Public blockchain: Internet
Private blockchain: Intranet
Supporters of public blockchains believe that these are the future as they follow the purpose of blockchain technology- decentralization and distribution. They go further to criticize private blockchains by comparing them to basic traditional databases which try to use new technology. More like taking an old feature cell phone and sticking an Apple sticker on it to build hype around it. Absurd, right?
Further criticisms state that private blockchains preach security because only a select group of people handle the data. This does not please critics as they believe that this is an actual security problem because the real users of the data are not on the blockchain, hence they cannot verify its validity.
This is not where this emotional debate ends. Supporters of private blockchains, such as IBM, openly state that their technology is better. Why? Because only parties that are meant to transact are the ones that become part of the blockchain. In addition, their data is not shown to everyone, but the parties involved. IBM further states that private blockchains provide privacy, information sharing, immutability and security protocols.
Even with IBM’s powerful stance, it has been accused of “hype surfing”. This means that they use old technology and dress it up in a blockchain outfit so as to sell to companies that do not fully understand blockchain.
Quite a fair debate, don’t you think? Good points from both opponents if you ask me.
In order to understand this tug of war, and possibly choose what is best for your company, it is best to know the differences.
Private Blockchains AKA The Intranet? No? Yes? Maybe?
A private blockchain suggests that participating parties must be pre-verified before participating in the network. Due to the limited number of participants, it lacks decentralization and distribution. This makes people often wonder why anyone would opt for a private blockchain in the first place.
Private blockchains require that members of the network highly trust each other. This is why they are mostly used in intra-business solutions which only allow employees of that certain business to have access. They become more efficient in supply chain use cases because they do not require thousands of participants to verify the transactions. Moreover, it is easier to change the protocol that builds consensus within the network as the validation of the transactions by participants is often determined by the developer. This is currently being used by a Swedish land-registry startup named Chromaway, which uses private blockchain to store title registries and ownership in a transparent manner.
However, blockchain has repeatedly been referred to as Web 3.0; which means decentralization and distribution. This is the kind of technology we want for the future. Question is, do private blockchains really match up to that? Is there a better alternative? Maybe public blockchains?
Public Blockchains AKA The Real Blockchain? Yes? No? Maybe?
Public blockchains are permissionless and are open to everyone and anyone. This means that the blockchain can be downloaded to one’s computer and they can view the history of the blockchain, receive and send transactions. To add on, every node has to audit a transaction before it is valid, using consensus. Each node has to abide by the set protocol; which helps build consensus among participants and helps accept valid transactions in a particular order.
The benefit of public blockchains is that they are both decentralized and distributed. This is why the blockchain is referred to as Internet 3.0, as it emanates the internet- but adds distribution to the mix.
Furthermore, public blockchains offer transparency as they can be audited by everyone on the network. This makes them very secure as fraud can easily be detected. They also help in information sharing as information can be shared with everyone in a secure manner. This is secure because data is immutable and this can be used to verify education credentials. Sorry fake doctors, we are coming for you. Lastly, the open source characteristics of the public blockchain enhances its security.
However, public blockchains have the potential to have bad actors to exploit the current systems. The current security makes it hard to detect potential threats. This means unexpected threats might strike. Notably, public blockchains set their rules at the beginning and changing the rules means acceptance by every node. This makes them slow and inefficient. They are also very costly as each node has to authorize every transaction, requiring a lot of power.
Consortium Blockchain: The best of both worlds
A consortium blockchain is what I call “the best of both worlds” as it is a public-private blockchain. In a consortium, pre-verified participants are the ones that partake in consensus in verifying transactions. The other participants can only create and view transactions. These are mainly used by parties that want to share their data with other parties. Validating nodes are chosen by the specific consortium. A consortium blockchain shares the pro’s and con’s of both public and private blockchains, depending on which side it’s leaning towards. However, it leans towards having advantages of the private blockchain in regards to privacy and limited consensus.
Honestly speaking, let’s face it: there is no need for this tug of war between the two blockchains. Public blockchains should let private blockchains handle intra-business deals and private blockchains should let public blockchains drive decentralization and distribution. Can’t we all coexist peacefully? No? Yes? Maybe?