Public and private blockchains

There are three main types of blockchain networks:

• public;
• private;
• hybrid.

Public blockchain

Public networks are completely open and transparent – any users can access them. Examples: Bitcoin, Ethereum, Ripple, Waves. Open Network Principles:

1. Decentralization. The information is stored on the computers of all network participants. Users have equal rights and can manage the blockchain.
2. Transparency. Each member of the network has access to information about transactions, transfers and agreements.
3. Equality. All users participate in the consensus process – determining which blocks will be added to the network. The network is controlled and supported by all its participants, who have the same rights and opportunities.

Advantages of a public blockchain:

• complete openness and transparency;
• safety and invariability of the entered information;
• high level of decentralization and data distribution;
• equal relations between network users.

Disadvantages of a public blockchain:

• rarely suitable for solving business problems, because it cannot always provide a high speed of transactions;
• restrictions at the legislative level (for example, through the GDPR);
• the risk of the “51% attack” when an attacker captures more than half of the computing power.

Private blockchain

The private blockchain is also called a permissive or permission-based blockchain. You can connect to it if you’ll follow certain rules and restrictions. In this blockchain, only certain users can make changes, set up rules, distribute access levels and coordinate the joining of new participants.

A private blockchain is often criticized because of a lack of decentralization, and not considered a blockchain. Critics call private blockchains centralized distributed ledger databases.

Advantages of a private blockchain:

• high speed of smart contracts execution;
• ability to create a network for solving specific business problems;
• ability to keep a trade secret because of the network privacy.

Disadvantages of a private blockchain:

• centralization risk;
• the risk of the emergence of groups of users who will act in their own interests in the network;
• privacy of the information.

Hybrid blockchain

The hybrid network combines the features of public and private blockchains. This allows companies to be more flexible in choosing which data to make public and which to make private. Using such a blockchain, you can provide privacy and security at the same time. But such networks are often criticized for being centralized.