Public and Private Blockchains: An Introduction

What are Public and Private Blockchains?

BlockchainMany people, when they hear the term “Blockchain”, immediately think of Bitcoin, or perhaps Ethereum. While these two cryptocurrencies have made the headlines often in the past six months or so for reasons both positive and negative, they are just a few examples of an implementation and evolution of a very useful set of concepts and tools, which have a much wider potential to solve problems that require immutability and cryptographic security.

Blockchain comes in two main flavours, public and private. They use decentralized peer to peer networks, with a shared ledger that is made of transactions that have been digitally signed so that their integrity can be maintained. They also use some form of protocol that reproduces transactions over one or more nodes. This is often referred to as a consensus mechanism. Both also provide a guarantee that the state of a transaction, or the shared ledger in general, cannot be changed after they have been created (they are immutable).

There are also some differences between public and private blockchains, for example, a private blockchain can:

  • Provide some restrictions to who is allowed to access the network, while a public chain is completely open and anyone can join it
  • Limit who can reproduce transactions via the consensus mechanism, or in other words who can recreate the shared ledger

Because anyone can join a public network, they are often more computationally intensive, due to the fact that their consensus mechanisms (often known as proof of stake, or proof of work) are more complicated. They also provide little to no privacy.

Because of the ability to set up permissioned networks, private blockchains are better suited to enterprise applications. Depending on the type of blockhain implementation, various stakeholders can be given different access rights to the data stored in the chain. This means that people only have access the information that they have the clearance to see. Users may also not always have the rights to create transactions on the network, or may only create certain types of transactions, allowing them to create or verify certain data only. IBMs Hyperledger is a very good example of a permissioned blockchain.

Another very important concept in the blockchain world is smart contracts. Applications of these algorithmic contracts allow for the exchange of shares, money or documents without the need for an arbitrator such as a broker, notary or agent. This can effectively cut out the middleman in many cases, while still providing the same amount of trust between parties.  JP Morgans Quorum is an enterprise version of the public Ethereum blockchain network, that is ideal for creating smart contracts, but that has been tuned for improved speed and throughput.

The Dawn of the Blockchain Era

As blockchain technologies become more mature and accessible, we will find them being used in more wide-ranging applications than cryptocurrencies.

The Dawn of a Blockchain EraA good example of a place that smart contracts could improve a common process, is insurance policies. When an insurance claim is made, a large amount of human interaction is required. This manual human intervention can mean that the claims take a very long time to process and that more cost is involved. The cost of the extra admin is invariably passed down to the customer. By writing the insurance policy as a smart contract, a claim could be handled much more quickly. When the conditions built into the smart contract are satisfied, and consensus reached on the legitimacy of the claim, it can be processed immediately. Another advantage of the use of smart contracts is the fact that the process can be initiated anywhere in the world, over the internet, from a smartphone or computer. If you are on a business trip in a foreign country and you need to initiate a claim? Get online and initiate over the internet, provide the smart contract with the inputs it needs, and once it is satisfied with the legitimacy of the claim, things will go ahead. No need to make expensive phone calls, and no reliance on a third party for getting the ball rolling.

Other examples of current and proposed uses of smart contracts include:

  • In copywriting to keep track of the ownership rights of content
  • In the internet of things to keep track of the delivery of items
  • In supply chain logistics to keep track of every step in the creation of a product in a factory


As you can see, blockchain is much bigger than just cryptocurrencies. It has the potential to drastically change how we approach problems and could be the catalyst to disrupt many industries that rely on consensus between parties, security and immutability. Although still in its relative infancy, the technology is quickly maturing, and its use could soon make the difference between success and failure to your business.

For more information on the Quorum or Hyperledger blockchains, visit the following sites:

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