By default, the term blockchain is often referred to a public blockchain. The cryptocurrencies that are currently in the news all make use of a public blockchain. Therefore this seems to be the obvious choice when starting to use a blockchain. However, in addition to a public blockchain, there is also the possibility of using a private blockchain. To make the right choice in the use of a blockchain, first must be made clear when to use which type of blockchain. There are some similarities and some differences between the varying blockchains.
Before we start looking at the differences there are a number of similarities between a public and a private blockchain:
- Both blockchains are decentralized peer-to-peer networks in which each participant has a replica of the shared general ledger including digitally drawn transactions;
- Both types of blockchains hold the replicas in sync through a consensus protocol;
- Both types of blockchains give a certain degree of certainty about the immutability of the general ledger.
What are the differences between a private blockchain and a public blockchain? The main differences:
- Who can participate in the network?
- Who can execute the consensus protocol?
- Who can keep the general ledger?
A public blockchain network is completely open and anyone can become a member of the network. The network has an incentive mechanism to encourage participants to participate in the network. Bitcoin is one of the largest public blockchain networks today.
A disadvantage of a public blockchain is that a substantial amount of computer power is needed to be able to keep the distributed, general ledger on a large scale (several solutions are now being developed to reduce this burden). Another disadvantage is the openness of the public blockchain, which means that there is no privacy of transactions. Both cases are important considerations for companies when using a blockchain.
When using a private blockchain within an organization, there are different possibilities to implement the blockchain. The procedure for the admission of nodes within a private blockchain differs from that for a public blockchain. The consensus model also works in a different way. Before a private blockchain can be implemented within an organization, it is important to have these choices clear and to define the route to be determined.