Private, Public, and Consortium Blockchains

If entirely public or entirely private blockchains don’t meet your business requirements, then there’s a middle ground too for you to be at. This middle ground is that of consortium blockchain, which is part private, part public. In a consortium blockchain, some pre-defined nodes are entrusted to handle the consensus process that involves authorizing the transactions via consensus. Other nodes of the chain may be allowed to assume the role of creating or reviewing transactions. The roles that are allocated to different nodes is dependent on the individual consortium blockchain.

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Which is the Right Blockchain for You?

What’s best between public, private, and consortium blockchain is largely subjective, depending on one’s specific needs. Blockchain technology made its debut with the concept of a public blockchain. Back then, the concepts of private or consortium blockchains were pretty much beyond the scope of anyone’s imagination. But now the ideas of private and consortium blockchains are grabbing people’s attentions because of their unique characteristics. Knowing that public blockchain is not the only blockchain option available now, businesses are readily experimenting with private and consortium blockchains. The selection of the blockchain technology for implementation should be based on respective business case and potential benefits that one expects to get out of the blockchain implementation.

But before anything else, it’s important for one to understand what these 3 types of blockchains exactly are and how do they differ from each other.

Public Blockchain

Public blockchain sort of marks the beginning of the major types of blockchains that we know of today. Think of Bitcoin, Litecoin, Ethereum, the public blockchain acts as the basis for all these three. It offered the original structure for a distributed ledger.

In a public blockchain, transactions can be sent and received from anyone and to anyone across the world. All nodes are given the same transmission power. Each node has the power to audit transactions. In fact, according to public blockchain’s consensus process, all the constituent nodes need to authorize a transaction for it to become valid. All that needs to be ensured is that every node stays in compliance with the protocol’s stipulations. As long as this remains so, the transactions of the node will be eligible for validation and subsequent addition to the chain.

Because all the nodes have equal transmission and receipt power, the nodes are decentralized as well as fully distributed. The below graphic explains the difference between distributed, centralized, and decentralized.

For many, the attributes of decentralization and distribution are considered to be the major benefits offered by the public blockchains. Then again, not all echo this sentiment. More than decentralization and distribution, though, the benefits of public blockchains that really stand out are the transparency and security offered by them. In fact, it’s the transparency of the public blockchain network that makes them secure. The security that’s afforded as a result of transparency is a concept that’s appreciated in open-source and digital currency communities.

Transactions in public type of blockchain can be audited by anyone which makes fraudulent activities difficult to go by undetected. Different blocks of peer-to-peer transactions are set up. All the transactions of each block would need to be validated and synced with each constituent node of the given public blockchain before the block can be added to the system. Every time someone sets up a new node in the network, using a computer and internet connection, the node will be synced with complete public blockchain’s history.

Public blockchain is not without drawbacks. Being highly transparent doesn’t mean that it’s completely immune to unethical manipulations and security breaches. It’s hard for any technology to guarantee 100% security, since there is always some loophole or possibility that previously remained unforeseen and that gives hackers enough leeway for creating disturbances in the system.

Another disadvantage of public blockchains is that transaction processing here is very expensive, in terms of time, money, and energy. The electricity required for running even a single transaction is huge, and since all the nodes of the blockchain are needed to authorize the transaction before its addition to the chain, it’s easy to see how the energy costs and time expenditure quickly multiply.

Public blockchains are an appropriate option when the benefits that one needs are that of decentralization, full ledger transparency, and private anonymity.

Private Blockchain

Private blockchains can be considered to have almost an inverse of all the basic properties of the public blockchains. A private blockchain is a closed blockchain network, but even this network isn’t completely distributed and decentralized like a public blockchain. There are certain specific constituent nodes of the network which are allocated the rights to view, create, and authorize transactions. It is up to the blockchain developers to decide which node gets what transaction rights. So, while in public blockchains there are no middlemen anywhere, in private blockchains there is a certain amount of intervention by a middleman.

One may think that without decentralization, such an important component of a standard blockchain, private blockchains might be futile in their purpose. But it is important to note that blockchains are more than just tools that offer decentralization. Their qualities of auditablity and cryptographic security are also worth remarking. Blockchains might not be foolproof when it comes to these attributes, but they still are a vast improvement over the traditional systems that we have been using thus far. Data archiving, voting, accounting systems, are just few of the wonderful application areas for blockchain. There is still more to come.

A place where implementation of private blockchain would make most sense is in a private business or intra-business case. Say a company wants a business solution that’s only available to its employees. Such a scenario would demand the use of a closed network like private blockchain, something that’s accessible to only select group of members. No one outside the company needs to be a part of this private business network, and a private blockchain would be a good way of ensuring this. In contrast to a public blockchain, a private blockchain is smaller in size and contained in scope. If there are any technical changes that need to be made, like in deciding consensus process, they’ll be much easier to implement on such a chain. Private blockchains definitely prove to be more efficient than public blockchains in this use case.

And given that private blockchains are private after all, they’re great for keeping data storage and transmission on the network as private and restricted to people with access rights only. So for companies that just need a solution within the scope of their own business, they can certainly benefit from using private blockchains.

Consortium Blockchain

A consortium blockchain is a mix of the properties of public and private blockchains, it is part private and part public. The split between the private and public nature of a consortium blockchain happens on the basis of consensus process. In a consortium blockchain, only a select few nodes of the network reserve the right to oversee the consensus process and authorize transactions. Other nodes of the network may have other rights like creating new transactions, reviewing transactions, reviewing blockchain history, etc. This division of rights and powers in consortium blockchains can be different for each individual consortium blockchain.

Your consortium blockchain can be made to be a more public consortium blockchain or a more private consortium blockchain. Depending on whether the consortium blockchain is predominantly public or private, it will have to cope with the drawbacks that each type (public or private) entails. How the consortium blockchain is designed would depend on individual requirements.