Blockchain technology was created as a decentralized “public” ledger that contains the history and details of all transactions in a network. The first blockchain, Bitcoin, created by Satoshi Nakamoto, is transparent to all; with basic information such as your wallet address, anyone can see details of your spending, earnings, transactions, and wealth. Hence, the Bitcoin network is regarded as “public” and “permissionless.”
However, as blockchain technology began to break into more industries, some organizations, companies, and corporations sought to utilize blockchain’s security and cryptographic benefits in an enclosed space; as a result, the need for private inclusion became dire. Of course, the inner workings of a private organization should remain within the company’s hierarchy, from founders to employees, but not in a public, permissionless ledger. As a result, private blockchains began to thrive.
What is A Private Blockchain?
A private blockchain is a centralized ledger maintained and controlled by permissioned members of a private organization who oversee and validate all transactions. Hence, all members involved in mining/validation, as well as nodes who create a new block, are manually configured by the network operator(s).
Unlike public blockchains like Bitcoin, Ethereum, etc., private blockchains aren’t decentralized. The network operators can override the commands of other members; hence, a hierarchy remains, and network participants are still subject to the central leaders.
Private Blockchains Aren’t Decentralized, So Why Do They Exist?
You may wonder why corporations and enterprises utilize private blockchains since their mode of operation remains hierarchical and permissioned. However, away from the blockchain’s decentralization, private blockchains benefit from transparency and security via cryptographic encryption. In other words, everybody within the network can read but “write” access is limited to a few assigned nodes, which are all subject to the network operator(s); however, people outside the network cannot access the information.
Distinguishing between Private and Public Blockchains
S/N
Private Blockchains
Public Blockchains
1.
Limited decentralization
Fully decentralized
2.
All participants are known to each other
There is a huge chance of anonymity
3.
It requires the trust of the network participants
Public blockchains are trustless
4.
Records can be edited in private blockchains
Public blockchain records are immutable
5.
Highly scalable
Poorly scaled
6.
Prone to malicious collaboration by bad actors since
network participants are few and they know one another
Nodes in public blockchains are few and largely unknown
to each other; hence, it is more secure.
Advantages of Private Blockchains
Private blockchains help to ensure the integrity of sensitive data while using blockchain technology
Since there are fewer network participants, transactions in private blockchains are fast and cheap.
It avoids the risk of illegal activities as typical with public blockchains since KYC is required.
It’s easy to maintain, so it saves cost.
They can function as regulation-compliant companies since network participants aren’t anonymous.
Existing Private Blockchains and Their Applications
Since Public blockchains gained popularity in 2014, several private blockchain platforms have been used by real-life companies to secure their processes and facilitate transparency. Some common ones are;
Hyperledger Fabric, used by Walmart to securely authenticate products via uploaded certificates, allowing the company to trace products to suppliers within seconds. Hence, malicious suppliers can be fished out.
Tracr, used by De Beers to verify the authenticity of diamonds collected, helping to avoid duplicity and counterfeits.
LifeGraphs, used by BurstIQ to securely transfer sensitive medical information via smart contract permissions.
Xage, used in logistics by Enterprising IoT companies to protect devices by self-diagnosing breaches and managing secure information across devices, preventing cyber attacks.
Many more private blockchain platforms exist in shipping and logistics, music, data management, insurance, banking and finance, etc.
In Conclusion,
Blockchain technology is expected to penetrate and disrupt many industries due to its utopian promise of decentralization and autonomy. However, there are some aspects of life that require privacy and anonymity; hence, private blockchains are essential.
However, it is worth noting that private blockchains cannot optimally function for general use; as a result, it is essential to keep private blockchains for sensitive applications that require the utmost integrity.
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