How private cryptocurrencies are different from public ones

Highlights

• Countries around the world are banning private cryptocurrencies to make a way for their official digital currency issued by central bank.
• The Public Blockchain network has no restriction on participation.
• Private Blockchain technology is regulated by a single entity, which means it is not open to public to participate.

Countries around the world are banning private cryptocurrencies to make a way for their official digital currency issued by central bank. Recently, India joined the list of countries that have banned or are contemplating banning private cryptocurrencies and is preparing to regulate cryptocurrencies.

At a time, the crypto market meant only Bitcoins. At present, there are thousands of cryptocurrencies that compete with each other, and these cryptocurrencies offer different levels of security. All the cryptocurrencies can be segregated into two main categories: Public and Private.

Currently, the popular options are Bitcoin, Ethereum, Dogecoin, Tether and others, which all are based on public blockchain networks that offers a degree of anonymity to users as they allow users to operate under pseudonyms, but users’ transaction history, transaction amount and address can be traced.

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In case, someone reveals the identity linked to the address the privacy can be easily breached. The transactions that take place on an open network can be viewed by any person who has access to the blockchain.  

Further, digital currencies such as Dash, Particl, Zcash, Monero, and others are based on private blockchain networks that cloud the transaction history to offer security to the users. These cryptocurrencies also have open public ledgers but with disorganised transaction information to protect the privacy. The privacy of transaction depends on the cryptography employed by the crypto’s project team.    

Cryptocurrencies were believed to have high security and privacy but in reality most of them only offer basic level of anonymity.

Also read: Swimming upstream: How Revain survived the crypto crash overnight

Public Cryptocurrencies

The public cryptocurrencies are based on an open public blockchain network where there is no restriction on participation and all the information regarding transactions is available in public domain. Once any entry is made on public blockchains it can’t be altered or deleted after the entries are validated and it also provide users with equal rights no matter what.

The public blockchain companies make sure that it offers highest level of security and transparency, but it is slower than usual, which attract illegal activities and causes loss of billions of dollars every year. Public Blockchain cryptocurrencies are not regulated by any central authority and provide full empowerment to the user. 

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Public blockchain have no regulations that the nodes have to follow, therefore, businesses dealing with sensitive information such as bank account detail or personal information do not prefer to join a private blockchain.

In Public blockchain, users get true decentralization and is maintained and updated by the nodes, with help of a consensus algorithm. This feature is not provided to the user of private blockchain.  

Also read: Crypto Catch: Bitcoin sinks to US$47,000; 90% of Bitcoin Mined

Private Cryptocurrencies

The private cryptocurrencies are based on private blockchain network that is regulated by a single entity, which means it is not open to public to participate, unlike Public blockchain. Participant needs permission to read, write and alter the blockchain, as it is developed for the internal networking system of a computer.

It has multiple layers of data, which makes it more secure and private for users as compared to Public Cryptocurrencies. This is one of the reasons that this blockchain technology is used by organizations that deals in sensitive information such as government organizations and financial services.

Private Blockchain technology is partially decentralized and to use it trust between the nodes is necessary and they have to follow certain rules and regulations to ensure proper functioning. Nodes are the electronic devices connected to the network and possessing an IP address.

The Private blockchain technology are more efficient and faster than public blockchain technology, as it allows limited people in the network that takes less resources as compared to public blockchain that it can’t backup making it slower.

The private blockchain technology aims to empower and secure the data of organization using it rather than individual employees. In Public platform, the fees depend on the pressure of nodes requesting transaction, which also increase time to complete the transaction, whereas in private platform it is not the case, making the transaction fees extremely low.

Countries around the world are concern about the illegal activities that takes place in public blockchain based cryptocurrencies, but as private cryptocurrencies are highly authenticated it filter out any intruders, therefore, limiting the illegal activities.

Also read: Can Tesla's Dogecoin acceptance revive crypto market spirit?

Bottom Line

Many believe that public and private cryptocurrency technology compete with each other, but this is not the case. Both the technology has different purposes. Private technology works better for businesses and organizations that deals in sensitive information. On the other hand, public technology works better for consumer businesses.