In the beginning, there was one blockchain (the Bitcoin Blockchain). Then came a second blockchain, and another – Now there are many, and more are being created as we speak. While they all share the same basic structure, these blockchains are quite unique. One division is between the public blockchains, known as ‘permission-less’ and private blockchains, known as ‘permission-ed’.
In the first category, we have the Bitcoin Blockchain and almost all altcoins. The second category is where you will find the likes of R3 and all the other blockchains being developed by mainstream financial institutions. There are some that are not quite easy to class, like the Hyperledger project. This is a project spearheaded by the Linux Foundation with support from over fifty tech companies and financial institutions. It looks like it will borrow a lot from Linux’s collaborative open source architecture. Meaning, its claim for identity as a ‘permissionless’ blockchain should be legitimate.
That aside, the difference between public and private blockchains is at the foundation of understanding the trends in the fintech space. At the very basic level the following are the differences:
1. Accessibility to read and write
A public blockchain is accessible to almost everyone. You just need to acquire the right hardware and software and are you are ready to read its contents and write to its record. No admins. No gatekeepers.
On the other hand, private blockchains are not accessible to anyone. You need to be provided with credentials from a gatekeeper, the designers of the private blockchain, only with their permission can you access its data or contribute to its records.
2. Speed of transactions
Given that public blockchains have to put up with a lot of security features that make it possible for anyone to access it anonymously, the public blockchains are slower in confirming data as well making it available.
On the other hand, private blockchain can afford faster speeds. This is because its contributors are already known, and thus, there’s no need for a large network of hashing (miners) and computation to deter attackers.
3. Identity of those who interact with them
To use a public blockchain like the one on which Bitcoin is recorded on, you do not need to disclose your physical identity. The public key (wallet address) acquired on the blockchain is enough for anyone to operate. This is what is referred to as pseudo-anonymity of a public blockchain.
On the other private blockchain are often built with the inherent requirement for its users to identify themselves. So we can say that they are by default identified.
4. The Assets they carry
This is another aspect that differentiates between public and private blockchains. The former almost always has native assets. These are things like Bitcoin and altcoins.
On the other hand, private blockchains are built to carry other digital assets like fiat currency, stock and valuable documentations.
As an analogy, private blockchains have been called intranets whereas public blockchains are called ‘the internet’. Both with their intrinsic core values and offerings, it’s an important area of clarification when considering the potential which comes with blockchain’s and the use cases, both new and existing which this new area of innovation will be applied to.
Rupert Hackett is the co-founder of Bitcoin Australia, and has a wealth of experience with Bitcoin and Cryptocurrencies, including the world’s first Masters in Digital Currencies. He bought his first bitcoin in 2011, and in 2014 immersed himself in the crypto world with Bitcoin Australia and angel investor fund Dominet led by Domenic Carosa.
Quote: “I really think Bitcoin could change the world.”