Public blockchains & private blockchains - the difference
Of course, there are an awful lot of different blockchains. Think about Ethereum's blockchain or Bitcoin's blockchain. Despite being completely different blockchains, they both have one thing in common. And that is that they are both public blockchains.
To understand how blockchain could be used in practice, it is important to understand the difference between public blockchains and private blockchains. In this article we will explain to you what both blockchains are, how to recognize them and what they could be used for.
What is a public blockchain?
The name of this kind of blockchain already says a lot about the use and purpose of the blockchain. A public blockchain is a blockchain that is accessible to the public. So that means it's a public blockchain that can be used by anyone. In some cases, there is also no single owner of the blockchain.
You recognize a public blockchain
when you could use it without any problems. Or when you can join the network of the blockchain.
User situations for public blockchains
A public blockchain is used in all sorts of situations. The best known public blockchains are of course Bitcoin and Ethereum. Anyone can perform a transaction on this blockchain. Also, anyone can develop an application and run it on the Ethereum
This is because the blockchain is managed by the network. All the nodes of the blockchain make up the network. The nodes in the network ensure that the transactions are processed. It is also possible to work as a node for a public blockchain.
The situations for which a public blockchain can be used are infinite. For example, Bitcoin
is mainly used for making transactions, while Ethereum is mainly used for decentralized applications (dApps).
What is a private blockchain?
The name kind of says it all: a private blockchain is private. This means that not everyone can access the content on this blockchain. So, simply put, the blockchain is shielded from outsiders.
In most cases, outsiders do not even know about the existence of this blockchain. But what good is it if the blockchain cannot be used by others?
A private blockchain is very useful for governments, organizations and companies, for example. They still use central servers today, and sometimes think about switching to blockchain as well. This is because blockchain offers several advantages, such as better data protection.
Yet these organizations often do not choose to actually switch to blockchain. This is because with a public blockchain, the data on the blockchain is stored on the nodes that are part of the network.
This is not convenient when it concerns sensitive data, such as the data of a hospital. In that case it is more convenient if they have their own blockchain, which only the hospital can access.
A private blockchain therefore also consists of far fewer nodes than a public blockchain. The organization that creates and uses the blockchain can choose who the nodes are and how the blockchain should work. So, in this way they can have a blockchain much easier to customize to what they need.
With a public blockchain it is not possible to just adapt the code. The public blockchain must fit the needs of the company or organization. And in most cases, it‘s not working like that. The blockchain is mostly made according to the wishes of the developers that created the blockchain.
User situations private blockchains
A private blockchain is mainly used by companies, governments and organizations. They have the blockchain developed by a party that has knowledge in this. They can then tailor the blockchain exactly to the wishes of the buyer.
For example, all hospitals in the Netherlands could set up a private blockchain together. Each hospital would then have a server in the building that is part of the blockchain network.
The advantage? When you go to another hospital, they can quickly and easily retrieve your data from another hospital. You don't have to worry about privacy. In fact, only the hospitals have access to the data on the blockchain. After all, it is a private blockchain.
The same could be applied by governments. When all government agencies switch to a private blockchain, the data is better protected from outsiders. Also, the government will be less bureaucratic because data about citizens can be retrieved much more easily from other agencies.
Criticism of private blockchains
A private blockchain sounds like the ideal solution for companies, organizations and governments eager to use blockchain technology. Yet there are also criticisms of this type of blockchain.
There are people who claim that a private blockchain overthrows the idea of the blockchain. Indeed, a blockchain is supposed to ensure more decentralization of personal data. This is because the data in public blockchains are stored across all nodes. There is therefore no individual authority that has access to this data.
You can ask yourself whether the criticism is justified. After all, it is logical that a government cannot simply use a blockchain to store data. Such a blockchain must meet certain conditions. Also, when an update needs to be performed, the government has no control over this. They are dependent on the participants in the blockchain.
Why is a public blockchain not useful for companies?
What is it that prevents companies and governments from having an influence on how the blockchain works? A blockchain is made up of different nodes, and they decide what code to use.
When a company suggests modifying Ethereum's code, they are dependent on the nodes. If they don't modify their code, the change won't be made either. So, as an individual company, you have little say in a public blockchain.
In addition, companies and governments often do not want customer and citizen data to be stored on other people's machines. Even though the data is secure by means of cryptography, many companies and governments are still very reluctant. Therefore, a private blockchain could also be the ideal first step towards using blockchain.
When you are active as a crypto trader, you only hear about public blockchains. These are blockchains that are public to the whole world. Bitcoin and Ethereum, for example, are the best known public blockchains.
However, companies and governments cannot just use this type of blockchain. The blockchain must meet certain conditions for it to be usable. And companies have no influence on this. They are entirely dependent on the blockchain's participants.
For it, a private blockchain is a solution. This is a blockchain that they have developed themselves for their own use. So, outsiders cannot participate in this blockchain. A private blockchain has a lot fewer nodes than a public blockchain. This is because all nodes are managed by the owner of the blockchain. Such a private blockchain, therefore, offers many opportunities for the adoption of blockchain technology.