How to Build a Private Blockchain: A Guide for Businesses

Published in

Blaize_tech

12 min readApr 12, 2024

Just a few years ago, blockchain was synonymous with Bitcoin, but the technology has matured into a powerful tool for various businesses. Imagine a technology that lets your company securely share confidential data with partners, automate complex workflows, and guarantee the authenticity of every transaction.

Unlike public blockchains, which are open to anyone, private blockchains create a secure, permissioned network specifically designed for businesses. Think of it like an exclusive club for your company and its trusted partners. This controlled environment offers several advantages:

Security: Forget about anonymous miners and public scrutiny. Private blockchains rely on pre-selected, trusted entities to validate transactions. This significantly reduces the risk of cyberattacks and ensures only authorized users can access sensitive data.
Paperless: Imagine streamlining complex processes like supply chain management or regulatory compliance. Private blockchains automate workflows, eliminate the need for intermediaries, and create a single, verifiable record of every transaction. This translates to fewer errors, faster processing times, and significant cost savings.
Transparency: In today’s digital age, trust is paramount. Private blockchains provide an immutable and tamper-proof record of every transaction. All authorized participants have a clear view of the data, fostering collaboration and eliminating disputes.

We’ll break down the technology in a clear and concise way, showcase real-world examples of how businesses are using it to gain a competitive edge, and provide a step-by-step plan for implementing a private blockchain solution within your organization.

Building a Private Blockchain Platform

The integration of blockchain technology within the business ecosystem is not merely a trend; it’s a strategic move to overcome the inherent limitations of traditional web2 infrastructures. In a landscape where digital transformation dictates competitiveness, blockchain emerges as an essential solution for a plenty of business challenges. This section delves into why blockchain is increasingly becoming a business imperative and how a private blockchain, in particular, offers a bespoke solution that aligns with business objectives and regulatory requirements.

At its core, blockchain technology addresses specific business problems that web2 solutions cannot adequately resolve. The compelling attraction to blockchain is its unique ability to provide a constant possibility of verifying the integrity and immutability of stored data. This feature alone propels blockchain to the forefront of technologies that can secure data against tampering and unauthorized alterations, thereby enhancing trust in digital transactions.

Furthermore, blockchain technology revolutionizes the way businesses approach transactional processes and tasks through tokenization. By digitizing assets and enabling their representation as tokens on a blockchain, businesses can unlock new efficiencies in asset management and transactions. This tokenization, coupled with the automation capabilities of smart contracts, streamlines operations, reduces the potential for human error, and introduces a level of transparency previously unattainable in traditional systems.

The automation of business processes via smart contracts or their analogs further exemplifies blockchain’s potential to transform business operations. This automation ensures consistency, speed, and reliability across various business functions, from supply chain management to contractual obligations and beyond. Additionally, the immutable audit trails created by blockchain provide a constant validation of data changes, ensuring that every transaction or modification is transparent and verifiable.

Blockchain technology also expands the financial capabilities of businesses by facilitating additional payment channels. These channels can support a wide range of transactions, from traditional fiat-based payments to innovative digital currency exchanges, thereby broadening the business’s reach and flexibility in financial operations. Moreover, the redundancy of blockchain storage systems significantly enhances the security of data storage, safeguarding critical business information against loss and unauthorized access.

Despite the universal appeal of blockchain technology, the public blockchain model is not always feasible for business applications. The need for privacy, control over access, and compliance with specific regulatory standards makes the public blockchain networks less suitable for most business operations, particularly those involving sensitive or proprietary data.

The Benefits of Private Blockchains for Business

Private blockchains stand out for their ability to offer businesses control, privacy, and customization. They eliminate dependencies on third-party infrastructures, enabling businesses to innovate at their pace. The control over access ensures data sensitivity and compliance with regulations, while the customizable nature of private blockchains allows for tailoring to specific business needs, fostering an ecosystem that can evolve with the business.

