Public vs. permissioned blockchain: differences and the key benefits

Businesses across all industries are increasingly acknowledging the fact that blockchains are not only about crypto mining but can also be used in hundreds of other ways. There is no more question whether to use blockchain or not; instead, there is now a question of choice — private, public, or permissioned blockchain?

This choice of public vs. private blockchain when it comes to the actual blockchain implementation might be a problematic one since many perceive the difference in a rather simplified way: public is for crypto and other anon-based operations online, public is for corporate use.

 It’s not that simple, of course. Let’s have a closer look at what is the difference between public and permissioned blockchains. And more specifically, when and why should you prefer one over the other two?

Public blockchains and what can you get from them

Some business people tend to disregard public blockchains because of their seemingly “socialistic capitalism” — no restrictions on participation, everyone is welcome to contribute a block. At first glance, this is not the way to do business at all.

If we take a closer look though, there may be business situations when public blockchain becomes the perfect match and even the only option sometimes. Let’s consider the key benefits.

1. Equal rights for all participants

Equality in rights for all the participants and absolute transparency through the whole transaction flow may become a significant benefit in a situation when you are working with brand new partners and long-term trust and confidence are yet to be established. Offering a public blockchain model is a solid first step demonstrating that you are open to cooperation on equal teams, no reservations.

2. Lower implementation costs

As public blockchain heavily relies on the decentralized operations of all the participants involved and on the open source, the cost per participant will be indeed lower than when you opt to develop a unique private blockchain from scratch.

If you see blockchain as a short-term project serving one or two purposes and not as a continuing business service — building your transaction flow on public blockchain premises is surely an option to consider.

3. True anonymity

In a range of highly specific situations, the anonymity of blockchain users can become the key decisive factor. For example, when you are organizing an auction, and bidders would like to remain unknown to each other. Sharing business intelligence data is another good example of when a public blockchain might be better than a private one.

Private blockchain advantages

Private blockchains allow for verified participation only, with the operator always having the veto right (on participation and also on the edits).

In the majority of business situations, private blockchain would be a reasonable choice for the following reasons:

1. High speed of operations

According to a widely spread stereotype, all blockchain transactions are instant by default. This is not always the case with public blockchains, due to the unlimited (and sometimes unpredictable) number of participants in them.

In contrast, private blockchains are limited in the number of both participants and tasks. Thus, they require fewer tech resources and are usually quicker.

2. A perfect in-house tool

A private blockchain is the best fit for multinational corporations and other large businesses. In such cases, they become some sort of in-house software, with the structure corresponding to the corporate hierarchy of teams and increased protection against data leaking outside the organization.

3. Environmental compliance

Due to a limited number of users (and this number is nearly always stable) private blockchains consume significantly less energy.

As noted earlier, public blockchains are cheaper to develop, while private blockchains are often cheaper to maintain.

Besides, lower energy spending is always a reputational benefit in the times when green reporting becomes a must for any large organization.

Benefits of the permissioned blockchain

Permissioned blockchain seems to be the least known type of blockchain, even despite their constantly growing popularity. As it is obvious from the name itself, permissioned blockchain allows access once there is a special user permission.

It’s a compromise solution between public and private blockchains, allowing for a very flexible customization in both development and blockchain management. How is this flexibility achieved?

1. Role-based activities

All permissions within a permissioned blockchain are assigned according to the specific roles of the current and future participants. This is especially convenient for businesses because the contract negotiation process, customer and employee onboarding, invoicing and payroll, etc., are all role-based processes.

Permissions issued within such a blockchain can be activity-based and/or data-centric. Activity-based permission means that certain blockchain participants would be under access-only or read-only modes. Data-centric permission means that certain categories of blockchain participants would have access only to specific data areas, while more sensitive data can be much more limited in usage.

2. Semiopen concept

Permissioned blockchain may have both internal and external participants. For example, you can invite all members of your own organization and then add a list of the selected suppliers. Over time, this list may be subject to multiple changes, with some suppliers being substituted by the new ones.

3. Balancing data transparency with its security

In simple terms, the role-based functioning of a permissioned blockchain means all its participants have access to reading data, but only a selected few will have the power to change it. This feature adds an extra layer of security to all transactions taking place in a permissioned blockchain.

Wrapping up

Choosing between blockchain types is not actually an either/or choice. For example, if you are working in a clinic or a lab, this does not mean that private blockchain is your only choice due to the sensitivity of medical records. Several transaction processes in one office may have different blockchain types, depending on their purpose and the specific nature of the data involved.

For most business operations though, the benefits of the permissioned blockchain seem to outweigh the benefits of both public and private blockchain at the same time. The customizability of a permissioned blockchain makes it transparent as a public blockchain and lightweight as the private one.