overview of ownership and shared record keeping benefit manufacturers, supply chain participants such as delivery companies and customers by following goods from origin to destination.
Financial services
In the financial industry, companies can identify customers through the blockchain’s cryptographic key and ledger, as well as demonstrate regulatory compliance through the automated use of smart contracts via an organization’s centralized network.
Health Service
In healthcare, blockchain technology can be used to track and secure patient data. It can also help to log patient claims chronologically – avoiding duplication with a distributed ledger on a healthcare company’s centralized network.
The banking and securities industry
In banking, the use of blockchain technology can mean faster payments and settlement of money transfers. Institutions are also looking at the use of stablecoins, a cryptocurrency tied to the value of fiat currency and controlled by an issuing bank or investment firm as part of a centralized network.
