Public Vs
Private Vs Permissioned Blockchain
Key points
Public Blockchain
o If one
desires to create a completely open
blockchain, similar to Bitcoin, which enables
anyone and everyone to join and contribute to the network, they can go for a public blockchain.
o In a public
blockchain, anyone can read,
write, and audit the ongoing activities on the public blockchain
network, which helps a public blockchain maintain its self-governed nature.
o The public
network operates on an
incentivizing scheme that encourages new participants to join and keep
the network agile.
o Public
blockchains offer a particularly valuable solution from the point of view of a truly decentralized, democratized,
and authority-free operation.
There are a few
disadvantages to a public blockchain.
o The primary
one is the heavy power consumption that is necessary to maintain the
distributed public ledger.
o Other
issues include the lack of complete privacy and anonymity. This can lead to
weaker security of the network and of the participant's identity.
o Along with
genuine contributors, at times the participants may also include fraudulent
members who may be involved in malicious activities like hacking, token
stealing, and network clogging.
Private Blockchain
o If one
needs to run a private blockchain that allows only selected entry of verified participants, like those
for a private business, one can opt for a private blockchain implementation.
o A
participant can join such a
private network only through an authentic and verified invitation. A
validation is also necessary either by the network operator(s) or by a clearly
defined set protocol implemented by the network.
o The primary
distinction between the public and private blockchains is that private
blockchains control who is allowed to participate in the network, execute the
consensus protocol that decides the mining rights and rewards, and maintain the
shared ledger. The owner or operator has the right to override, edit, or delete
the necessary entries on the blockchain as required.
o In the
truest sense, a private blockchain is not decentralized and is a distributed ledger that operates as
a closed, secure database based on cryptography concepts.
o Technically
speaking, not everyone can run
a full node on the private blockchain, make transactions, or
validate/authenticate the blockchain changes.
Permissioned Blockchain
o The third
category of blockchains is permissioned blockchains.
o Permissioned
blockchains allow for a mixed
bag between the public and private blockchains and support many
customization options.
o These
include allowing anyone to
join the permissioned network after suitable verification of their
identity, and allocation of select and designated permissions to perform only
certain activities on the network.
o For
example, Ripple, one of the largest cryptocurrencies, supports permission-based
roles for participants.
o Such
blockchains are built so that they grant special permissions to each
participant.
o This allows participants the ability to
perform specific functions such as read, access, and write information
on the blockchains.
o Businesses
are increasingly opting for permissioned blockchain networks, as this allows
them to selectively place restrictions while configuring the networks,
and control the activities of the various participants in the desired
roles.