Private, public and consortium blockchains: The differences explained

Private blockchains provide users with the absolute privacy they desire.

Private blockchains (which are permissioned settings) establish rules governing who can see and write to the chain, in contrast to public, permissionless blockchains. There is a clear hierarchy of control in these systems; hence, they are not decentralized. However, they are dispersed because many nodes still keep a copy of the chain on their machines.

A private blockchain network requires an invitation, which must be approved by the network founder or a set of rules established by the network starter. Businesses that create a private blockchain typically do it on a permissioned network. This limits who is authorized to engage in the network and for which specific transactions. Participants must first get an invitation or authorization.

Existing participants could decide on prospective entrants; a regulatory authority could issue participation licenses, or a consortium could decide. Once a company joins the network, it will help to keep the blockchain running in a decentralized fashion.

This type of permissioned blockchain paradigm allows users to take advantage of more than 30 years of technical literature to get considerable benefits. 

Private chains are better suited to enterprise settings when a company wants to benefit from blockchain qualities without exposing its network to the public. Digital identification, dealing with supply chain issues, disrupting the banking sector, or facilitating secure patient/provider data exchanges in healthcare are some of the use-cases of private blockchains. The Linux Foundation’s Hyperledger Fabric is an excellent example of a private blockchain.

The contentious assertion that private blockchains aren’t actual blockchains, given that the underlying principle of blockchain is decentralization, is one of the disadvantages of private blockchains.

Because centralized nodes determine what is valid, it is also more challenging to build information truthfully in a private blockchain. A minimal number of nodes can also imply a lower level of security. The consensus mechanism can be jeopardized if a few nodes go rogue.

Furthermore, private blockchain source code is frequently proprietary and locked. Users are unable to independently verify or check it, which may result in a reduction in security. On a private blockchain, there is no anonymity.

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