The Difference Between Public and Private Blockchains and Why Bitcoin Is Special

Blockchain is said to be the backbone of the future internet. This is because the basic singularity of blockchains, known as the block, constitutes a blockchain responsible for recording information.

There are two types of blockchains; public blockchains and private blockchains. Public blockchains rely on a decentralized peer-to-peer connection network. However, in private blockchains, centralized authority is in charge of monitoring and controlling the ledger. This, therefore, means that the major difference between the two is the type of access granted to users.

Public Blockchains

Public blockchains strictly follow the idea of dementalization. These blockchains are also referred to as permissionless blockchains as they are completely open to the users. Some of the public blockchains include Bitcoin and Ethereum. With these blockchains, any individual on the network is eligible to add blocks to the network.

The anonymity of public blockchains is also another distinguishing factor. Public blockchains are highly anonymous. Individuals participating in a blockchain transaction can be easily identified with private blockchains. However, the identities of participants in a public blockchain are kept hidden.

Public Blockchains Can Be Advantageous in The Following Ways:

Security is one of the biggest advantages of a public blockchain. One of the reasons for making public blockchains safe is because any transaction that occurs cannot be changed. Even more, a transaction is only valid if most users second it. Hence, all transactions within a public blockchain are immune to tampering from outside. A more decentralized blockchain offers more security than a less decentralized one.

Public blockchains are made using open-source code that is open to the public, and therefore users can easily verify all transactions. Due to this, public blockchains will push the idea of decentralized identity.

Companies like Microsoft have commended the trust exhibited by decentralized identity, which will replace usernames or emails with a personal ID and permit data transfer in the blockchains, enabling safety and transparency. With DIDs, users can get all the services in one place.

No one can trace user transactions on the blockchain.

The Downside of Public Blockchains Can be Described As:

As much as public blockchains have the said advantages, there are some drawbacks. The first disadvantage is the power consumed by these public blockchains. Blockchains such as Bitcoin, which deploy the proof-of-work mechanism, use nodes for mining. These nodes consume a lot of energy, making mining an extensive process. Another con of public blockchains is congestion. A large number of users making a transaction on a blockchain makes the network slow, thus hindering transactions.

Private Blockchains

Private blockchains have the advantage of being fast and reliable because they hold fewer users. A good example is XRP Ripple, known for their speed, ability to protect thousands of transactions, and high scalability. Because of their centralized system, private blockchain transactions are managed by a centralized system.

However, trust is a major issue with a centralized system. Another problem with a centralized system is that few nodes make the connection; therefore, the network is vulnerable to cyber-attacks. Finally, anonymity makes public blockchains such as Bitcoin a step ahead of private blockchains. It is impossible to trace the users involved in a transaction and its details.

Here’s the deal: the main difference between public and private blockchains comes down to who has access to them. Public blockchains like Bitcoin allow anyone in the world to access their data; it’s open source and free for everyone. On the other hand, private blockchains are only accessible by limited individuals or organizations—usually those who have invested a lot in setting them up.

Public, Private, and Permissioned Blockchains: A Comparison

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.