Superiority of public blockchains

Blockchain technology has become popular mainly because of its openness, neutrality, censorship-resistant, and permissionless. We can think of open blockchains as a pure democracy, where developers are legislators, miners are deputy, and end-users are electoral. All parties can act as an incentive for themselves to act honestly. If developers (legislators) do not do their best to improve the ecosystem, miners and users will choose different, better blockchains. If miners start to form a cartel, censor transactions, or approve illegal transactions, end-users will stop using this blockchain. If end-users stop using the blockchain, the whole project collapses; thus, developers and miners lose their jobs. This perfect equilibrium makes public blockchains great. Everything is strengthened by the fact that both developers, miners, and end-users holds some shares in the project in the form of cryptocurrency, so the gains and losses are tangible.

Things change significantly when we strip a blockchain from its trait of being public––the most fundamental property. Private Blockchains are just immutable, integral, distributed databases. It must be admitted that private blockchains have many advantages, they can handle higher transaction throughput, do not require costly mining, are asymptotic resistant and are easier to manage. On the other hand, private blockchains are not as transparent as public ones; their security model is based on trust in institutions, whereas open blockchain security is based on game theory and market forces. A public blockchain is a decentralized, trusted third party. That is why the solutions based on public blockchains are superior to those based on private ones.

Read more