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Public and private blockchains

Some blockchains are open to anyone. Others are run by a known group of organisations, who decide who can join. The difference changes who you have to trust.

Information, not advice.

Open to anyone (permissionless)

On a permissionless blockchain, anyone can download the software, read the record, send transactions and try to publish blocks, without asking anyone. Accounts can be made without giving a name. Bitcoin and Ethereum work this way.

Because anyone can join, including people who want to cheat, these networks make publishing a block costly (proof of work or proof of stake) and reward honest publishers in the network's own coin.

Run by a known group (permissioned)

On a permissioned blockchain, only approved members can publish blocks. The group, often called a consortium, may also limit who can read the record or send transactions.

Members know who each other are, so agreement is usually faster and needs far less computing. A member who misbehaves can be removed, and there may be legal contracts to fall back on.

Technical detail

Some permissioned networks show a transaction's details only to the parties in it, while the record shows that it happened. Some use a business's existing directory of users instead of each user managing their own keys.

What it changes for the people relying on it

On an open network, no one can quietly let a member in or shut one out, but no one is answerable for the network either.

On a permissioned network, whoever controls membership has real power. If a single organisation decides who can publish, users have to trust that organisation. NIST notes that the owner or consortium can replace any number of blocks, by the network's own rules, if it chooses to.

Who makes the rules

“No one controls a blockchain” is not quite true. On an open network, the software developers, the block publishers and the users each have a say: developers write new versions, and publishers and users choose whether to run them.

In 2013, a new version of the most popular Bitcoin software split the chain in two by mistake. Its developers chose to go back to the old version, and one of the two chains was dropped.

On a permissioned network, the owner or consortium governs: who joins, who is removed, and the rules for its code.

Technical detail

A change to the software that older versions can still follow is a soft fork; one they cannot follow is a hard fork.

Who can see the record

On an open network the record is generally public: anyone can see every transaction to and from an address, from the start. A permissioned network may keep its record to its members.

Either way, the question to ask is whether the data should be seen by everyone, and what harm it could do if it were.