As blockchain technology advances, businesses and developers face a big decision: public or private blockchain? While both types of blockchain are built on the same principles, their architecture, use cases, and benefits are very different. Knowing the differences is key to choosing the blockchain best suited for your use case.

In this post, we will examine the main differences between public and private blockchain networks and the pros and cons of each. By understanding the uniqueness of each type of blockchain, this guide will help you decide which blockchain network you need to achieve your goals.

What is blockchain?

First created in 2008, blockchain is a decentralized, distributed ledger designed to be a more secure alternative to existing financial and management systems. Blockchain is changing modern digital systems by providing a decentralized, transparent, and secure way to manage data and transactions.

Blockchain is applicable across many industries. In finance, it powers cryptocurrencies like Bitcoin and can provide secure, peer-to-peer transactions without intermediaries. Because of their decentralized nature, blockchain networks also support supply chain managers, healthcare professionals, government institutions, and many other businesses that act as network operators.

How it works

Unlike traditional databases, which are controlled by a central authority, blockchain operates on a decentralized network of nodes (computers) that validate and store data. This means no one has control and only authorized participants make decisions collectively across the network.

Blockchain ensures data immutability through its structure of linked “blocks,” each secured by cryptographic hashes. Once a block is added to the chain, it’s almost impossible to change because changing any information would require changing all subsequent blocks. So once data is recorded, it can’t be changed. That’s what allows a blockchain network to be a secure and reliable financial system.

Types of blockchain networks

There are two types of blockchain networks: public and private. Many differences exist between them, but the main difference is that public blockchains are open to everyone, while a private blockchain network is only open to authorized users.

Public Blockchain

A public blockchain network is open to anyone. As long as you have an internet connection, you can access a public blockchain and join the system as an authorized node. Blockchain technology powers several public blockchain networks today, including Bitcoin and Ethereum, which host and validate transactions for cryptocurrencies and digital assets.

Private Blockchain

These are a different type of blockchain in which the entire network is not open to the general public. You can only access a private blockchain if you’re authorized to do so by the network owner. There are several examples of this type of blockchain today, including Hyperledger and Corda.

Public vs Private blockchain differences

Accessibility and participation

Public Blockchain

These blockchains are a public network. They’re open to anyone with an internet connection, and users can join the network freely, making them much more accessible than private networks. Anyone who wants to access a public blockchain can register to participate and become a node. They can then individually access the blockchain to verify transactions or perform tasks like mining.

Private Blockchain

Unlike a public blockchain network, private blockchains are a closed network. Only authorized participants can find and join private blockchains. Node access across private blockchains is heavily controlled, sometimes by a central authority. It is often preferred in enterprise environments as it provides more security at the cost of more centralization.

Transparency and privacy

Public Blockchain

All transactions made across a public blockchain are publicly visible to everyone and can’t be changed. This builds trust in the network, but it also means sensitive data can be exposed. Even though transactions are visible, they aren’t linked to personal information. Each user’s identity is protected by a unique cryptographic address, a concept called pseudonymity.

Private Blockchain

Private blockchains are more secure because transaction visibility is limited to a few authorized participants. They use a controlled transparency approach where instead of every transaction being visible to everyone publicly, information is only made available to certain users. Therefore, data is hidden from public view, making private blockchains suitable for heavily regulated industries.

Consensus mechanism

Public Blockchain

The two most common consensus mechanisms for public blockchains are Proof of Work (PoW) and Proof of Stake (PoS). PoW involves mining to verify transactions, whereas PoS requires users to stake their currency to gain access. One of the biggest issues with blockchain technology is its energy consumption, which is caused by PoW. PoW consumes a lot of energy and greatly impacts the environment.

Private Blockchain

Private blockchains have more flexibility in their consensus mechanisms. They can choose to use Proof of Authority (PoA), where authority is given to a select few, or Delegated Proof of Stake (DPoS,) which is similar to PoS but involves chosen delegates. These mechanisms make private blockchains more secure and can function faster and more energy efficient as they rely on a few users.

Security and trust model

Public Blockchain

Public blockchains rely on cryptography and the above consensus mechanisms through a trustless security model to remain secure. Each user is their own node in a public blockchain. This means networks are often large, and security depends on everyone across the blockchain and cryptographic protection.

