A quick comparison between a Private, Public & Hybrid Blockchain

  Many aren’t aware of the differences between a private and public blockchain. At its most basic level, a blockchain is simply a data structure, or a chain of blocks. In some ways both types of blockchain have similarities:
  • They depend on a peer-to-peer architecture, where each participant maintains a copy of a blockchain for safeguarding and is required to sign transaction when interacting with a distributed ledger
  • Data stored on one protocol that relies on consensus chain of blocks
  • A distributed ledger promises to provide the immutability that blockchain technology guarantees
  • Uses public key cryptography
But, there are some key differences between a public and private Blockchain:
  • Participation is based on either a Permissioned or Permissionless network
  • Transparency surrounding transactions as private chain information is not publicly available
  • Consensus algorithm
  • Native cryptocurrency or blockchain
The sole distinction between public and private chains is that it:

Permissioned Blockchain (Private)

Unlike Public chains which are popular to date, private blockchains were designed to be the absolute opposite of a public blockchain. Why is a centralized solution introduced to be an alternative to a decentralized blockchain, the answer is that corporations, institutions and businesses want a cost-effective method to agree on the integrity of shared database or a way of means to share sensitive data in a secure environment. Old centralized systems, had to often rely on third parties (banks) to make sure there was an accurate ledger, paying them a hefty commission in the process of doing so. Enterprises also prefer to use private chains due to the security & privacy concerns that arise as the result of the openness of public blockchains. There is little to no privacy with public blockchains, businesses are often reluctant to share sensitive data, fearing the legal consequences when dealing with clients data. Usually, an enterprise will set up a permissioned network that can only be joined if the host has granted access through invitation. By limiting who can participate in the network, a permissioned network provides businesses a platform to share information between the various parties. The Linux Foundation’s Hyperledger Fabric, a project evangelized by IBM and the likes of giant corporations is an example of a permissioned blockchain framework implementation. Private blockchains are meant to restrict access to data, to ensure that outsiders do not have the ability to interact with a closed distributed ledger.  As enterprises’ place value in digital identity, this is fundamental for most industry use cases, be it handling supply chain management, disrupting the financial industry, or for use to ensure integrity of data. The real implication for Business-to-Business networks is to partake in permissioned networks to ensure that each participant has the knowledge and right to interact with a common distributed ledger that no other entities will have access to.

Public Blockchain

Anyone can participate in a public blockchain due to the fact that it’s often designed to be open sourced, allowing anyone with the technical know-how to access the data stored on a distributed ledger and to join as a host in the network. Tech savvy individuals will be able to view and access the data stored on immutable ledgers as this let’s anyone that wants to read, write, or join a public blockchain. Bitcoin, Litecoin, and Ethereum are all good examples of public blockchains, as all the data is available for the public to see. In transparent environments, everyone can see who has interacted with the distributed ledger – public blockchains are essentially considered to be the original distributed ledger structure. Anyone can receive and send transactions to someone around the world. Participants can be audited by someone who is part of the permissionless network. Nodes often times have the power as any other node in the network, making public blockchains not only decentralized, but fully distributed. Public blockchains are mainly useful for two things; value routing (including initial creation and distribution) and trustless timestamping of messages.

Private + Public Blockchain (Consortium Blockchains)

Enterprises prefer a private blockchain due to fact that they are much faster and cheaper to operate when compared to a public blockchain, because in permission networks, an entity doesn’t have to spend an enormous amount of energy, time and money to reach a consensus here. But public chains are the preferred type of blockchains amongst the general public, a reason for businesses to support more open networks. Both private and public blockchains have their own benefits and downsides, but what happens when you combine these two types of blockchain? You get a Hybrid! Projects like Aergo, a enterprise blockchain solution plans to help businesses build innovative applications on top either a private & public blockchain or a mixture of both. The public blockchain of Aergo is designed to mitigate the problems currently faced by open public blockchain, essentially giving enterprises the options of choosing their preferred style of either open or closed networks. Demonstrating that businesses can now implement both types of blockchain into their practices is a great advantage for adoption.

Private + Public Blockchain (Consortium Blockchains)

Enterprises prefer a private blockchain due to fact that they are much faster and cheaper to operate when compared to a public blockchain, because in permission networks, an entity doesn’t have to spend an enormous amount of energy, time and money to reach a consensus here. But public chains are the preferred type of blockchains among the general public, a reason for businesses to support more open networks. Both private and public blockchains have their own benefits and downsides, but what happens when you combine these two types of blockchain? You get a Hybrid! Projects like Aergo, a enterprise blockchain solution plans to help businesses build innovative applications on top either a private & public blockchain or a mixture of both. The public blockchain of Aergo is designed to mitigate the problems currently faced by open public blockchain, essentially giving enterprises the options of choosing their preferred style of either open or closed networks. Demonstrating that businesses can now implement both types of blockchain into their practices is a great advantage for adoption.
  The ecosystem will consist of both private and public blockchains, Enterprises will drive the potential of combining both public and private blockchains that are designed to accomplish cross-chain exchanged and greater compatibility is the way forward for all parties. A consortium blockchain is public and private at the same time. This split works at the level of the consensus process. The idea that there is ‘one true way’ to be blockchaining is completely wrong headed, and both categories have their own advantages and disadvantages, enterprises are realizing this and reacting by adopting both styles of blockchains with the idea that this is good for business.
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