Private blockchains offer a tailored solution by providing:

Control Over Access: Businesses can precisely manage who has access to the blockchain, ensuring that only authorized individuals can view or modify the data. This level of control is critical for maintaining data confidentiality and compliance with privacy regulations.
Integration and Customization: The entire blockchain layer becomes an integral part of the business’s digital infrastructure, eliminating dependencies on third-party platforms. This autonomy allows businesses to customize the blockchain to their specific needs and operational requirements, enabling the addition of new features and functionalities at their discretion.
Ecosystem Creation: Private blockchains empower businesses to create and nurture their own ecosystems. This capability is particularly valuable for companies looking to leverage blockchain technology to establish new business models or to enhance existing ones through improved collaboration and data sharing among stakeholders.
Tailored Payment Solutions: The flexibility to integrate payment channels and providers that align with the business’s financial operations and objectives further exemplifies the advantages of private blockchains. This adaptability ensures that businesses can offer secure and efficient payment options to their customers and partners.
Regulatory Compliance: Private blockchains can be designed and adjusted to meet the specific regulatory requirements that a business faces. This adaptability is crucial for industries subject to stringent compliance standards, ensuring that the blockchain solution supports rather than complicates regulatory adherence.

The shift towards private blockchain technology reflects a strategic response to the specific needs and challenges of modern businesses. By offering unparalleled security, efficiency, and flexibility, private blockchains not only solve current operational challenges but also open doors to innovation and competitive advantage in the digital era.

What Should you Expect for the Private Blockchain Network

Private blockchains offer a transformative advantage for businesses, but their intricate nature demands meticulous planning and a long-term vision. Unlike deploying pre-built software, successful implementation hinges on a nuanced understanding of the underlying architecture and its long-term implications. This section delves into the critical considerations you can expect building a private blockchain.

Strategic Forking of Open-Source Clients: While forking established open-source clients like Ethereum’s Geth or Cosmos’ Evmos provides a battle-tested foundation, the selection process necessitates a keen eye for detail. Consider factors like the project’s ongoing development activity, community size, and the specific feature set offered by each client. In-depth code audits and security assessments become paramount to identify and mitigate any potential vulnerabilities inherited from the parent codebase.
Enterprise-Grade Permissioned Platforms: For scenarios demanding enhanced security, scalability, and regulatory compliance, permissioned blockchain platforms like Hyperledger Fabric or R3 Corda offer a compelling alternative. These platforms provide pre-built features specifically designed for consortium blockchain networks, often including robust permissioning mechanisms, identity management tools, and integration with existing enterprise systems. However, a thorough evaluation of licensing costs, vendor lock-in potential, and the platform’s alignment with your specific technical roadmap is crucial before making a selection.
Custom Development with Permissioned Blockchain Frameworks: For highly specialized use cases or when existing solutions fall short, building your own private blockchain with frameworks like OP_Stack L2, Avalanche Subnets, Substrate, or Cosmos SDK offers maximum flexibility. This approach empowers you to tailor the consensus mechanism, governance structure, and cryptographic primitives to your exact requirements. However, it necessitates a team with deep blockchain development expertise and a long-term commitment to maintaining the codebase.

The very essence of a private blockchain lies in restricting access and maintaining the integrity of the network. This necessitates a layered security approach encompassing:
Secure Enclaves and Hardware Security Modules (HSMs): Utilizing secure enclaves or HSMs for cryptographic key management adds an extra layer of protection for sensitive data and private keys associated with validator nodes.
Formal Verification and Smart Contract Audits: For mission-critical applications, employing formal verification techniques and rigorous smart contract audits by security experts can help identify and eliminate vulnerabilities within the smart contract code.
Network Segmentation and Firewalls: Implementing network segmentation strategies and robust firewalls can further restrict unauthorized access to the blockchain network and its associated infrastructure.

By meticulously considering these intricate details and adopting a holistic approach to security, you can establish a private blockchain network that is not only scalable and performant but also demonstrably secure, fostering trust and confidence among all participants.

