Thanks for checking out this article, I really want to give a simple and solid definition of what is a public vs private blockchain, and lastly what is the middle ground between the two: the consortium blockchain.

Clearing your doubts about public, private and consortium blockchains

I will explain what are the advantages of private blockchains over public ones and vice versa, and also why the consortium model became popular as well.

Hopefully after reading this article you can have an idea of what type of blockchain to choose for your next project, saving you some money in consulting expenses. You will also be able to evaluate an ICO or startup better, because you will be able to judge if their choice of blockchain is appropriate or not for their use case.

Public Blockchain

The first public blockchain (the bitcoin one) was created in order to make a system that will allow the exchange of any kind of tokenizable asset between parties in a decentralized and anonymous way over the internet.

Just like giving cash to an unknown person on the street, but over the internet.

Essentially every person in the world with an internet connection can create a transaction to be potentially included in the public blockchain. He or she can also run the mining software and verify other network’s transactions being broadcasted.

As a rule of thumb, you want to use a public blockchain whenever decentralization is a must, when you want anonymity of the users and complete transparency of operations.

PROs

• Transactions are public, boosting transparency, trust and fairness to every user
• User anonymity is assured, which guarantees individual privacy to whoever interacts with the public blockchain

CONs

• A public blockchain is slow and wasteful, this is due to the high amount of traffic from all over the world. Everybody is interacting with it, so there will be some longer waiting times to, for example, confirm transactions.
• High costs are another negative feature of public blockchains. This can manifest into high transaction fees, and high cost of development to build and audit your decentralized application.

Conclusion

Given this information, I would like to add that even if a public blockchain has high cost of operations and slower speeds, it will still be better than traditional accounting systems that the majority of companies use nowadays.

The final takeaway point is that public blockchain equals decentralization, transparency and anonymity at the expense of cost and speed of operations.

Private Blockchain

I talked about public, now it’s time to talk about private blockchains. Let’s go over what they are, their features, and then give a quick pros&cons list.

In the private blockchain the middle man comes back into play, but why? Because in a private blockchain there is one entity (company, institution, etc…) that will exclusively have the privilege of writing and verifying transactions.

This ultimately results in very fast operation and transaction times, way more faster than a public blockchain. What are we sacrificing tho? We are sacrificing the decentralization, anonymity and transparency that a public blockchain has, that’s why hardcore blockchain purists hate private blockchains.

PROs

• A private blockchain is very fast in terms of speed of operations and transaction confirmation&settlement times.
• Privacy can be preserved because the central chief entity can choose who has read access to the blockchain.
• It is very appropriate for traditional business and governance models, since companies don’t need to give up their centralized authority.

CONs

• No decentralization and transparency, one entity creates and verify the transactions. Other users/nodes are restricted from interacting with the private blockchain.

Conclusion

In conclusion, I agree that a private blockchain defeats the original purpose of the blockchain technology, which is decentralization and transparency. But this does not absolutely mean that a private blockchain is bad.

Trusting a company/service that uses a private blockchain is in no way different or worse than trusting a company’s accounting system nowadays. In both scenarios the company centralizes the decisional and operations power. The difference definitely lies in the efficiency, in fact a private blockchain will decrease the cost of operations, while traditional accounting systems remain expensive to maintain and operate.

Consortium Blockchains

Now that you learned what is a private and a public blockchain I hope you realized how these two technologies are the exact opposite and have very different use cases.

Did you happen to ask yourself if there is kind of a middle-ground solution? There is! It’s called Consortium blockchain.

A consortium blockchain is partly private, meaning that instead of allowing ALL people with an internet connection to verify transactions there is a select group of predetermined nodes/entities that will be able to do the transaction validations.

PROs

• There is no longer one central authoritative company ruling, but a group of companies. This is not fully decentralized but definitely does not allow a single entity to hold all the power, limiting the drawbacks of centralization.
• It is great for organizational collaboration
• The flexibility a consortium blockchain allows a developer to plan endless product/service possibilities

CONs

• Most people think that a consortium blockchain is the same thing as a private one, and might ignore this kind of blockchain solution completely.
• For some very specific use cases, a fully private or public chain is still the best option.

Conclusion

I like to think of a consortium blockchain as trusting a council of elders. The elders are known entities and can decide who can read and operate on the blockchain ledger.

Final words

Now that you know what are these kind of blockchains and how do they work, you will have some foundational knowledge to be able to understand their applications and use cases.

If you are in a tough decisional situation ask yourself questions like: how important is decentralization here? How important is speed of transactions? How important is to avoid centralization because it may lead to corruption? How important is transparency? Then consult the pro/cons list and make the most logic decision.

Thanks for reading the article, and as always, if something is not clear, you have questions, better explanations or objections, drop a comment!