The Difference Between Public and Private Blockchain – What You Need to Know

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The world has become an online society with a digital identity being the new identity. The increasing digitization of records and data is leading to the development of blockchain technology which makes it possible to record transactions and information in a secure, automated, and transparent way. Blockchain technology can be used for various purposes such as e-commerce, peer-to-peer lending, smart contracts, and cryptocurrency. However, there is a subtle difference between public and private blockchains. 

A private blockchain is one where data (transactions) cannot be viewed by third parties or the general public. This makes it suitable for financial institutions, banks, and other organizations that do not want their mistakes or frauds to be exposed to the public. On the other hand, a public blockchain is one where anyone can view and make payments on behalf of third parties or businesses. However, due to its decentralized nature this type of blockchain cannot be used by any single entity or organization without getting into legal issues or security breaches. The following article will explain what you need to know about public vs private blockchains; what each kind is good for; examples of each; risks involved; and which one is right for you.

What is a Public Blockchain?

A public blockchain is a blockchain that anyone can view and make payments on. It is decentralized and public, meaning that all data and transactions are open to the general public. This makes it suitable for businesses like banks and financial institutions that do not want their mistakes or frauds to be exposed to the public. A private blockchain is one where data (transactions) cannot be viewed by third parties or the general public. This makes it suitable for financial institutions, banks, and other organizations that do not want their mistakes or frauds to be exposed to the public.

What is a Private Blockchain?

A private blockchain is a blockchain that only certain parties can view, such as the owners, managers, and employees. This makes it suitable for business organizations that do not want their mistakes or frauds to be revealed to the public.

Differences between Public and Private Blockchain

The biggest difference between public and private blockchains is privacy. With a public blockchain, anyone can see all transactions, including those involving the owners, managers, and employees of the business. With a private blockchain, only the owners, managers, or employees can see the data. This privacy is possible with public blockchains because all data is public, but it is not possible with private blockchains because only the owners, managers, or employees can see the data.

Pros of a Private Blockchain

Private blockchains are more secure than public blockchains. This is due to the fact that only the owners, managers, or employees of the business can view the data on a private blockchain. This level of privacy makes it more difficult for hackers to access data, gain control of computers, or breach the security of sensitive information.

Pros of a Public Blockchain

There are no pros to using a public blockchain. The only thing that will happen if the data is visible to the public is that it will be easily traded on cryptocurrency exchanges and be used in leveraged loans or equity investments. This is not a recommended practice because it means that third parties will have easy access to the data and can make payments on behalf of businesses on the basis of that data. This is not the best solution for businesses that do not want their data being accessible online.

Example of How to Use a Public Blockchain

In this example, you will use a public blockchain to create a decentralized, peer-to-peer network called a “distributed ledger.” You will use the blockchain to record all the details regarding the trade, including the prices, locations, and terms of the trade.

Example of How to Use a Private Blockchain

In this example, you will use a private blockchain to create a centralized, database-driven network called a “trust chain.” You will use the private blockchain to verify and authenticate the information that is recorded on the public blockchain, such as the identity of the buyer and the provenance of the items.

Conclusion

The main difference between public and private blockchains is privacy. With a public blockchain, anyone can see all transactions, including those involving the owners, managers, and employees of the business. With a private blockchain, only the owners, managers, or employees can see the data. Private blockchains are more secure than public blockchains, as only certain parties can view the data. There are also some other differences such as consensus-based validation in a public blockchain vs. smart contracts in a private blockchain, as well as the type of consensus used for authenticity/validation in a private blockchain vs. a public blockchain.