Examples of Private Blockchain

Private blockchains are rapidly transforming numerous industries by offering secure, transparent, and efficient solutions for data management and collaboration. Here’s a deep dive into five key spheres where private blockchains are making significant waves:

Supply Chain Management:

Challenge: Traditional supply chains are often plagued by inefficiencies, lack of transparency, and difficulty in tracking product provenance. Counterfeiting and fraud are also significant concerns.
Private Blockchain Solution: A private blockchain can create a secure, shared ledger for all participants in the supply chain — manufacturers, distributors, retailers, and even consumers. Every step of a product’s journey, from origin to final sale, can be immutably recorded on the blockchain, providing enhanced transparency and traceability. This fosters trust, streamlines logistics, and facilitates faster issue resolution. Additionally, smart contracts can automate key processes, such as triggering payments upon delivery confirmation.
Real-Life Example: Walmart’s Food Trust uses a private blockchain to track food provenance for leafy green vegetables. This allows participants to trace the origin of any contaminated product within seconds, significantly improving recall efficiency and reducing foodborne illness outbreaks.

Trade Finance:

Challenge: Trade finance is a complex and paper-intensive process prone to errors and fraud. Traditional methods can be slow and expensive, hindering global trade.
Private Blockchain Solution: Private blockchains can streamline trade finance by providing a secure platform for exchanging documents like letters of credit and invoices. Smart contracts can automate key steps in the trade finance process, such as releasing payment upon verification of shipment documents. This reduces processing times, lowers costs, and minimizes the risk of fraud.
Real-Life Example: we.trade, a consortium blockchain platform backed by major banks like HSBC and IBM, facilitates secure and efficient trade finance transactions between businesses. Here, we.trade connects businesses globally to securely exchange trade documents and manage letters of credit, reducing processing times and transaction costs.

Healthcare:

Challenge: Maintaining secure and accurate patient medical records can be a challenge in traditional healthcare systems. Data sharing between healthcare providers is often slow and cumbersome.
Private Blockchain Solution: Private blockchains can offer a secure and tamper-proof platform for storing and managing patient medical records. Authorized healthcare providers can access a patient’s complete medical history with their consent, improving care coordination and treatment decisions. Additionally, private blockchains can facilitate secure research data sharing while maintaining patient privacy.
Real-Life Example: MediBloc, a South Korean healthcare blockchain platform, allows patients to securely control their medical records and grant access to authorized healthcare providers. Patients can also choose to share specific portions of their medical data for research purposes while maintaining control over their privacy.

Government Services:

Challenge: Traditional government processes can be bureaucratic and inefficient. Citizen data management and verification can be complex and error-prone.
Private Blockchain Solution: Private blockchains can streamline government services by creating a secure and tamper-proof platform for managing citizen data. Issuing and verifying documents like birth certificates, passports, and licenses can be made more efficient and secure using blockchain technology. Additionally, secure voting systems and social welfare program management can be implemented using private blockchains.
Real-Life Example: Estonia, a leader in e-government initiatives, utilizes blockchain technology for various government services, including secure medical record management and secure digital identity verification for citizens. Estonia’s X-Road system allows secure data exchange between government agencies and authorized institutions, streamlining service delivery and citizen interactions.

Intellectual Property Management:

Challenge: Protecting intellectual property (IP) rights, such as copyrights and patents, can be challenging in the digital age. Traditional methods of IP registration and enforcement can be slow and expensive.
Private Blockchain Solution: Private blockchains can offer a secure and verifiable way to register and track intellectual property assets. The immutable nature of blockchain technology provides a tamper-proof record of ownership, facilitating efficient rights management and dispute resolution. Additionally, smart contracts can automate royalty payments for creators and content distributors.
Real-Life Example: IBM’s Blockchain Platform is being used by companies like CitizenHawk to register and manage intellectual property assets, ensuring secure ownership records and streamlined royalty distribution. CitizenHawk leverages blockchain to create a tamper-proof record of ownership for creative works, allowing creators to easily track usage and receive automated royalty payments whenever their content is distributed.

