Private Blockchain vs. Public Blockchain: What’s the Difference?

Private blockchain has yet to achieve the same level of popularity as public blockchain, and some experts question whether it ever will.

According to a report by Insight Partners, the blockchain industry is expected to grow from $4.3 billion to $228 billion by 2028. This includes public and private blockchains, as well as consortium blockchains.

What Is a Private Blockchain?

A private blockchain, also known as a permissioned blockchain, is controlled by a single operator or entity. They determine who can access the network and whether they can view and create data on the blockchain. Elias Strehle, the Chief Technology Officer at CircularTree and former researcher at the Blockchain Research Lab, describes this in his report “Public Versus Private Blockchains.”

The restricted access of a private blockchain makes it appealing to enterprises that want to keep their transaction information private. Private blockchains share the same core attributes as any other blockchain. They use a digital ledger to store data within blocks, with each block referring to the previous block through a cryptographic hash. This allows users to trace transactions and changes back to the Genesis block.

Public Blockchain vs. Private Blockchain

• Public Blockchain

Public blockchain is decentralized, meaning there is no organization or individual in control of it. Users can remain anonymous, and it is commonly used for cryptocurrencies and NFTs. The decentralized nature of public blockchains makes them “permissionless” and “trustless.”

Public blockchains offer several benefits. Anyone with an internet connection can use them, and all transactions are recorded and immutable. The network is highly secure due to the large number of nodes, making it difficult for cyber attackers to take control.

However, public blockchains have some disadvantages. They often have low throughput due to the need to reach consensus among a diverse group of users. Additionally, public blockchains consume a significant amount of electricity as users mine for cryptocurrency.

• Private Blockchain

In contrast, a private blockchain requires users to be verified. This is a key difference from public blockchains. Private blockchains can be centralized or partially decentralized, and their users are identified and considered “trusted.”

Private blockchains may have an advantage in terms of transaction processing speed because they have a homogenous group of users who need to achieve consensus. They also tend to have a simpler consensus process and do not typically offer incentives like cryptocurrency.

Despite being faster, more efficient, and trusted, private blockchains have their drawbacks. The primary concern is that they can be less secure due to their centralized nature and smaller number of nodes. Private blockchain records can be edited, overridden, or deleted by the network operator, which can be seen as a disadvantage by some users.