Private Blockchain

Private blockchain sacrifices some of its decentralization to achieve more security in a trusted environment. Only a few known entities are allowed access, which reduces security concerns. This controlled access also means there’s a much smaller attack surface in private blockchains. Because of this small surface and fewer users, private networks are less prone to infiltration or specific attacks like Sybil attacks.

Scalability

Public Blockchain

Public blockchains like Bitcoin and Ethereum face scalability issues due to global consensus mechanisms. These mechanisms require all nodes to verify each transaction, slowing down processing speed. This can lead to delays and limit transaction throughput. For example, Bitcoin processes around 7 TPS, and Ethereum processes around 15-30 TPS, both of which are lower than traditional systems.

Private Blockchain

Private blockchains have fewer nodes, which means faster consensus and higher transaction throughput. With a few trusted participants, transactions can be processed faster. Private blockchains are suitable for high-transaction applications like financial services as they provide faster and more scalable solutions while maintaining privacy and security.

Public vs private blockchain use cases

Public vs. private blockchain: Advantages and disadvantages

Advantages of public blockchain

The first major advantage of a public blockchain is the transparency it can give to everyone in the network. All transactions are public, so transparency over transactions and trust in the network. These public blockchains are truly decentralized, meaning a single entity can never control them.

Disadvantages of public blockchain

Public blockchains can have scalability issues. They have limited transaction speed and high energy consumption because many users access the network at the same time. Public networks also have some privacy concerns, so they are not suitable if a network needs to handle very sensitive data.

Advantages of private blockchain

Private blockchains give the network owner and users more control and privacy. Because of strict access control, these networks have more data privacy and limited transparency compared to public networks. They’re also faster. Private blockchains provide faster transactions because of a controlled network and streamlined consensus.

Disadvantages of private blockchain

Private blockchains achieve the above at the cost of less decentralization. Less decentralization can create trust issues as it is not in line with blockchain’s traditional decentralized nature. There’s also limited transparency between users in these networks, which means they can be less suitable for applications that require full public transparency.

Hybrid blockchain as an alternative

A hybrid blockchain combines elements of public and private blockchains. It combines the flexibility of public transparency with the security and control of private networks. It allows some data to be public while keeping sensitive information to authorized participants.

Hybrid blockchains can enable secure and transparent data sharing between businesses across different industries, like supply chain tracking, without exposing proprietary information to the public. Governments can also use hybrid blockchains to store records like land titles where some data is public (e.g. transaction logs). At the same time, private information (e.g. owner details) is confidential within authorized circles.

Hybrid blockchain benefits

A hybrid blockchain can have a balance between transparency and privacy. It gives you customizable transparency depending on how your network is designed. This customizability also gives hybrid blockchain more scalability and efficiency. You can have optimized performance without sacrificing full decentralization.

Hybrid blockchain limitations

Because of their complexity, hybrid structures require more advanced governance. In theory, hybridization can have the benefits of public vs. private blockchain, but in reality, blockchain developers can run into issues when trying to balance trust with continued decentralization.

Public or private blockchain?

When choosing between public and private blockchain, consider your organization’s unique needs, especially around security, scalability, and cost. Public blockchain is for applications that require decentralization and transparency, while private blockchain is for organizations that need control over data, faster processing, and more scalability.

Industry regulations, such as GDPR for data protection or specific financial regulations, will also play a big role in your decision. Private blockchain is often more suitable for industries with strict privacy and compliance requirements, as it gives more control over access to sensitive data.

The cost of implementing and maintaining blockchain solutions also varies. A public blockchain has a lower initial cost but higher transaction fees due to congestion. Private blockchain has higher upfront costs due to infrastructure and maintenance but has better scalability and control, making it more cost-effective for high-volume or enterprise-level applications. Hybrid solutions can be a good middle ground in your use case but it’s the most expensive to implement and maintain. Consider your needs vs your budget and factor this in your decision.

