What is the difference between a private blockchain and a public one

The world became aware of blockchain technology after the creation of the Bitcoin cryptocurrency by Satoshi Nakamoto in 2008.Since then,technology is getting its share of attention and is sweeping across all industries and governments.

Today, there are private and public blockchains. And for better application of solutions, it is necessary to understand the difference between these concepts.

Public blockchain

Essentially, a public blockchain – it's completelyan open blockchain that anyone can join and participate by sending/receiving a transaction or a simple network audit. Public blockchain takes the model of the earliest cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH).

All nodes in the public blockchain have equalcredentials. Thus, the public blockchain is not only decentralized, but also fully distributed. In order for any transaction to be valid, the majority of the votes of the constituent nodes must authorize it in a process known as consensus.

Strengths of the public blockchain

Transparency

The main power of the public blockchain isthe need for minimal or complete trust. Each transaction is registered publicly, and an unchanged copy of the registry is open for verification by any member of the network, at the same time, there is no need for intermediaries.

Security

In addition to decentralization, the public blockchain is also fairly distributed. Any malicious activity on the network is easily detected, which makes it difficult for intruders to penetrate the system.

Weaknesses in public blockchain

Slow

Bitcoin, the most common public blockchain ecosystem, can only process seven transactions per second.This is much slower than other systems, such as Visa, which canprocess of reconciliation in the public chain takesmore time than in private.

Less scalable

In a public network, the more participants –the slower it becomes as the number of transactions filling the network grows. Due to this, it becomes less scalable than other systems.

Private blockchain

Private blockchain – it is a closed, access-controlled network, also known as a “permissioned blockchain.”

To participate in the private network you must obtainan invitation from its owner. Users operate under certain rules and restrictions: some have full access, while others – limited. The restrictions make the private blockchain centralized to some extent, given that only a small group of users have control rights.

In addition, unlike the public blockchain,The private block chain requires that the identity of the participants be known. Ripple and Hyperledger are some of the most popular private blockchain networks.

Strengths of the private blockchain

High speed

Fewer private memberstakes less time to reach consensus. This leads to more transactions. A good example is Ripple, which can handle 1700 transactions per second. This is great compared to bitcoins, at 7 TPS.

Scalability

A private network allows you to control the number of people joining it, and allows you to interact only with those that the system can handle without overload.

Weaknesses of the private blockchain

Partially centralized

Private chains allow multiple network users to control the network and make decisions. This contradicts the main purpose of the blockchain, which is to eliminate intermediaries.

Less secure

With fewer audit nodes, a private blockchain is susceptible to malicious attacks. Participants can organize network hacking or data manipulation.

The similarity between public and private blockchain

Decentralized Peer-to-Peer Networks

Both are built on a community of users, eachthe node stores a copy of the general digitally signed transaction register. In other words, both do not have a central (for example, banking) entity in management.

Consensus

In both cases, users are responsible for authenticating transactions. Thus, the block is added to the chain only after most users agree with the authenticity of the transaction.

Public and private blockchain – Which path will be chosen to create a CBDC?

In January in Davos the World2020 economic forum. The CBDC discussion was the best part of this year's meeting, while discussions revolved around how individual countries can issue and manage central bank digital currencies (CBDC).

Given the direction of the discussion, it became clear thatCentral banks do not consider any of the existing cryptocurrencies as a possible option. Central banks currently prefer a private blockchain (nationwide and not internationally) for this purpose.