Private vs. Public Blockchain – Differences Explained
Wondering about private vs. public blockchains? Do you need a permissioned blockchain, or is permissionless the way to go? We’ve covered everything you need to know.
What are the four types of blockchain? The four types of blockchain are as follows:
- Public Blockchain: permissionless, anyone has access
- Private Blockchain: closed network
- Permissioned: private, open, or closed networks
- Hybrid Blockchain: combination of private and public blockchain
What Is the Blockchain?
Blockchain technology is a new Web 3.0 technology that serves as a decentralized, irreversible ledger for record-keeping that doesn’t require the participation or management of a central entity or organization.
The blockchain was invented as part of Bitcoin. The whitepaper, written by the pseudonymous Satoshi Nakamoto, defined the ledger as a system of cryptographically signed blocks of data that the collective computing power of the network would verify and place into an immutable ledger. This was perceived as the solution to the “double spend” problem hindering the development of digital cash and served as the basis for the Bitcoin cryptocurrency.
In terms of the original blockchain, the process of exchange was relatively simple:
- One user transfers a set number of bitcoins to another user.
- The information related to this transaction (the users, timestamps, wallets addresses, etc.) are bundled together into a “block” that is encrypted and cryptographically signed.
- Blocks are bundled together, and nodes in the network (called “miners”) donate CPU power to solve the equation confirming those blocks’ signatures.
- Once the blocks are verified, the transactions are considered legitimate and are appended to the end of the ledger.
- The update is pushed to each network user (all of which carry their own copy of the ledger).
Hence, the blockchain is literally a chain of blocks representing data about network activity.
Blockchain offers a few critical benefits:
- Decentralization: The blockchain removes the need for maintaining centralized servers to store data. Instead, that data is collectively stored by the blockchain users and the ledger, providing more resilience from attacks against central weak points and control over that data.
- Immutability: The blockchain ledger cannot be changed without the collective work of the network or (in the case of private chains) the permission of a governing organization. This means that the blockchain is even more resilient, especially against fraud.
- Extensibility: The original blockchain was intended to govern the exchange of tokens, and many crypto chains still essentially support this function. Modern innovations in blockchain technology, like smart contracts, have allowed for the decentralization of automated agreements and even code to run underneath applications.
What Are the Different Types of Blockchain?
While there are general similarities between different implementations of blockchain technology, that doesn’t mean that there aren’t differences and, in some cases, improvements.
Some of the different types of blockchain include the following:
- Public: The most well-known type of blockchain. Public blockchains are 100% decentralized and user-operated. Furthermore, they are “permissionless,” meaning that anyone can join at any time without needing the authorization of a governing body. Bitcoin is the most widely used form of public chain in that it is completely decentralized and maintained through the nodes’ systems. There are no centralized entities and no party that can control the blockchain.
- Private: The opposite of a public chain, private chains require that users have access to the network, usually through identity authentication, and that they follow specific rules to that chain to participate. Private chains also rely on a governing body or managing organization to dictate the terms of the protocol and access to the system, mining capabilities, or even what the blockchain event stores.
- Permissioned: Permissioned chains are a sort of hybrid of public and private. There is a control mechanism in place, but additional controls around roles and permissions exist so that different users can perform different types of actions on the chain.
These chains aren’t necessarily exclusive—for example, your app could use a private, permissioned chain to maintain security while leveraging different permissions for the system.
Benefits of Private Blockchain Technology
As more businesses adopt blockchain technology, they are finding that there are some key benefits that these technologies bring. Because of this, the creative use of these technologies have found purchase in industries like finance, cloud computing, and identity management.
Some of the benefits of a private blockchain include the following:
- Decentralization: Central servers can serve as points of failure and attack for hackers. If a server of passwords is hacked, then all those passwords are compromised. With a private blockchain, there isn’t a central location where a hacker can steal every single password; no single node is a central point of failure.
- Development and Extensibility: With smart contracts and other emerging technologies, as well as the fundamentally open-source nature of the underlying tech, it’s relatively easy to modify blockchain systems to fit a company’s specific needs.
- Transparency: Any transaction, user activity, or attempted breach is automatically appended to the ledger—recorded forever in that blockchain. Because these systems are immutable and irreversible, they serve as an effective backbone for systems that have strict auditing requirements.
- Ownership: Private, permissionless blockchains can be configured as such to leave the ownership of data out of the hands of central businesses and in the hands of users. Data, like personally identifiable data, can be left in the hands of the user, who can only share what’s needed minimally for processes like authentication or authorization. Not only is this an attractive concept for users, but it helps both users and companies address some of the real concerns around third-party data collection.
Utilize Decentralized Identity Management with 1Kosmos
One of the challenges of enterprise identity management systems is that they rely too much on centralized servers that serve as honeypots while removing control of identity information from users.
1Kosmos BlockID leverages a permissioned blockchain that decentralizes identity management to your users so that information is stored in devices, not central servers. This approach, alongside a focus on identity proofing, passwordless login, and streamlined user experiences.
With 1Kosmos, you get the following features:
- SIM Binding: The BlockID application uses SMS verification, identity proofing, and SIM card authentication to create solid, robust, and secure device authentication from any employee’s phone.
- Identity-Based Authentication: We push biometrics and authentication into a new “who you are” paradigm. BlockID uses biometrics to identify individuals, not devices, through credential triangulation and identity verification.
- Cloud-Native Architecture: Flexible and scalable cloud architecture makes it simple to build applications using our standard API and SDK.
- Identity Proofing: BlockID verifies identity anywhere, anytime and on any device with over 99% accuracy.
- Privacy by Design: Embedding privacy into the design of our ecosystem is a core principle of 1Kosmos. We protect personally identifiable information in a distributed identity architecture and the encrypted data is only accessible by the user.
- Private and Permissioned Blockchain: 1Kosmos protects personally identifiable information in a private and permissioned blockchain, encrypts digital identities, and is only accessible by the user. The distributed properties ensure no databases to breach or honeypots for hackers to target.
- Interoperability: BlockID can readily integrate with existing infrastructure through its 50+ out-of-the-box integrations or via API/SDK.
To learn more about private blockchain and identity management, sign up for our newsletter and read more about 1Kosmos Identity Proofing.
