Public versus Private Blockchain

Blockchain ledgers can be public (“permissionless”), or private (“permissioned”). The distinction between the two is much like the internet versus an intranet.

Permissionless ledgers

Permissionless ledgers (e.g., Bitcoin) allow anyone to make transactions and to hold identical copies of the full ledger.

Permissioned ledgers

Permissioned ledgers limit contributions to a limited set of users who have been given permission. Access to view records can be restricted or public, depending on the settings of the ledger.

In fact, many different aspects of the blockchain can be customized to meet different needs. These are likely to be the most useful for public sector use.

VS

Public Blockchain Benefits

  • 1. Distributed Ledger: All nodes in the Blockchain participate in the validation of transaction
  • 2. Open reading and writing data: Any participating party can read, write, and view data on the Blockchain.
  • 3. Immutable: Once an entry is validated, it cannot be modified or deleted.

Private Blockchain Benefits

  • 1. Permissioned Blockchain: The consortium controls the resources and access to the Blockchain
  • 2. Improved privacy: The transaction on the Blockchain can only be accessed by permissioned parties.
  • 3. Increased scalability: Enterprises can add and remove nodes on demand.

Consensus Models

The types of “consensus models”, which are the rules that determine who has the right to publish the next block, vary depending on type of blockchain at hand.

There are a growing number of consensus models that determine which node has the right to publish the next block. The two below are examples.

Proof of Work

– Always for permissionless ledgers (e.g., Bitcoin)

  • Since no trust exists, in order to keep one or a few users from taking control, a complicated process exists to help even the playing field.
  • Each user competes to solve a puzzle that is intentionally resource intensive (e.g., processing power, and by extension, electricity) to solve.
  • The winner publishes the next block and earns financial reward.

Proof of Authority

– Usually for permissioned ledgers

  • User identities must be known and verified.
  • Ability to publish new blocks is dictated by user permissions (not unlike a traditional database).
  • No issues related to processing power or electricity.