Private Blockchain Use Case

The transformative potential of private blockchains is undeniable, yet the intricacies of development can pose a significant challenge. Blaize bridges this gap, acting as a trusted advisor and expert developer for businesses seeking to harness the power of private blockchain technology. Within this section, we illuminate Blaize’s success stories through a series of compelling case studies. These diverse projects showcase Blaize’s deep technical proficiency and strategic acumen, demonstrating how private blockchains can revolutionize operations across multiple industries. By delving into these real-world applications, you will gain a comprehensive understanding of Blaize’s capabilities and the transformative power of private blockchain technology.

Architecture of Decentralized Layer for Radiologex

In the healthcare sector, Blaize spearheaded the development of a decentralized layer for Radiologex, a revolutionary platform designed to streamline and secure medical communications, data exchange, and collaboration.

This private blockchain infrastructure facilitates immediate, secure, and immutable data transactions, ensuring privacy and efficiency paramount to healthcare providers and patients. By integrating advanced cryptographic techniques and custom smart contracts, Blaize has enabled Radiologex to offer a robust, scalable platform that meets the stringent requirements of the medical industry.

Blockchain Data Hub Solution for R-DEE’s Integrated Health IT Suite

Another hallmark of Blaize’s expertise is the development of a blockchain data hub for R-DEE, integrating it with the company’s Integrated Health IT Suite. This solution leverages private blockchain technology to ensure secure data management, interoperability, and compliance with global healthcare standards. The platform supports seamless and secure data exchange across various healthcare services, enhancing patient care through improved data accuracy and availability.

Development of a Private Blockchain for a Supply Chain Platform

Blaize partnered with a client (under NDA) to develop a revolutionary private blockchain platform for supply chain management. This platform initially focused on cargo tracking and internal status changes tracking via IoT but could be adapted to other industries.

It offered several key functionalities:

Real-time product lifecycle tracking: This allowed users to monitor product movement from production facilities to final delivery, ensuring transparency and efficiency.
IoT data integration: Sensors and other devices would gather data on product conditions throughout the journey, providing valuable insights and ensuring cargo integrity.
Detailed product metadata storage: The platform stored crucial information about each product and its suppliers, facilitating easy access and retrieval.

To achieve these goals, Blaize built a complex system including a private blockchain, an SDK for integrating IoT data, a tiered masternode system for data management, and a specialized development team with expertise in blockchain, smart contracts, and web development.

Working With Blaize for Private Blockchain Development

Blaize specializes in crafting bespoke private blockchain solutions that cater to the nuanced needs of modern businesses. Our expertise spans the entire development cycle, from ideation to deployment and beyond, ensuring that your private blockchain not only meets but exceeds business requirements.

Private blockchains offer a powerful solution, but successfully bringing them to life requires a skilled and multifaceted team. Unlike off-the-shelf software, these complex systems necessitate expertise across various technological domains.

Here’s a breakdown of the core team members who will play a critical role in your private blockchain development journey:

Blockchain Architect: Visionary leader defining the network’s architecture. Deep understanding of blockchain tech, consensus mechanisms, and distributed ledgers. Selects platform, consensus mechanism, and overall system design.
Blockchain Engineer: Technical wizards who translate the architect’s vision. Expertise in programming languages like Solidity or Go. Strong grasp of smart contract development principles and security best practices.
DevOps Engineer: Bridge between development and operations. Builds and deploys the network, ensures smooth operation, and implements automated testing and monitoring. Experience with containerization technologies like Docker and Kubernetes is a plus.
Security Expert: Identifies and mitigates vulnerabilities in smart contracts and infrastructure. Ensures adherence to blockchain security best practices.
Project Manager: Keeps the project on track, managing timelines, budgets, and resources. Facilitates communication, ensures deliverables are met, and navigates development challenges.
Business Analyst: Translates business needs into technical specifications and ensures the solution aligns with organizational goals.

By choosing Blaize, businesses can leverage our deep industry knowledge, technical expertise, and unwavering support to develop private blockchains that are secure, scalable, and strategically aligned with their goals.

Article source: Blaize blog https://blaize.tech/article-type/case-study/how-to-create-a-private-blockchain/