The Battle Between Private and Public Blockchains

The earliest known citation on the Internet is dated to 1986. It was attributed to Thomas J. Watson and posted in the signature of a poster from Convex Computer Corporation saying — “I think there is a world market for about five computers”. “Baloney. Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works” — argued by Clifford Stoll, computer scientist in a featured article titled “The Internet? Bah!” published in Newsweek magazine. The go-to mobile business plan of Vodafone projected could sell only 1 million phones.

All these prove that there is a tendency to underestimate the real impact and commercial potential of technologies as there are no existing realistic use cases developed, or the technology is not mature yet to unleash it’s true potential.

Likewise, blockchain’s true potential is yet to be discovered. Despite still being in its early adoption phase, blockchain is being used in prominent case studies to bank the unbanked, to revolutionize the remittances market with even negative fees, to guarantee transparent voting process, or even to replace national currencies issued by governments. 

While the road towards blockchain mainstream adoption offers fascination for what it comes,  concerns are still expressed by corporations that wish to adopt the blockchain technology. We are still in the early infrastructure-building era, while new players are populating the market with cost-effective and scalable blockchain infrastructure platforms which fire the “battle” of blockchains. 

In this article we attempt to clarify one of the key questions when it comes to blockchains as it pertains to the dilemma between private and public infrastructures. For this purpose, we will try to demystify the characteristics, advantages, and drawbacks of each blockchain type before making a decision. 

One of the most typical questions addressed is the difference between a public and private blockchain. 

Private Blockchains

Private (permissioned) blockchains allow different levels of permissions for users, so access can be restricted, and information can be encrypted to protect confidentiality. While private blockchains are faster and more scalable, their nature is more centralized which constitute them prone to potential manipulation from malicious actors. 

When it comes to permissioned blockchains, we refer to a small group of participants that control and maintain the network. Examples of private blockchains include but are not limited to HyperLedger, Corda-R2 Alliance, Ripple or the latest generation of projects such as Ethereum Express. 

Among the key characteristics of private blockchains is the transaction finality settlement, which is critical when we refer to financial transactions since there is no risk of hard fork. 

Synopsizing the key benefits of private blockchains:

• No 51% attacks or hard forks
• Faster and scalable
• Transaction privacy
• No orphaned blocks
• Smart contracts can evolve, while more developer diverse programing language could be utilized 

Among the secondary benefits which might be important for decision makers is the predictable nature of the pricing since they are mainly offered with a billing cycle and are not affected by the fluctuation of digital currencies which is known as a gas fee. There is enhanced control over network’s participants, and a more clear platform governance.

Popular Private Blockchains: 

HyperLedger

The HyperLedger project launched by the Linux Foundation in an effort to standardize and democratize blockchain within the business world. Most of the people think its an individual blockchain, while in fact, it’s a group of blockchain projects with pseudonym a hyper ledger. The most widely used project is the FABRIC which is primarily built for enterprise use-cases. 

While HyperLedger has a huge developer community, developers still struggling to instantiate smart contractors. To solve that challenge, IBM introduced a package extension for visual studio code IDE (integrated development environment). All of them are non-currency projects and industrial applications.

IBM has a great influence on the development of the project since it’s holding 6 out 11 Technical Steering Committee. The Hyperledger TSC is responsible for creating working groups to focus on technical issues, approving projects and reviewing updates.

Today Hyperledger has more than 250 members with premier members to include but not limited to Airbus, Cisco, Deutsche Bank, American Express, SAP, Intel, and J.P. Morgan! 

Corda-R3 Alliance 

Corda is a Distributed Ledger Technology — some engineers might say this is not even a blockchain. This is also the comparative advantage of Corda which allows the platform to perform better when it comes to financial transactions. Built by US blockchain software firm Rin 2017, Corda it is at once a private network designed to record, manage and synchronize data between partners, and an open source platform which can be used to build apps for financial institutions on top of it. 

Corda allows the creation of immutable records for financial events. But unlike other blockchains, the transactions are done privately in Corda. Financial institutions choose to use a Distributed Ledger Technology that utilises known identities to inject trust into the system and keeps transactions private between interacting parties, with the goal to reduce the effort required to maintain data consistency while still allowing it to handle a higher volume of transactions.

A new generation of permissioned blockchains:

The platform is based on of the Ethereum blockchain architecture, but removes inherit scalability limitations to Ethereum which cannot proceed more than 15 transactions per second. By enabling the community to make decisions through authoritative voting and capital appreciation, the EEX ecosystem intends to reach a whole new level of social significance and influence for society.

The speed and number of transactions offered by the project is 10 times higher than that of the Ethereum network. EEX operates on the principle of giving its users the ability to vote with their capital and authority. While the project is still new and tests is positioning to the markets, Ethereum Express project announced the launch of two pilot projects that will encompass over 15,000 users.

The first project in question is Mining Express, a mining company that was in need of a viable and technologically advanced solution for facilitating interaction with end users. The second project that is using EEX’s technical solutions is betting company MYMI aiming to make the process of online entertainment more transparent and understandable for its users.

Given the increasing volume of gambling-related transactions on blockchains, the need for better throughput and more streamlined solutions is becoming a pressing matter.

Public Blockchains

Public blockchains are those networks that allow access for anyone. No one controls or limits the information, while no member can change the protocol of blockchains according to the users. There it’s safe to say that users of a public blockchain can put their complete trust in a third party.

Speaking about Bitcoin, anyone can create bitcoin’s cryptographic keys, anyone can be a node, join the network, and even become a miner to seek a reward for safeguarding the network.

Miners can walk away from being a node, return if and when they feel like it, and get a full account of all network activity since they left.

Synopsizing the key benefits of public blockchains:

• Trustful
• Secure
• Open and Transparent
• Pricing depending on network’s demand
• Decentralization 
• Anonymity
• Auditability

Public blockchain technology has the potential to disrupt current business models through disintermediation. In addition, there is no need to maintain servers or hiring system admins, which radically reduces the costs of creating and running decentralised applications.

Popular Public Blockchains: 

The most notable examples of Public Blockchains are Bitcoin, Ethereum, Litecoin, Monero and others. 

A new generation of public blockchains:

The new generation of public blockchains aim to solve the “blockchain trilemma” which stands for scalability, security, and decentralization. A few add a fourth layer, which is no other than privacy. 

The new generation platforms aim to build open platform without sacrificing performance, without delegation to a central entity, and with verifiable security. Let’s not forget that  a permissionless network is operated and governed by a large community.

Among the notable initiatives is Harmony Protocol — a San Francisco startup which is building a blockchain based on a system called deep sharding — the process involving breaking up a large database into smaller, more manageable segments in order to speed up transactions on the network.

Harmony is already among the most decentralized operational PoS blockchains with more than 1,000 nodes operators and a notable selection of projects building on the network like Lympo, Quidd in a joint acquisition with Animoca Brands, SafeHaven, Carbon Money, Kamix, and more.

The battle between Public vs Private Blockchains: Is there a winner yet?

The public and private blockchains can co-exist and each of those to work in different industries by adopting approaches depending on the user cases. It seems likely that financial institutions and closed consortiums might find private blockchains more appealing, while Decentralized Finance and projects that serve bigger communities they will find their safe havens in public blockchains. The industry applications are countless, so more than one players can co-exist and thrive in their niche market.