Private vs Public Blockchain

Eran Peled
Eran Peled

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2 years ago

blog

History teaches us that this battle has already been decided

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Blockchain technology introduced a whole new set of possibilities for businesses to explore. Perhaps the first step for enterprises looking for blockchain-based solutions is to choose between public and private blockchain infrastructures.

Currently, the private blockchains hand is on top, with projects like Hyperledger and Corda managing to on-board enterprises onto their platforms much more successfully than their public blockchains counterparts.

Here at Orbs, we do not believe that the future will favor permissioned, private blockchains. In our opinion, the true innovation and disruptive potential for blockchain technology lie with public, permissionless, open-source blockchain protocols.

In this blog we’ll review some of the misconceptions when coming to choose between public and private blockchains and how, in fact, using a public blockchain-based solution is more beneficial to enterprises in the long run.

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Competitive advantage

Under Orbs, the value of public blockchain is defined as the ability to facilitate trust by creating apps providing blockchain-backed guarantees to their users and partners. These include auditability - the ability for users to know the app protocol and audit its data; forkability - the ability for users to leave the app with their data; governance - the ability to enforce how the app protocol changes.

Tal Kol, Orbs co-founder, gives a specific example of Uber and the necessity of these guarantees in this podcast episode of Brave New Coin [Around 23:40]

Enterprises that will take the leap of providing their users with these guarantees can disrupt their respective markets by having an advantage over those that don’t. Providing these guarantees makes businesses more competitive. With all other things being equal, users will always prefer to receive these guarantees than not receiving them.

And here is the key part: Only public blockchains can offer these guarantees, as broken down easily by Tal.

Costs

Orbs unique architecture solves many of the cost issues usually associated with public blockchain infrastructures such as Ethereum and EOS. These include the diseconomy of scale where costs increase with demand, lack of scalability, unpredictable fees, unknown SLA, as well as network congestion. With Orbs, you pay for the computing resource you consume, much like a cloud service such as AWS.

Private blockchains, in contrast to popular opinion, are actually expensive to operate. Projects like Hyperledger demand that each user run and maintain its own Hyperledger node. This usually means that the organization needs to hire somebody familiar with Hyperledger. EY recently published a report where they estimated the costs of using Hyperledger to be approximately $150K a year.

Watch Tal's AMA answer at 11:49.

In summary, Orbs value proposition to enterprises is a scalable cost model which includes SLA as well as fixed predictable fees, and which is actually more competitive than private blockchains.

Permissioned vs Permissionless

Private blockchains usually consist of several companies, or a consortium, and are designed so that one can only join their networks as a peer with permission from an administrator or by negotiating with the already existing peers.

This raises several issues: Weaker, smaller members may not find acceptance and respect as equal peers on those networks. They may find themselves at a disadvantage when proposing protocol changes. In addition, there is a risk of collusion between several members of the consortium which may decide to “roll back” the chain or change the details of a transaction.

Meanwhile, public blockchains such as Orbs are open source community projects. New members can join the network without asking for permission or having to prove to anyone that they can be a worthy stakeholder. They can then build all kinds of applications on top of the public blockchain without the need to rely on a corporation or a consortium to give them the appropriate API. They can also contribute to the network security by staking or by becoming a validator.

Data ownership

Many enterprises fear that running an application on a public blockchain means losing control of your data because it is recorded on a public ledger accessible to anyone. As a result they turn to private solutions.

Data on public blockchains is recorded on a shared public ledger, which anyone can review or make a copy of. However, having data on a public blockchain doesn’t necessarily translate to it being available to, accessible to, or readable by anyone. Without access to additional data, which users privately hold, such as private keys, the record cannot be decrypted. In addition, enterprises can build specific applications on public blockchains that offer levels of access to their data, in particular using cryptography. Watch Tal's AMA answer [at 14:00].

Similarities with the Internet

Today, every company is connected to the internet, it seems trivial to even say it, they depend on it to do business. But, when the internet started, companies were afraid to share their data and they used private networks. As we know this premise is of course false, you can connect to the internet and keep your data safe behind firewalls. Orbs believes that the same process will happen with blockchain, enterprises may choose to start on private blockchains, but ultimately, they will migrate to public protocols as their confidence increases.

Interoperability

We will not go into this subject in detail, but just like in the internet example, private blockchain "intranets" are isolated systems that cannot communicate with external protocols. Public blockchains, on the other hand, are open protocols, similar to the internet today.

Although there are many public blockchain infrastructure projects out there, almost all of them, Orbs included, have interoperability at the top of their priorities list (together with scalability, consensus models, etc.). All of them understand that a protocol that would not be able to interoperate with other protocols will be at a disadvantage in the long run.

Conclusions

As history has taught us with the spread and usage of the internet, the enterprise blockchain future is inevitably public.

Short-sighted enterprises that choose to build on private blockchains today face the risk of a painful, expensive, possibly impossible migration to a public blockchain infrastructure in the future.

However, having said all of the above, not all public blockchain projects are fit for enterprises use-cases. In fact, the vast majority of them are oriented towards decentralised applications (such as defi, web3, etc.), and are not fit for large scale consumer applications. This is what we call the Blockchain Dichotomy.

Tal’s AMA answer [at 16:15]

Orbs is uniquely positioned in the solution landscape as it is the only public blockchain infrastructure with a live mainet that is designed for enterprises use-cases. We believe that targeting enterprises is the best path to unlocking mainstream adoption for public blockchains.

Orbs overcomes this blockchain dichotomy obstacle by providing enterprises the proper infrastructure for their applications: A novel hybrid consensus protocol, scalability, SLAs, isolated environment via virtual chains, predictable fees, and more…

To learn more about Orbs and receive updates on the project, visit our website and our official Telegram channel

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