What is the difference between a private and public blockchain?

A blockchain is an ongoing record of transactions – a distributed database that is secured by a network of nodes and miners.

Blockchains are usually public – for example, the Bitcoin blockchain. In a public blockchain, all transactions are publicly transparent and data cannot be tampered with or altered. There are no restrictions on who can join the network. Anyone can read, write or participate in it. It is, therefore, decentralised, and no one entity has complete control over it.

There are many businesses and government organisations who are attracted to the benefits of a public blockchain system but fear that its open nature could pose a threat to their operations and the confidentiality of certain data they hold.

For these people, there are private blockchains.

What’s a private blockchain?

Private blockchains are often referred to as ‘Permissioned blockchain’. Unlike public blockchains, they are a closed network and only allow certain authorised entities to participate. They also grant specific rights and restrictions to participants in the network.

This basically means that private blockchains are more centralised in nature, because only a small group of participants control the network. Examples of private blockchains include Hyperledger.

Think of a public blockchain like a public park. The park is accessible to anyone – we are all free to have picnics, walk our dogs, or play ball. It’s not owned by anyone, and everyone in the community takes responsibility for keeping it clean. The park rules are set by everyone who uses the park, who must come to a general consensus about what the rules are going to be.

A private blockchain, on the other hand, is more like a community garden in the middle of a group of houses arranged in a square. It’s not accessible to anyone who doesn’t live there and to get in, someone has to let you come through their house. The small group of people share responsibility for tending the gardens and only use it themselves.