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While blockchain isn’t exactly new (think ancient Rome), it’s in the realm of digital technology where it’s experienced a complete upheaval and quite possibly its renaissance.
Public blockchains are the most famous kind of blockchain because of help cryptocurrencies like Bitcoin and Ethereum to exist. That’s not to say that public blockchains can only be used for digital currencies.
They are the backbone of decentralized applications (dApps), make governance transparent, and are set to streamline industries that go from supply chain management to voting systems.
This blog will take us deep inside the public blockchains concept, their features, benefits, use cases, and challenges so we understand why public blockchains are one of the most disruptive technologies of the 21st century.
What is a Public Blockchain?
A public blockchain allows anyone to access it. It records transactions occurring on a network of computers called nodes in a decentralized, distributed manner.
A consensus mechanism verifies these transactions and places them into a chain of linked blocks, creating an immutable record. Permissionless public blockchains are usually of the type where nobody has to grant permission to participate as a user, validator, or miner.
In easy terms, a public blockchain is just like a public ledger of all entries available to everyone to sign and record, none of the parties claim complete control of such data.
Key Characteristics of Public Blockchains
1. Decentralization: It is essential to note that there is no central authority for blockchain, unlike the centralized systems; there is always a controller. It thereby minimizes their censorship and also makes them more secure.
2. Transparency: All the operations that ever take place on any public ledger are open for all to see for themselves. It makes the system auditable and trustworthy since everyone involved can check previous instructions provided by the system.
3. Immutability: Once the blockchain records a transaction, it cannot alter or remove the record, providing a relatively high level of data quality and confidence.
4. Permissionless: A public Blockchain is such where everyone is free to access the network of validating transactions or even generating new block. This open participation is a principle of decentralization for future firms.
5. Security: Ethereum-based blockchains, for example, use highly developed cryptographic algorithms, including hashing and digital signatures, to ensure safe transactions and personal information storage.
6. Consensus Mechanisms: Within a public blockchain there are several consensus models ( like proof of work, proof of stake, or delegated proof of stake ) that are responsible for validating a transaction and adding a new block to the chain.
Public Blockchains vs. Private Blockchains
There is a strong and well-deserved difference between two types of blockchains: public blockchains and private blockchains.
To give the reader more clarity into what is a public blockchain, it would be useful to make a direct comparison with the other category of blockchain technologies: private blockchains.
• Private Blockchains: Unlike the public blockchains, there are private blockchains which are only used by a few selected participants.
The network enables selective participation as the Blockchain cannot be accessed freely by anyone in society. Such blockchains are employed by companies and corporations to support their database and work provenance, where data confidentiality and sovereignty are critical.
• Public Blockchains: These are open to anyone. Public blockchains, as being open, are naturally aimed towards increasing transparency, decentralization, and openness to adapt to participants.
They are normally applied to systems that require openness have a large number of participants and are more critical than confidentiality and privacy.
The first trade-off is that private blockchains will provide more level of control and can be processed faster because there are a limited number of players, while on the other hand, public blockchains may take longer time to process a certain number of transactions because of several players and yet a public blockchain may afford the opportunity of decentralization as well as transparency.
How Does a Public Blockchain Work?
The basis of any public blockchain is how transactions are committed and validated. This generally follows a series of actions for initiating a transaction, and then making it onto the unchangeable record.
1. Transaction Creation: Transaction is a kind of action that a user performs in case of transferring cryptocurrency, updating a contract, or adding data to the blockchain.
2. Broadcasting: Once a transaction is broadcasted to the network, other nodes (computers) connected to the blockchain add them to their local copy of the blockchain.
3. Validation: A consensus mechanism is used to validate the transaction in the network. Common consensus algorithms include:
o Proof of Work (PoW): This is how miners compete in PoW: they seek to solve complicated mathematical problems. And, yes, the first person to solve the riddle gets to add a new block to the chain and is paid.
o Proof of Stake (PoS): With PoS, new blocks are created by selected validators who are chosen based on the quantity of cryptocurrency they own and are willing to act as collateral on their behalf. Some validators are picked at random, and their weight may be determined by the network’s stake in them.
o Delegated Proof of Stake (DPoS): In DPoS, the stakeholders vote for the delegates (or representatives) to be validated for transactions on their behalf.
4. Block Creation: The transaction is validated, and then aggregated with other transactions to make a block.
5. Block Addition: Upon being validated by the consensus mechanism it gets added to the existing blockchain and added to the immutable ledger (the blockchain).
6. Finality: Once the block is added, it’s added to the blockchain and is permanent. The transaction is becoming more and more difficult to alter or reverse as new blocks are added on top of it.
Advantages of Public Blockchains
The advantages offered by public blockchains have attracted the interest of industry innovators and developers across the world. Some of the key benefits include:
1. Trustlessness and Decentralization
Public blockchains eliminate the need for a trusted third party like a bank or government to validate transactions. Making the process decentralized enables peer-to-peer communication without central authority. This creates a trustless environment where trust is placed solely on the blockchain protocol.
