At first glance it might seem like enterprise (corporations) would favor private blockchains. Public blockchains tend to be slow, plagued with baggage (Bitcoin is only for criminals) and otherwise unsuitable for corporate use. 

That’s a grim picture, however, in reality public blockchains offer a number of advantages including interoperability, huge developer communities and equality for all participants. As more corporations look into blockchain, these and other advantages are rapidly becoming apparent. Indeed, a recent EY survey found that, “There is growing interest in public blockchain: 75% of respondents are likely to use public blockchain in the future.”

When considering the benefits that public blockchains offer that number is unsurprising. However, before we discuss in detail all the benefits of a public blockchain, first we must cover the disadvantages of using a private chain.

The Disadvantages of Private Blockchains

By their very nature private blockchains offer an advantage to their founding member(s). These founders set the rules of the blockchain and they may have the power to change those rules at any time. For instance, in a private smart contract platform it may be possible for one party to rewrite a financial contract, giving unfair advantage to themselves.

The entire point of a blockchain is that nobody has to trust anyone else, so long as the code is good the blockchain is fair. That’s not the case with a private chain where participants need to trust each other in order to do business. This defeats the purpose of a blockchain which begs the question, why even bother with a blockchain if it’s no better than a database? 

This inequality and trust issue is magnified with size. Imagine a private blockchain with thousands of participants and billions of dollars of stored value. The incentive to tweak the rules for personal gain is now incredibly high. Again, for this to work everyone must trust each other.  

Perhaps the largest problem with private blockchains is that they’re fractured. Samsung blockchain, IBM blockchain, Toyota blockchain, etc. In this scenario everyone has to join everyone else’s blockchain in order to do business. Inevitably there would be different standards, complex agreements and interoperability problems. A world of ten-thousand corporate blockchains is no major improvement over the fractured system we have today.

Blockchain promises to revolutionize supply chain, for instance, by bringing corporations together in a shared environment. Making that a reality, however, depends on there being a unified environment. Such an environment cannot happen if the manufacturer, shipping company and retailer are all operating on separate blockchains.

The Advantages of Working with a Public Blockchain

In the first place there is no controlling authority in a public blockchain. On the Bitcoin network there is a group of developers who can suggest changes, however, those changes have to be accepted by the miners in order to be adopted. The developers cannot force change upon the network. The same is true of Ethereum. The Ethereum Alliance has perhaps more influence than any other one group but even they cannot change the Ethereum blockchain without community support.

Speaking of communities, public blockchains collectively have hundreds of volunteer developers working to improve them. These are highly talented people giving up their time to improve the protocols. Most companies will not want to hire dozens of fulltime developers to work on their blockchains and so the chains will improve slowly, or not at all.  

Even if a company does hire the developers needed to improve it the question arises: how is the company paying those salaries? What value is the blockchain taking from its participants that allows it to pay millions of dollars per year in development costs? These are essential questions to ask and the answer is unlikely to involve much altruism.

Public blockchains are also capable of replicating many of the features which make private blockchains desirable. Anonymous transactions, for instance. No company is going to run contracts on a public chain if the contracts are easily visible by anyone. If all data can be made private, however, that’s a different story. Currently EY is working on Nightfall, a Zero-Knowledge proof implementation on Ethereum which they believe will make private transactions viable.

Probably the largest advantage of a public blockchain, as alluded to already, is interoperability. By working in a shared environment collaboration becomes simple. That makes a public blockchain a perfect place for international companies to work together. A public blockchain is neutral ground and represents a common standard for all participants. This is useful for a number of industries, perhaps most of all for supply chain, refer to Exyte here, where various companies must work together, often across international borders. 

The Spirit of Blockchain Technology

What works well for one enterprise won’t be a good fit for another. So it is that in some cases a private blockchain may be the optimum solution for a company’s needs. Maybe a company only needs to work with a handful of others, all of whom they trust. In this scenario a private blockchain might work fine. However, public blockchains are capable of so much more. They are like the internet in that they bring participants together, massively cutting down barriers to collaboration.

As new technologies are developed many of the flaws that currently hold back public blockchains will be remedied. In the next year or two it’s speculated that Ethereum will reach a point where it can clear several thousand transactions a second (or more). That’s up from the roughly fifteen TPS it can clear now. Zero-Knowledge proofs also offer a promise of confidential transactions and contracts. That means companies can use public blockchains without revealing the terms of the contract or who the participants are. 

The spirit of a blockchain is trustless transactions and that spirit is lost with a private blockchain and its censored participation. More companies are realizing this and enterprise interest in public blockchains is only continuing to grow. That’s good news for enterprise and everyone else who will benefit from more efficient collaboration, communication and value transfer.