Private vs. Public vs. Permissioned Blockchain: A Comparative Guide

Blockchain is used by companies in various industries that require specific systems and processes. With these specifications, different types of blockchain networks have emerged. As a business leader, it is important to know which blockchain network will work for your organization.

The infographic below covers the basics of blockchain and will provide a comparative guide to the nature of private vs. public vs. allowed blockchains, touching on their differences in terms of participants, networks, applications and performance.

What is a private blockchain?

A private blockchain is a type of blockchain where only a single organization or entity has control over the network. It allows the entry of only selected verified participants, and the operator has the right to override, edit or delete entries as necessary.

In this type of blockchain, participating parties must be validated before joining the network and given permission before they can read, write or edit the blockchain. Multiple layers of access are in place to keep certain data confidential. The data is private to the network, owned by the operator and not generally accessible to anyone outside the network.

What is a public blockchain?

A public blockchain is a permissionless network that allows anyone to join and participate in its core activities. It is decentralized – no one can change the protocols, and no particular participant or single entity controls the data.

While public blockchain operators are pseudo-anonymous, the data is immutable and secure, as the ledger remains permanent, providing an immutable history of transactions. It is not possible to change entries once they are validated unless a rogue actor controls more than 51% of the network. Even if this were the case, the modification would be publicly provable and detectable, so the claim of data immutability holds.

What is a permissioned blockchain?

A permissioned blockchain has the features of both private and public blockchains. It maintains a level of access control that allows specific actions to be performed only by verified participants. Anyone can join the network after verifying their identity and granting selected permissions, but users can only perform certain actions depending on their permissions. Unlike private blockchains, the data is normally public and the central authorization unit only retains control over the authorization of new participants in the network, without direct authority over the data.

Private vs. public vs. permissioned blockchain: What’s the difference?

In a public blockchain, anyone can participate in the network. Everyone is free to read, write or revise the ongoing activities. This democratized nature and authority-free operation is driven by the incentive scheme, which encourages new participants to join to keep the network active.

In a private blockchain, only verified participants can join the network. Validation is provided either by the network operator or a permanently locked set of rules or protocols.

In the case of a permissioned blockchain, participants must first be verified before they can participate. The exclusive permissions give them the ability to perform specified activities on the network. This is done to protect the integrity of certain data.

Private and permissioned blockchains have identity management tools that allow users to plug in their own identity management solutions.

With blockchain’s identity management capabilities, individuals and businesses can store their identity data on their devices and choose which information to share with validators. In this setup, the Participant may use a third-party tool to protect confidential information, such as a password management app, a digital bank vault, or an authentication protocol.

Public blockchains, by design, do not have built-in identity management capabilities. Users register themselves and are fully responsible for protecting their private keys. This does not preclude third-party identity management systems from being leveraged on top of public blockchains.

The network latency is different on these three types of blockchains; because private networks are smaller, nodes receive information at a faster rate and the node operators have fuller control over the network due to interconnection in these systems because the participants are already identified.

Public networks operate on a larger scale and have an unlimited number of participants. Therefore, it may take longer for the information to travel across all nodes. In practice, however, a core group of well-connected nodes tends to form in public blockchains based on proof of work, due to its consensus mechanism that penalizes the waiting time between block producers.

Permissive networks have almost the same framework as a private network because they are small and each participant is already identified. Therefore, data is transmitted over a shorter distance at a faster speed.

Blockchain analysis generates a graphical overview of transaction trends and patterns in the network. They can provide real-time alerts on high-risk activities, allowing compliance teams to focus on the most urgent matters. Companies can use this information to track what individuals are buying, which products are most popular, and can use the data to provide business insights and forecasts.

Account-based systems within public blockchains enable easy use of traditional graph analysis tools. However, care must be taken when determining internal transactions from peer-to-peer transactions, so that all relationships (such as token buying and selling) between addresses will reflect correctly on the graph. That said, it is offset by the fact that analysis of public blockchain transactions is more insightful than permissioned or private blockchains, simply because the more transactions of all varieties that are entered into the public ledger, the more potentially useful information can be gleaned from it .

Businesses can likewise benefit from applications designed for private and permitted ledgers. By combining the “on” and “off” financial data stores, they can generate better analytics. They can also share machine learning or artificial intelligence-based output from their enterprise systems on the ledger for comprehensive and more decisive analytics data.

It is important to note that analytics can be applied to any blockchain network. The only real difference is how easy it is to get analytics on one chain versus another. Private and permissioned blockchains have smaller networks that will be easier to analyze compared to a public blockchain with a larger number of players that you need to identify and analyze.

Regulatory frameworks are still evolving, but for now it seems unlikely that public blockchains will get the nod from businesses due to privacy and other compliance concerns. Private and permissioned blockchains have a better chance of complying with existing policies (and even the latest standards and guidelines) since they offer more applications built in line with the company’s existing structure

Different blockchains address different requirements

Private blockchain, public blockchain and permissioned blockchain have specific uses for different industries. Each type has its advantages and disadvantages, so when deciding which one to use, you need to take your business needs and requirements into account.

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