We could predictably go into detail about the functions of blockchain technology. How it works, why it is so popular, and the impact it’s had on multiple fields. We could also discuss how it plays a common part in cryptocurrency. Or even how there have been recent speculations about the benefits it could bring to other industries. Healthcare, insurance, government, and a wide variety of other potential uses.

What is it?

First, to state the obvious, a private blockchain is the exact opposite of a public blockchain. The primary reason being that several functions that are open on the latter aren’t open on the former.

In private blockchains, the owner either is a single entity or an enterprise. Whoever the owner may be, they have the ability to override/delete commands on a blockchain if need be. This is primarily why it’s not technically a decentralized system. Thus, it can be seen as a distributed ledger or database with its security being thanks to cryptography.

A private blockchain will typically allow only a selected entry of verifiable participants, like those for a private business. This network requires an invitation and must receive validation. A participant is able to join this kind of blockchain only through an authentic proposal. A confirmation is necessary either by the network operator(s) or by a set protocol that the network implements.

Examples of private blockchains include Hyperledger and Ripple (XRP). Hyperledger is an open-source project that aims to advance cross-industry blockchain technologies. It is a global collaboration that includes leaders in banking, finance, supply chains, technology, and many others. Ripple is an open-source protocol that allows fast and cheap transactions. It connects banks and payment providers by way of the RippleNet. By doing this, it provides a smooth experience for sending and receiving money all across the globe.

Advantages & Disadvantages

Here are some of the most prominent advantages that come from using a private blockchain:

  • Speed: They can process higher transaction amounts per second, especially when you compare it to public blockchains. This is due to the presence of a few participants with authorization results in lesser times in acquiring a network consensus. Consequently, this allows for the processing of more transactions for each block.
  • Scalability: Only a few nodes are responsible for data management. So, the network can support and process comparatively higher transactions. Unlike a decentralized system - where obtaining consensus takes time - a private network’s decision-making process is more centralized. Thus, it is much faster.

Here are some disadvantages of using a private blockchain:

  • Lack of trust: The sincerity of the private network depends heavily on the credibility of legitimate nodes. They are responsible for checking and validating authentic transactions. In addition, the validity of records cannot be independently verified. External players have to trust a private blockchain network without having any control over the verification.
  • Security: With the presence of fewer nodes, it’s a lot easier for an untrustworthy individual to gain control of the network. A private network is more susceptible to hacking and the manipulation of data.
  • Centralization: The project (or business) or a league of industry players must build and maintain the private network. This includes preserving an intricate Identity and Access Management (IAM) system for the users. Doing so will often lead to centralization, which is what blockchain actively tries to avoid.
private blockchain

Public: what’s the difference?

It’s apparent that a private blockchain and a public blockchain are different from each other. We could just go by the contradictions in their names, however, there is more to it that one aspect.

The primary distinction between these two blockchains ties directly to who is able to participate in the network. Moreover, who can carry out the consensus protocol and preserve the shared ledger. A public blockchain network is open and pretty much anyone can join the network and participate in it. The network usually possesses a motivational mechanism of sorts that encourages more participants to be part of the network. A notable example of a public blockchain is Bitcoin, which is one of the largest public blockchain networks that exist.

Consortium: what’s the difference?

Consortium blockchains share a noteworthy similarity with private blockchains, in that they function on granting permission. This means that not everyone who has an Internet connection can gain access to the chain; they need an invitation. Because of this, it’s technically not a decentralized system, much like private networks.

What sets consortium and private blockchains apart, though, is who is controlling the network. As you may recall, the owner of private blockchains is either is a single entity or an enterprise. The governing of a consortium blockchain, on the other hand, is not done by or given to a single entity. Rather, its control is in the hands of a group of predetermined people, or nodes. The maintenance of a consortium blockchain at the hands of a single entity is not possible.

Permissioned: what’s the difference?

Permissioned blockchains come in a variety of shapes and sizes. In fact, it’s not out of the ordinary to view them as hybrids of public blockchains and private blockchains.

They provide an array of customization options between the public and private blockchains. This is another type of blockchain that essentially functions on a “You need an invitation to join” protocol. It allows anyone to join the network following the verification of their identity. Furthermore, the distribution of designated permissions to execute specific activities on the network. For example, the aforementioned Ripple supports permission-centric roles for participants.

In hindsight, any differences that permissioned blockchains have that separates them from private blockchains derives from public blockchains.