A blockchain is a distributed, digital ledger that records transactions on multiple computers, creating a permanent and tamper-evident record. A public blockchain is a blockchain that is open to anyone, while a permissioned blockchain is a blockchain that is restricted to authorized participants.
Pros and Cons of Public Chains
One major benefit of a public blockchain is that it's open and transparent. This means that it's decentralized and not controlled by any single entity, which can be really important in certain situations. For example, if you're concerned about censorship or other forms of interference, a public blockchain might be a good choice because it's resistant to those kinds of things. Plus, it's easier for developers to build applications and services on top of a public blockchain because anyone can access it. Examples of applications built on public blockchain include decentralized crypto exchanges, popular web3 games, and more.
On the flip side, public blockchains can be vulnerable to security threats from malicious actors who might try to disrupt the network or steal funds. And because anyone can participate in a public blockchain, it can be hard to achieve consensus on certain decisions or changes to the network, potentially leading to disputes. Public blockchains also suffer from transaction throughput bottlenecks and gas fees. This can present issues for both developers and users.
Pros and Cons of Permissioned Chains
Permissioned blockchains, on the other hand, are restricted to authorized participants. This means that only certain individuals or organizations can access and participate in the blockchain. This can make it easier to maintain the security and integrity of the network because there are fewer potential attackers. Plus, it's often easier to achieve consensus on decisions or changes to the network because only authorized participants are involved. Permissioned blockchains can also be configured to have 0 gas fees and much higher throughput. Generally gas fees are a security mechanism to prevent DDOS attacks as it would be very expensive. On permissioned chains though, security can be done through role based access control whereby only approved users can make transactions on the chain.
However, permissioned blockchains also have some drawbacks. They're not as decentralized as public blockchains, which can make them more susceptible to censorship or other forms of interference from the entities that control access to the network. Plus, because they're not open to anyone, it can be more difficult for developers to build applications and services on top of them.
Use Cases for Each
So, what are some common use cases for public and permissioned blockchains? Public blockchains are often used for decentralized applications (dApps) that require a high level of transparency and accountability, such as in the case of cryptocurrency transactions. Some examples of public blockchains include Bitcoin and Ethereum.
Bitcoin and Ethereum are the most well known public blockchains. Most of us know the technology these chains ushered in—agreed upon states, censor-resistant data, tokenization, and smart contract automations. Public blockchain technology gave us new ways to think about the portability of assets and how two parties—friends, competitors, even anonymous parties—can transact with variable trust.
But aspects of the public chains made some less suitable to business use cases. Where the public space valued decentralization and security, businesses wanted to build blockchain applications with speed and more throughput. Public blockchains are also very expensive to use. Limited throughput meant high and unpredictable costs for transactions. Yuga Labs is a case in point, where a popular NFT sale ran up a gas tab of nearly $125 million. All this led to the emergence of permissioned chains in enterprise applications.
Enterprises began to use the underlying tech and work around the challenges public use cases presented—like open access, expensive fees, and limited scale.
They saw blockchain as a way to increase transparency, share data securely, and transact in novel ways. But they also saw blockchain as a path to a paperless future, a way to revolutionize back office systems and increase efficiency. Blockchain streamlined B2B interactions with smart contract automations and agreed to results, and this enhanced coordination has unlocked tremendous value.
Permissioned blockchains evolved alongside the public space. Enterprises proved scale and developed new zero-gas execution models. They were built for regulatory compliance, business roles, and permissioned access. In hardened use cases, permissioned chains proved reliable—giving businesses the ability to stay online around the clock and transact automatically around the globe.
These permissioned tenants made their way to the web3 space. On-chain privacy, zero knowledge proofs, and the scalability possible using closed chains was attractive to a public space tired of limited throughput and high costs for transactions. New constructs like layer 2’s and application chains sacrificed decentralization to achieve speed.
Similarly, the enterprise, now comfortable with blockchain as a technology, wanted some of what the public space offered. Businesses were interested in NFTs, coins, stablecoins, and DAOs, and wanted a way to connect to the public ecosystem to reach new customers.
This convergence of public and private has been unfolding for sometime and it points toward a more cohesive future, one where blockchain technology exists in myriad formats.
Polygon Technology has taken a step toward marrying the insights of enterprise blockchain and the public ecosystem. With PolygonEdge available as a protocol choice on web3 platforms like Kaleido, clients will gain access to mainnet Ethereum and Polygon’s full suite of scaling solutions as Polygon builds out their roadmap. New architectures will become possible.
- Sidechains will allow web3 gaming companies to mint thousands of NFTs without gas
- Traditional finance institutions will manage custody of millions of digital assets with a bridge to the public chains
- Carbon markets will allow companies to mint, buy, and trade credits without transaction fees and no ceiling on scale
- New token standards will help digitize real world assets and create liquidity in global markets
Partnerships between enterprise blockchain platforms and scaling solutions like Polygon are an effort to unite the worlds of public and private and give enterprises a quick on-ramp to new streams of revenue. And this convergence is only beginning.
How we think about building a blockchain platform for developers is evolving too. To seize the opportunities available in web3, Enterprises will need a tech stack that can manage multiple use cases, connect to multiple chains, and have the plug-and-play flexibility to shape applications toward a variety of users.
Hyperledger FireFly, a Hyperledger Foundation project, is this tech stack. Soon it will allow connections across all popular public chains, making it the development platform of choice not only for the enterprise, but also for public-native developers who want to reach production faster, connect to multiple chains, and manage multiple use cases from a single console.
Why All This Matters
At Kaleido, we’re always excited about blockchain. Everyday we speak with enterprises about ways to digitize legacy systems and build for the web3 future. Our solutions help businesses transform their legacy processes, improve efficiency, and find new revenue streams. Daily we see how lessons learned in the public space inform enterprise applications and vice versa.
As we move forward, we’re focused on building for this more cohesive, collaborative future. We’re focused on interoperability. As applications are built across industries, borders, and chains, we think a lot about how these systems will communicate with one another and how they will get data in and out, always with an eye toward efficiency.
The public-private convergence is a step toward unlocking the full potential of Web3 technologies for everybody, across industries, around the globe. New ways of transacting, new levels of transparency, and new trust models will emerge as public and private intermingle further. We’re excited to stand at this intersection and help innovative companies, engineers, and thought leaders shape the future of blockchain.
FinalThoughts
To sum it up, both public and permissioned blockchains have their pros and cons. Public blockchains are open and transparent, but can be harder to maintain the security and integrity of the network. Permissioned blockchains are more secure and easier to manage, but they're not as decentralized and not open to anyone. The right choice for a specific situation depends on the needs and requirements of the individuals or organizations involved.
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