The popular interpretation of private blockchains has not been very accurate, and its comparison to public blockchains is as contrasting as the difference between day and night say experts.
Blockchain technology is becoming very popular and is increasingly being embraced by governments and institutions. Variations exist and have been described as private and public blockchains depending on inherent properties. What is it that qualifies a blockchain as private or public, and how do they compare?
Oleg Khovayko is a leading developer at Emercoin. He described public blockchains as any blockchain that possesses an equal availability to every participant within the blockchain. In other words, anyone can read, make transactions, and mine. This implies that every cryptocurrencyblockchain is a public blockchain.
While a private blockchain is any blockchain with certain restrictions. For example, mining is only available for "selected miners". Unfortunately, many people consider the term "private blockchain" to be very wide, even in the case of one node, where real mining does not exist. An example is a company known as Surety Technologies which keeps a system similar to a private blockchain for timestamps.
According to Oleg, one crucial property of all private blockchains is that the owners are usually not able to prove the non-existence of "hidden alternative blockchains", which could prove to be a problem. Giving an example, he said:
“Let’s say I am keeping a land ownership ledger in the private blockchain, a few resources are always needed to support it. Imagine, I run a hidden alternative blockchain, where I add all money transactions from the disclosed blockchain, but some land ownership records altering to "my friends". After I collect enough records, I just stop mining disclosed blockchain, and disclose hidden one for public access, since mining stopped in the previous disclosed blockchain, the entire network reorganizes the blocks, and switch to alternative. As a result, all past land records will be owned by my friends.”
A highly technical ecommerce executive, David Mondrus, puts it this way:
“I assume that when people say "private" blockchain they most of the time actually mean alternative blockchain with transparent record keeping and multiple INDEPENDENT node owners, otherwise one could just be describing a fancy distributed database. Until Proof of Stake is proven to work we only have Proof of Work. Using POW a blockchain is as strong as the amount of money it takes to reverse a transaction.”
Dave continued by explaining that in the case of bitcoin, the amount of money needed to reverse a transaction is north of 5 billion dollars. Therefore, economically, any attack that yields less than this amount, which is still expected to rise, doesn't make sense and therefore won't work.
He further said that in a private blockchain, even a POW, there is significantly less hardware behind it, meaning there is less difficulty, and it is therefore easier to reverse or double spend, thereby affecting the level of trust on a private blockchain. As a matter of fact, a private blockchain can only be trusted by its owner, meanwhile, the only reason to use a blockchain is ‘trust’. Once you have a high percentage of the control in the hands of one entity, or a set of colluding entities, you start having problems.
According to Dave, BTC's case is more cost effective to incorporate and resolve a 51% attack. However, in a small chain, you can essentially take over and ruin a chain with too much hash power. That's one of the reasons why SHA-256 doesn't have that many successful alternatives. They are competing with bitcoin for money, electricity, justification, etc. One notable exception is Maza Coin, which is SHA-256-based, but it is set to become a sovereign currency thanks to Payu Harris.
However, that is also the reason why the Mining Slicer was created, which allows the splitting of large Th/s ASIC into much smaller components.