Reasons for Private Blockchain
The desire to adopt blockchain for your business is getting more topical day by day as major corporations are vouching for the technology. However, using public blockchain isn’t a good fit for everybody and it’s best to do some research before relying on it. In some cases, you might be better off taking advantage of a private blockchain. It does come with some limitations, which dictate the ways the technology should be used. Plus, there are certainly detractors who say that private is never the way to go. But I like to focus on the positive, so today I’ll list the top reasons to use a private blockchain and how it can benefit your company.
Putting A Name to the Face
What Is a Private Blockchain?
Unlike a public blockchain, its private counterpart only allows a select group of users to view the contents and make changes to them. This ensures that all modifications to the information are fully traceable and can be attributed to a certain user, making damaging changes less than likely. A private blockchain does mean centralization, since, most of the time, it guarantees that only people within a certain organization have the write permissions. You can, however, give read permissions to those outside the core group, if some of the lower-ranking employees need basic access to the info but shouldn’t be allowed to change it.
Grounds for Adoption
Reasons to Use Private Blockchain
- Access Control
Enterprise-oriented blockchains usually operate private and sensitive data and providing a secure way to store and access it is crucial. Private blockchains let users separate and restrict data access from different entities. This may sound odd if we are talking about public networks, where anonymity and transparency are key, but it’s unacceptable for corporations and businesses. Solutions such as JP Morgan’s Quorum, R3 Corda or Hyperledger Fabric have implemented privacy features in different ways to meet these requirements.
- In Corda, transactions are not globally broadcasted as in many other solutions and structured as Merkle trees.
- Quorum achieves privacy with the help of Constellation transaction manager, that allows either transaction or smart contracts privacy.
- Hyperledger Fabric is known for “channels” that are literally a blockchain inside a blockchain, where all the entities should be properly authenticated to be a part of the channel and share the data. Also, with the latest update, Fabric has announced a new “private data” feature that forms an additional private data collection layer inside the channels.
If you’re running a consortium-based blockchain, you can always trace back the actions done and see who did them and when. That way responsibility can’t be avoided and if someone makes a mistake, you can easily point it out and take action. This prevents sabotage and fraudulent record changing.
- Modular Architecture
Private blockchains are usually built on modules, which means they scale quite well. It’s an important facet for company-owned blockchains since, sooner or later, a company grows and its data and technology needs to grow along with it. Modules make scaling much easier, which is one of the key characteristics of a business-based solution. Plus, working with a modular architecture is going to be easier on your developers, which means that the chance of errors is reduced considerably.
However, it is undeniable, that not all private blockchain platforms are designed to scale up smoothly. For example, Hyperledger Fabric supports both vertical and horizontal scaling, but from the user experience perspective, horizontal scaling is pretty complicated and requires a bunch of tools to operate the network configurations and manually exchange them between each peer to add a new one. That’s a process that’d be hard to automate. In R3’s Corda, the process of adding new entities is much easier, but it still couldn’t be done in a single click.
Nevertheless, in private solutions, scalability doesn’t equal the number of nodes. It mostly focuses on throughput.
- High Transaction Throughput
Since private blockchain doesn’t need Proof of Work or Proof of Stake to approve transactions, it often relies on selective endorsement and automated consensus. These allow for transactions to pass faster and make it easier to handle large amounts of data, something that isn’t always possible in a public blockchain.
Pluggable consensus mechanisms help different private networks suit different business models. Hyperledger Fabric has a Kafka-based consensus model, that provides high performance and crash tolerance, and, on the other hand, the system allows you to ’turn off’ the consensus (it is called SOLO) to ease the testing and the development process. In comparison with Fabric, the R3 Corda platform reaches two types of consensus to perform a valid ledger update: validity consensus and uniqueness consensus.
- Token-Free Options
Most of the private blockchains doesn’t use cryptocurrency as a ‘fuel’ for the network, because the consensus is reached on a different level, in comparison with Proof of Work, where tokens are paid to miners who are verifying transactions. Usually, in private networks tokens are redundant, because it may be complicated for the businesses to meet all the legal parts. Non-tokenized blockchain solutions help enterprises and businesses stay regulatory compliant and customer oriented.
Parting Words
Wrap-Up
I do hope that my list was helpful and shone some light on the choice between public and private blockchain for you. While the decision ultimately comes down to your business structure and goals, this knowledge should be your weapon in making the choice. And, once you’ve decided, come to me for a consultation on running your business on blockchain or for development.
