Should Your Organization Choose a Public or Private Blockchain?

Public or private?

Organizations selecting a distributed ledger will be weighing issues of speed, cost and security.

Public blockchains, which are far more common, allow for anyone to participate and are more transparent. Their proponents see them as truer to the original intent of blockchain – that is, to create a distributed network in which individuals can see and directly control economic activity.

But private blockchains, which require an invitation or permission to join, have generated a growing following among organizations eager to conduct business with a specific group of participants. They are also popular among groups seeking faster transactional speeds. Private blockchains are faster because the number of participants involved in a distributed ledger is limited. In addition, the cost of data storage may be lower.

Private blockchains are tailored to specific data needs while public blockchains promote trust.

More and more organizations may find themselves having to choose between the two as a growing number of blockchain developers increasingly focus on privacy and velocity issues.

A company’s decision will depend on its goals, say blockchain experts. Is it looking for the openness that a public blockchain ensures? Or is it seeking a more private environment? The latter may be particularly well suited when companies are applying their technologies for specific rather than wider-ranging purposes and are looking to exert more control over transactions.

“It makes sense for a company to use a public blockchain when the industry of the company requires transparency to gain the trust of customers,” says Ronald Hold, co-founder of the Masters of Crypto online community. “Initiatives in regulated industry or that necessitate government oversight will be on public blockchains.”

Holt adds that companies seeking “anonymity” would be better suited for a private blockchain.

This line of thinking clearly resonates with Jeff Stollman, a technology adviser who consults to companies on their initial coin offerings. He said a pharmaceutical company, for example, may see itself as better off developing a private blockchain to track “the authenticity of pharmaceuticals as they pass through the supply chain from manufacturer to distributor to dispenser.”

Exploring Composite Models

In future, companies may have other, hybrid options. Consider FlureeDB, which is combining traditional databases with an immutable blockchain-type ledger. This composite model is akin to user provisioning and hybrid cloud processes. In short, companies can create gateways for information to flow between blockchains.

“Data can lie on multiple blockchains — private, permissioned, or public — with any number of unique characteristics that include voting power, visibility permissioning, and other rules,” said Fluree’s co-founder and CEO Brian Platz. “Private blockchains are tailored to specific data needs. Companies can enforce more stringent policies than would be possible on a public ledger.”

Stollman said public blockchains “are likely to foster more development tools because of their broader user base, such as smart-contract code evaluators and software developer kits.” But some companies and industries may have other priorities and may opt for a different path.

James Rubin contributed to this report.