Public and private blockchain trends

There are several trends in blockchain usage to watch out for, as they will shape how these will be used in the future. Private blockchain adoption is growing fast across the finance, healthcare, and supply chain industries. Organizations are using private blockchain for secure, scalable, and efficient data management. As this trend continues, using private blockchain within enterprises will become more mainstream.

New and more efficient consensus mechanisms are also emerging to address scalability and energy consumption issues. Ethereum already moved away from PoW and is now using hybridized PoS. Innovations like DPoS and Practical Byzantine Fault Tolerance (PBFT) are being explored to make blockchains more energy-efficient, secure, and capable of handling more transactions.

Last, as the blockchain ecosystem grows, interoperability between public and private blockchain is becoming a priority. New initiatives like Polkadot and Cosmos are promoting cross-blockchain compatibility, allowing seamless communication and data exchange that can unlock new use cases and cross-industry collaboration.

Conclusion

To sum up the public vs. private blockchain debate, each blockchain has its own advantages. A public blockchain has decentralization, transparency, and security, making it suitable for decentralized applications like cryptocurrencies and public auditing. Private blockchains have more control over the network operators and better scalability and privacy.

It’s up to you to decide. Make an informed decision based on the benefits of each network and what you want to achieve with your solution. Regardless of your choice, investing in blockchain should give you more efficiency and transparency in managing your data in the future.

FAQs

What is the difference between public and private blockchain?

The main difference between these two is accessibility. Public blockchain is open to everyone; anyone can join the network, validate transactions, and access data. Private blockchain has stricter controls, and only authorized entities can access it. The other difference is transparency. Public blockchain is fully transparent, while private blockchain is selective visibility based on permissions.

Which is more secure: public or private blockchain?

Both public and private blockchains are secure, but as a general rule, private blockchain is a more secure network. This is because it allows operators to restrict access while anyone can access a public network.

Each network also has different vulnerabilities. Due to its open and global nature, public blockchain is more vulnerable to 51% attacks or network congestion. Private blockchain doesn’t have these concerns, but a data breach can be more severe as it hosts more sensitive data. Private networks can also be more prone to insider threats or centralization risks.

Can public blockchain be used for enterprise applications?

Public blockchain offers decentralization and transparency, but using it for enterprise applications has its challenges. Transparency can conflict with privacy requirements as sensitive business data becomes public. A public blockchain is not suitable for businesses that need to protect intellectual property or confidential transactions.

Scalability is another issue for public blockchain in typical enterprise or large-scale corporate applications. Enterprises need higher transaction speed and more scalability to handle a large volume of data quickly. This is not always possible in a public network because the network has to support multiple users.

However, public blockchain can be used in enterprises for specific use cases such as cryptocurrency transactions, decentralized finance (DeFi), or supply chain transparency. If security is a concern in these cases, it might be worth implementing a hybrid blockchain solution. With a hybrid solution, some parts of the network can be made private while maintaining the decentralized and public nature of the blockchain network as a whole.

Why is private blockchain popular in regulated industries?

Private blockchain is becoming popular in regulated industries like finance, healthcare, and insurance because it can meet strict privacy and compliance requirements. Data privacy is critical in these sectors, and private blockchain gives more control over who can access and validate the information.

For instance, private blockchain can ensure that only authorized parties (e.g. regulators and business partners) can access sensitive data so businesses can comply with data protection laws like GDPR. Private blockchain also allows data governance rules to be enforced so transactions are recorded securely without public visibility.

Besides privacy, compliance is another benefit of private blockchain in heavily regulated industries. Since private blockchain can restrict access, it can meet stricter regulatory requirements for data security and auditability.

Can I combine public and private blockchains?

Yes, combining public and private blockchain features through a hybrid process is possible. A hybrid blockchain combines public and private blockchain features so organizations can enjoy decentralization, transparency, and security while controlling sensitive data.

In a hybrid blockchain, the public blockchain provides transparency, while the private blockchain provides confidentiality and control over who can access and participate in the network. For example, sensitive business data can be stored in the private blockchain, while transaction records or audit trails can be made public for transparency.

Hybrid blockchain can be used for cross-industry collaboration (different sectors can collaborate without compromising proprietary data) and government records (public data is accessible but private information is secure). It is flexible, combines the best of both public and private networks, and can be used in many industries and use cases.