The rapid evolution of blockchain and distributed ledger technology has led many companies to investigate use cases in line with their respective industries. In exploring enterprise blockchain solutions, businesses face the crucial task of determining the underlying network structure that best suits their needs. This undertaking requires key decision makers to become familiar with tech nuances – especially if successful implementation and project optimization are priorities.
So what exactly do businesses need to consider when exploring blockchain solutions? For many, the first consideration is whether to pursue a public or private framework. Public blockchains are just that, accessible and readable to anyone – an entirely open peer-to-peer network. Conversely, a private blockchain restricts network access to approved participants. While corporate security concerns tend to encourage private blockchain use, a comprehensive assessment is essential to selecting the appropriate network type.
Both public and private blockchains require network validators to function properly. When a transaction (or transfer of data) occurs on either network, validators are involved in determining the legitimacy of the action. Each blockchain type uses a system of nodes to maintain a decentralized, shared data structure. The primary difference between the validation technique on each network is the inclusion of an incentivization mechanism.
On public blockchains, validators receive rewards for their participation in the form of cryptocurrency. For example, Bitcoin, Ethereum, and Litecoin blockchains are high profile iterations of the Proof of Work (PoW) consensus or incentive mechanism. In contrast, private blockchains do not require an incentive to function. Instead, a system is only as decentralized as its most centralized centralized component. Here, using private blockchains is inherently centralized and therefore has a single point of failure and is much more…