Emerging technologies are acting as catalysts for change in many industries, and among these, blockchain networks emerge as one of the most promising and disruptive.
With the ability to transform the way we store, transfer, and manage data and digital assets, blockchains are redefining paradigms in sectors ranging from finance to logistics and healthcare. In this article, we will explore what exactly blockchain networks are, how they work, and how they are divided into two main categories: public and private.
What is a Blockchain Network?
A blockchain network is essentially a decentralised and distributed digital ledger that records transactions securely and transparently through a network of interconnected computers, called nodes.
What does that mean? If we use Bitcoin as an example, there are 10’s of thousands of computers (nodes) in the network and each node maintains a copy of the entire history of all transactions on the Bitcoin network (distributed digital ledger). So, every time someone buys, sells or sends some Bitcoin, all the nodes record that same transaction, and all transactions are available to review publicly via the internet.
Unlike traditional centralised systems, where trust is placed in a central authority, such as a bank or financial institution, blockchains eliminate the need for intermediaries by allowing network participants to validate and verify transactions collectively.
How a Blockchain Works
Blockchains operate by creating blocks of data that contain information about recent transactions. Again, if we use Bitcoin as an example, each block has a set and limited amount of data that can go into each block, hence the reason why multiple blocks are required and created.
These blocks are linked together chronologically, creating a continuous chain of blocks, hence the name “blockchain.” Each block contains a unique cryptographic hash that identifies it and links it to the previous block, ensuring the integrity and immutability of the chain.
The data is “immutable”, meaning it cannot be changed by going back in time and trying to change data that was secured in a previous block. The hashing algorithm secures each block of data as it is saved, and a new is block created.
When a transaction is made on the network, it is transmitted to all nodes on the network for validation. Once a majority of nodes confirm the legitimacy of the transaction, a new block is added to the chain, and the transaction is permanently recorded on the decentralised ledger.
Difference Between Public and Private Blockchains
Although all blockchains share the same basic principle of decentralisation and transparency, there are fundamental differences between public and private blockchains in terms of access, control, and governance. Below, we will explore these differences in detail.
Public Blockchains
Public blockchains are open and accessible networks in which anyone can participate, read and write on the network. These networks are decentralised and do not have a central authority that controls operations. In a public blockchain, participants can maintain anonymity and no permission is required to join the network or make transactions.
One of the most notable features of public blockchains is their high level of security and resistance to censorship. Due to their decentralised and distributed nature, public blockchains are inherently more difficult to manipulate or attack. Additionally, by allowing anyone to contribute to the transaction validation process, these networks foster transparency and trust in the system.
Popular examples of public blockchains include Bitcoin and Ethereum. Bitcoin, the first and best-known cryptocurrency, operates on a public blockchain that records all transactions made on the network.
Any address can be monitored publicly and all transactions to and from that address are viewable via a network scanning tool.
Ethereum is also a public blockchain platform, but in addition to just recording the movement of Ethereum back and forth on the network, Ethereum allows the execution of Smart Contracts and decentralised applications (dApps) through its public blockchain.
In addition, a number of “layer 2” networks on Ethereum as well as 100’s of different blockchains have emerged that offer different features for deploying dApps, such as providing lower costs or greater transaction speed when compared to the Ethereum network.
Private Blockchains
Unlike public blockchains, private blockchains are controlled and maintained by a centralised entity or consortium of organisations. These networks restrict access and participation to a select group of authorised nodes, making them best suited for enterprise or government use cases where privacy and control are a priority.
These types of networks are ideal for managing closed environments for systems, with the advantages of decentralisation and transparency that this emerging technology provides.
In a private blockchain, participants must be invited and authorised to join the network. This allows for greater control over who can access and contribute to the network, which can be beneficial in environments where confidentiality and security are critical.
Private blockchains also tend to be more efficient in terms of speed and scalability, as the number of nodes and network complexity are usually lower compared to public blockchains. This makes them best suited for enterprise applications that require high performance and fast transaction processing.
Speed versus Security
The speed of a blockchain network is measured in transactions per second or TPS. The TPS on the Bitcoin network is approximately 7 transactions per second while Ethereum can transact approximately 30 transactions per second.
In general, there is a concept among blockchain developers that the trade-off between security vs speed is a faster network is inherently less secure.
Private blockchains are almost always faster than public networks due to less transactions, less nodes and less traffic on the network. But this also makes private blockchain networks much less secure than public blockchains.
Conclusion
In conclusion, we can say that public and private blockchains represent two different approaches to implementing blockchain technology, each with its own advantages and challenges.
While public blockchains prioritise transparency and censorship resistance, private blockchains focus on privacy and control. Ultimately, the choice between one or the other will depend on the specific requirements of the use case and the needs of the user.
Asta has developed numerous dApps and blockchain solutions, so please reach out and contact us today to learn how a public or private blockchain might be the perfect solution for your business requirements.
Learn more about our Blockchain development services: https://www.asta.com.au/web-3
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