Today, the use of blockchain technology in business has been hot-topic all over the World. The technology is trending due to its transparency, traceability, real-time data of transactions, and immutability. The architecture also eliminates any central authority or intermediaries in the technology. So far, $23.7billion dollars have been invested in blockchain technology, around the world.
Almost every industry today is adopting blockchain technology to improve their system and bring in an unauthorized network for seamless and protected operations. Enterprises today are analyzing the different platforms to build their own blockchain applications. Blockchain technology can be both private and public. If you are planning to implement the technology in your business, which is better? Here is a detailed classification of blockchain and features for you to understand which is better and why.
DLTs Vs. Blockchain
Before digging dip into the types and features of blockchain, it is important to understand what it is. People are often confused about DLTs (Distributed Ledger Technology), and Blockchain. Let us find out what is DLT, and how it is different from the blockchain.
A DLT or Distributed Ledger Technology is a decentralized database managed by various parties across numerous nodes. A DLT is like a house under all decentralized systems that are managed by different members. Blockchains are a part of DLTs. Blockchains and DLTs are both digital record books that are presented across network users. However, that is the only similarity between the two.
Blockchains are typically known for the data stored in the form of blocks or data that requires users’ validation of the network, and no block can be added to the network without the consent of the users. Not all distributed ledgers impose cryptographic assurance of new information before it is updated in the network.
In some DLTs, the admin has control over the network dictating goals, running data, and structures on the platform. Similar to the Greek Syllogism of the local statement suggests, “all blockchains are DLTs, but not all DLTs are blockchains“.
Types of Blockchain Technology
Blockchains are classified into three types.
Private blockchains are often termed permissioned blockchains that are opposite of public blockchains. The use of data and access to the network are constrained to different sections of individuals who consist of stipulated credentials. For example HyperLedger, and R3Corda.
This blockchain type combines strong features of both public and private blockchains, that allow DLT to keep private sensitive data while making associated data open to the public for transaction verifications. For example, Dragonchain.
Public blockchains also known as permission blockchains are decentralized and open source platforms that open up their network to anyone who participates as developers, users, community members, or miners. Activities and transactions are transparent and open providing anyone with the chance to manage the data at any period. For example, Ethereum and Bitcoin.
What Are the Similarities Between Public And Private Blockchains?
Blockchain technology is a complex architecture, and to understand deeply, it is important to understand the similarities between public and private blockchains.
- Authentication: Private and public blockchains are similar and depend on their members and users for the approval or authentication of edits such as entry of new activities or transactions to the digital ledger.
- Immutability: All blockchain technologies either private or public are immutable. Blocks or authenticated data cannot be entirely erased or altered by one person.
- Replica of Peer-to-peer ledger: To prevent situations of public, and private illegal tampering, both private and public blockchains distribute and maintain real-time duplicates of blocks or data across every computer on the network.
What is the Difference Between Private and Public Blockchains?
Here are some of the differences between public and private blockchains.
- Magnitude: private blockchains are lighter and consist of high transactional output due to the decreased transaction volume that is carried out on them, in comparison to public blockchains that are massive due to huge transactional activities that are always taking place on them.
- Access Level: In public blockchains, addition, data verification, and usage are open to everyone worldwide. Private blockchains are distinct in such a way that only verified entities can partake in the network.
- Security: The active participation of users, and the decentralized nature of the public blockchain, are combined to strengthen the network security. Private blockchains are vulnerable to the risk of data breaches, hacks, and insider manipulation majorly due to the reason that few players control the network system.
- Control: Private blockchains are significant for centralizing the network’s control to a few users, while public blockchains are best for decentralization of custody in the hands of all users of the digital ledger forum.
Benefits & Features of Public Blockchains
The public blockchains are the original distributed ledger structures behind the growth of blockchain technology. Anyone from any part of the world can receive, send or verify the transactions made on them along with the ability to audit them as well. Every transaction made on the network must be approved by each of the nodes through a consensus method. Some of the popular public blockchains are Ethereum, Litecoin, and Bitcoin. Some of its benefits and features consist of:
- Distributed Ledger: Databases that exist on public blockchains are not centralized, unlike client server platforms. Every node on the blockchain platform maintains its pilot copy of the digital database and provides validation to new transactions. This helps to eradicate illegal intermediaries that exist in the centralized transaction chains.
- Open Access: Usage, governance, and data submission on public blockchains are available for anyone around the globe.
- Anonymity: Public blockchains offer crucial advantages which are anonymous users. This means that the public is protected from public visibility and does not reveal their identity using cryptographic identities known as public keys.
- Security: By implying the distributive and decentralized nature of ledgers on public blockchains, the chance of hacks, manipulation, and attacks is less. This is because it is impossible to alter and make changes to every copy of the database present in every node of the network.
Drawbacks of Public Blockchains
Every technology has its own set of advantages and disadvantages, here are some of the drawbacks of public blockchain networks.
- Smart Contracts: Smart contracts are immutable and irreversible. Enterprises cannot risk deploying faulty smart contracts that are unchangeable, enduring the irreversible outcomes of the computerized enforcement of such smart contracts.
- Power: Similar to public blockchain which required huge storage spaces, it’s dependent on consensus and mining algorithms restrict the provision of energy capacity and high computing. The high cost is not possible to be carried by the enterprises with a business context.
- Scalability: All users of blockchain known as “nodes“, are restricted to assessing each new transaction on the blockchain network. The direct outcome of this is due to slow and low transactions. Enterprises that deal in the immediate authorization of transactions like Visa or PayPal will find a hard time bearing with a public blockchain.
- Storage Limitations: Every computer on the blockchain network stores blocks of information for an indefinite time. The outcome is the imposition of heavy storage statutes that are not practical within the context of enterprise application.
- Privacy: One of the major downsides of a public blockchain is its fully transparent nature. The outcome is that there is no privacy for transactions.
Benefits of a Private Blockchain Network
Private blockchains work best on limited access and permissioned networks. Usually, new users are assessed and enticed as per rules formed by the platform’s founder. Enterprises use blockchains for business goals with restricted access to company employees. Some of the features and benefits of the blockchain consist of:
- Faster Transactions: Unlike a public blockchain, private blockchains have few nodes. This makes the validation and processing of activities or transactions quicker as the number of users requires to reach consensus is less.
- Regulated Access: one of the important features of private blockchain is that it overreaches the control of the admin as to who can and cannot control the platform. The new users to the network are shared access by the enterprise through the business identity management process.
- Profitable government: There’s a central authority that controls the entire digital platform in private blockchains. The admin decides the processes, methods, standards, and tools with which everyday administration of the network was ensured.
Drawbacks of Private Blockchains
Here are some of the drawbacks of private blockchains.
- No Trust: The private blockchains are attached to a few powerful nodes which validate the blockchain. This means that other members of the network without access to validate the network have no access to it.
- Security: since only a few members are present in the private blockchain it becomes easy for one member to control the network for fraudulent activities. Thus, it increases the chances of attacks, hacks, and manipulation of databases.
For enterprises, private blockchains seem to be more promising and viable for business growth. It is better than the public blockchain because of scalability, energy power, computing power, security, and transaction validation speeds. If taking a closer look at the private blockchains, they deviated from the concept of decentralization.