Public Blockchain
What Is a Public Blockchain
A public blockchain refers to a distributed ledger that operates in an open, permissionless environment. Anyone with an internet connection can join the network, participate in transaction validation, and access the data stored on the blockchain. Public blockchains function as decentralized, peer-to-peer systems where no single entity has control over the network, making them trustless and transparent. This decentralization ensures that no centralized authority can censor transactions or manipulate data.
Public blockchains are often characterized by their high level of security and immutability. Once a block of transactions is added to the chain, altering or removing it becomes nearly impossible due to the network’s decentralized nature. Participants in a public blockchain are incentivized to maintain network security and consensus through rewards such as cryptocurrency tokens.
How Public Blockchains Work
Decentralized Consensus Mechanisms
Public blockchains rely on decentralized consensus mechanisms to validate transactions and secure the network. Consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS), ensure that all nodes (participants) in the network agree on the state of the blockchain.
In PoW, miners use computational power to solve cryptographic puzzles, validating new transactions and earning rewards in the form of newly minted cryptocurrency. Bitcoin is a prime example of a PoW-based public blockchain.
In PoS, validators are chosen to create new blocks and validate transactions based on the amount of cryptocurrency they have staked as collateral. Validators are rewarded with transaction fees or new tokens for their participation. Ethereum is transitioning to a PoS consensus mechanism with Ethereum 2.0, aiming to increase scalability and reduce the energy consumption associated with PoW.
Open Access
One of the defining features of a public blockchain is its open access. Anyone can join the network as a node, miner, or validator without needing approval from a central authority. Every transaction, once validated, is added to the blockchain, where it is visible to all participants. Public blockchains are transparent by design, with transaction data available to anyone who wishes to view it.
Token Economy and Incentives
Public blockchains operate on a token-based economy where participants are incentivized to contribute to the network. Miners or validators receive rewards in the form of native cryptocurrency tokens for validating transactions and securing the blockchain, maintaining its integrity and security. Tokens can also be used when paying for transaction fees, participating in governance decisions, or accessing decentralized applications built on the blockchain.
Purpose of Public Blockchains
Censorship Resistance
Public blockchains are crucial for decentralization, as they prevent any single entity, government, or corporation from exerting undue influence over the network, making public blockchains resistant to censorship. Users can transact freely without fear of interference or manipulation. Censorship resistance is particularly important in regions where governments may attempt to restrict access to financial services or control the flow of money.
Trustless Environment
An advantage of public blockchains is their ability to facilitate trustless transactions. Participants do not need to trust one another or rely on intermediaries like banks or payment processors to verify transactions. The network’s consensus mechanism and cryptographic protocols ensure that transactions are verified, secure, and accurate.
By removing the need for intermediaries, public blockchains reduce the cost and complexity of conducting transactions. Smart contracts—self-executing agreements coded into the blockchain—further enhance the trustless nature of public blockchains by automating transactions and ensuring that conditions are met before execution.
Innovation
The open and permissionless nature of public blockchains drives creativity and the expansion of decentralized ecosystems. Developers can build decentralized applications (dApps) on top of public blockchains, taking advantage of their open infrastructure to create new financial products, services, and governance models. Public blockchains also support the growth of decentralized autonomous organizations (DAOs), which operate without central leadership, allowing stakeholders to participate in decision-making processes.
Ethereum, for example, is a public blockchain that serves as the platform for thousands of dApps, including decentralized exchanges, lending platforms, and non-fungible token (NFT) marketplaces.