The rapid evolution of blockchain technology and distributed ledgers has led many companies to study use cases in line with their respective industries. When exploring commercial blockchain solutions, companies are faced with the crucial task of determining the underlying network structure that best suits their needs. This commitment requires that key decision makers become familiar with the nuances of the technology, especially if the implementation and optimization of successful projects are priorities. So what exactly should companies consider when exploring blockchain solutions? For many, the first consideration is whether to pursue a public or private setting. Public blockchains are just that, accessible and readable by anyone, a completely open peer-to-peer network. Conversely, a private blockchain restricts network access to approved participants. Although business security concerns tend to encourage the use of private blockchains, a thorough evaluation is essential to select the right type of network.
Validation measures
Public and private blockchains require network validators to function properly. When a transaction (or data transfer) occurs on one of the networks, validators are involved in determining the legitimacy of the action. Each type of blockchain uses a system of nodes to maintain a decentralized shared data structure. The main difference between the validation technique in each network is the inclusion of an incentive mechanism. On public blockchains, validators receive rewards for their participation in the form of cryptocurrency. For example, the Bitcoin, Ethereum, and Litecoin blockchains are highly mediated iterations of the consensus or incentive mechanism for work validation. In contrast, private blockchains do not require any incentive to operate. Instead, a system is only as decentralized as its most centralized component. In this case, the use of private blockchains is inherently centralized and therefore has a single point of failure and is much easier to hack. When taking into account the security implications of both options, public blockchains require further investigation. Since everyone can join a public blockchain, malicious participants can gain majority control over the network's consensus protocol, compromising immutability. Although these 51% or most of the attacks pose a significant threat, new lines of defense aim to reduce their frequency and impact. However, the private blockchain ecosystem currently offers better protection against this threat, as users have been fully tested.
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Confidentiality or transparency.
Transparency is, along with immutability, a defining characteristic of blockchain technology. On a public blockchain, all transactions are exposed, visible to anyone at any time. It is a completely open source system. Although the transferred data is transparent in this ecosystem, the identity of the participants may remain anonymous. After all, there is no obligation to reveal your identity on a public blockchain – privacy and anonymity are protected. This pseudonymous structure is the opposite of the relationship between identity and data in a private blockchain. In this environment, transactions are inherently private, but the identity of all nodes is made transparent. This transparency is crucial for companies that need to know who they are dealing with, without a doubt. There are definite advantages to using a private blockchain where participants are verified before joining the network. To facilitate this process, traditional Know Your Customer (KYC) and Anti-Money Laundering (AML) verification techniques can be used. Public blockchains cannot unequivocally confirm the identity of a network participant unless he or she chooses to reveal it.hybrid solutions
For some companies, neither public blockchains nor private channels may be the solution. In these cases, the consortium blockchain may be an appropriate alternative. But what is it exactly? In simple terms, a consortium blockchain is a partially private blockchain. Instead of a single company overseeing the blockchain, a group of companies, governments, or other bodies come together to form a network. Within this network, individual members are shortlisted as validators. This structure helps increase data confidentiality and security while avoiding the creation of a single control blockchain, which many consider counterproductive. In addition to consortium blockchains, zero-knowledge evidence has evolved to provide more privacy for public blockchains. This high-level cryptographic evidence allows validators to prove that something exists without knowing what it is. However, due to the complexity of their processing, zero-knowledge proofs sacrifice speed for data privacy. In addition to these on-chain solutions, many third-party developers have begun exploring on- and off-channel applications that interact with the public blockchain ecosystem. Although many are in their infancy, these apps are well positioned to take advantage of blockchain's public and private networks: the more encrypted data is distributed, the harder it is to hack into the system. This security feature is unique to a decentralized big ledger, where it is much more difficult to get results with a trusted group or groups.
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