2. Security
Digital signatures and hashing used in cryptographic principles are public blockchains used to ensure it is difficult for the malicious actor to tamper with the data.
These networks are distributed in nature, so there is no single point of failure, and changing the blockchain would require everyone to change the blockchain, a highly resource-intensive and difficult problem to accomplish.
3. Transparency and Auditability
Participating in public blockchains makes all transactions visible to whoever chooses to see them. This level of transparency also guarantees that everyone can follow past now time asset movement and is thus essential in cases when transparency is essential such as supply chain management, health, and finance.
4. Less Intermediaries, Less Costs
Public blockchains can significantly reduce the costs of intermediaries such as banks, clearinghouses, and other third parties essentially through direct peer-to-peer transactions they make possible. In cross-border payments, traditional methods tend to be slow and expensive, and this benefit especially.
5. Immutability
Once the data is placed on a public blockchain, it becomes almost impossible to change. The online database provides data immutability guaranteeing the integrity of the data, and preventing anyone from tampering with records after they’ve been recorded.
The application of this feature is especially advantageous for applications that necessitate the permanency or unchangeability of the record, like legal contracts, medical records, and intellectual property.
Use Cases of Public Blockchains
Cryptocurrencies are not the only use case of public blockchains. Their potential spans various industries and use cases, including:
1. Cryptocurrencies
Public blockchains have become the most prominent application due to the creation and management of cryptocurrencies like Bitcoin and Ethereum. Both of these currencies, however, use blockchain technology to make sure that they are secure, transparent, and resistant to censorship.
2. Smart Contracts
Smart contracts are self-executing contracts whereby the contract terms are written in the code itself, and this is made possible in public blockchains such as Ethereum.
Since these are contracts, these contracts automatically execute and enforce terms when given specified conditions are met, eliminating the need for a third party reducing the risk of a party shirking the deal, and increasing the trust.
3. Decentralized Finance (DeFi)
DeFi is about creating a decentralized financial system, powered by public blockchains. DeFi applications carry out lending, borrowing, trading, and receiving interest on assets outside traditional financial institutions.
Uniswap, MakerDAO, and Compound platforms give users more transparency in their financial activities and fewer intermediaries to deal with.
4. Supply Chain Management
Being on a public blockchain enables you to establish an immutable and transparent way to track goods as they move through the supply chain. This transparency cuts through fraud, ensures the authentic product, and promotes the accountability of products like food safety, pharmaceuticals, and of course luxury goods.
5. Voting Systems
As a solution for secure, transparent, and tamper-proof voting systems, public blockchains are being explored. With blockchain-based voting, the outcome of each vote would be recorded on an immutable ledger, to guarantee (no pun intended) that the result is accurate and verifiable.
This might stop election fraud and reinforce the common faith in the electoral process.
6. Digital Identity Management
Public blockchains provide a secure, decentralized way of dealing with digital identities. The blockchain helps people control their identity and manage the flow of personal information securely, eliminating the risk of identity theft and protecting privacy.
Challenges of Public Blockchains
Public blockchains also face several challenges that must be addressed before they can achieve widespread adoption, despite their many advantages.
1. Scalability
Public blockchains face a main challenge: scaling. The number of users on the network also means that it takes more time and resources to validate transactions, which means that the transaction speeds slow down, and the costs increase.
Some are investigating solutions, such as Ethereum 2.0 and the Lightning network for Bitcoin to scale the blockchain more effectively.
2. Energy Consumption
Many blockchains, such as the ones using Proof of Work (PoW), consume large amounts of energy to mine. The concern is that blockchain technology comes with an environmental price tag. As a result, multiple projects are undergoing a transition from more energy-intensive consensus mechanisms like Proof of Stake (PoS).
3. Regulatory Uncertainty
The space of public blockchains and cryptocurrencies is in its early stages of evolution with a significant amount of shakiness in its regulatory landscape. But governments around the world are struggling to find the best way to regulate blockchain-based systems for taxation, anti-money laundering (AML), and know-your-customer (KYC).
The uncertainty can be so great that it is hard for businesses and developers to get a sense of what navigating the legal landscape will look like.
4. User Experience
Though advancements in blockchain technology are no doubt outstanding, it is far too complex for the majority of users. For newbies, the technology can be confusing: wallets, private keys, transaction fees, and managing blockchain-based assets. If widespread adoption is to occur, the user experience has to be improved.
Conclusion
One of the most exciting technological innovations in the digital age so far has been public blockchains. Here the promise is to transform finance from supply chain management to governance, all with a decentralized, transparent, and secure nature.
While there are still caveats such as scalability, energy consumption, and regulatory implications, the potential of public blockchains to bring about a world of more open and equal opportunities in the digital world is big.
And because the technology is evolving and getting more mature, we should probably be seeing public blockchains become increasingly involved in the making of the future of digital systems and applications.
It feels like no matter if you’re a developer or business leader or just a regular old interested member of the public reading up on public blockchains, it’s clear public blockchains are going to shape the way we interact with data and money and even each other for decades to come.