An Introduction to Private Blockchain
Have you heard about the term private blockchain? Do you know why private blockchains are preferred? If not, then you are landed at the right spot. Here you will get information about private blockchain along with its advantages.
Blockchain is based on the distributed ledger, which has been at the enterprise level for so long. However, they have recently become popular in the eyes of the public because of cryptocurrency. Depending on the configuration of the blockchain, one can access the data available in the blockchain.
Usually, blockchain is created for a specific purpose where users can access multiple data. But there are private blockchains where permission is given only to limited users. Private Blockchain is catching numerous eyes these days. Several organizations and even startups plan to move their businesses to blockchain networks.
In this blog, you will find information about a private blockchain, its features, examples, and the difference between a private and a public blockchain.
Contents
- A brief introduction to Blockchain
- What is a Private Blockchain?
- Public Blockchain vs Private Blockchain
- Private Blockchain vs Centralized Database
- Features
- Pros and Cons
A brief introduction to Blockchain
Blockchain is a decentralized and distributed database. In short, it’s a public ledger that records transactions among parties.
- Blockchain is a peer-to-peer (P2P) distributed network that connects participants/nodes.
- Blockchain is decentralized. No central point of authority in the network.
- Here, Each node has the exact same copy of the network’s transaction records.
- Every network update needs a global network agreement (consensus).
- Blockchain utilizes a consensus mechanism to synchronize the nodes, network updates, and transaction verification.
For more information, read: How does Blockchain work?
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What is a Private Blockchain?
Private blockchains (or Permissioned) are created and maintained by private organizations. Here, the creators have access control over mining rights and the consensus algorithm followed by the private blockchain network. These are the distributed network with private control. In addition, they follow cryptography, digital signing, and consensus mechanisms to synchronize and secure the network.
Unlike Public or permissionless blockchains, private blockchains have several fixed participants, and no one can join without an invitation.
Moreover, it has several significant use cases in domains such as Financial Services, Healthcare, Government Services, Retail, Insurance, Real Estate, Supply Chain, and many more.
Examples of Private blockchains are Hyperledger, Ethereum Enterprise, R3 Corda, Ripple, and many more.
Features of Private Blockchain
Below are the features of a private blockchain network:
- Read and Write participation by selected individuals
- No outside participation allowed
- Distributed yet not completely decentralized
- Highly Scalable
- Efficient and Robust
- Peer-to-Peer Transactions
- High transaction speed and low transaction costs
- Easy to review and audit
- Protect against illegal usage
Public Blockchain vs Private Blockchain
Following are the differences between public and private blockchains:
| Public Blockchain | Private Blockchain |
| Decentralized | Comparatively less centralized |
| Permissionless – Non-network participants can also read, write and participate in the Public Blockchain network. | Permissioned – Only network participants and invite-only authorized candidates can avail to participate, read and write in a Private Blockchain network. |
| In a public blockchain network, participants are usually strangers to each other. | In private blockchain networks, participants or organizations are known to each other. |
| Each participant has equal power in the network. Hence, distributed control. | Only a few participants have full access to all services and decision-making. |
| Transaction speed is slower, comparatively. | Transaction speed is faster. |
| Transaction cost is higher in public blockchains. | Transaction costs are lower in a private blockchain. |
| Hard to become more scalable | Easy scalability |
| Comparatively, lower efficiency. | High-efficiency |
| High security, privacy, and never go down due to complete decentralization. | Comparatively, it lower security and privacy. |
| Consensus mechanisms used in Public Blockchain – Proof of Work (PoW), Proof of Stake (PoS), Proof of Capacity (PoC), etc. | Consensus mechanisms used in Private Blockchain – proof of elapsed time (PoET), Byzantine Fault Tolerance (BFT). |
| Native cryptocurrencies, and Tokens | No cryptocurrency but can create tokens. |
| Ex: Bitcoin, Ethereum, Litecoin, etc. | Ex: Hyperledger, Corda, Ripple, etc. |
Private Blockchain vs Centralized Database
One question always pops up while discussing private blockchains, if blockchain can be private or centralized, then what’s wrong with traditional databases? Let’s see precisely how private blockchains are different from centralized databases?
Following are the major differences:
| Private Blockchain | Database |
| Partially Decentralized | Completely centralized |
| Follows the peer-to-peer (P2P) model | Follows client-server model |
| Comparatively, expensive | Cheaper than blockchain |
| Fast performance | Faster than Blockchain |
| Eliminates middle party for transactions | Includes third party (Banks, etc) for transactions |
| Allows participants only to read and write on a blockchain database. | Follows CRUD (Create, Read, Update and Delete) for data handling by DBMS Administrator. |
| Ex: Hyperledger, Corda, Ripple, etc. | Ex: MySQL, Oracle, MongoDB, etc. |
Pros and Cons of Private Blockchain
Pros
- Offers privacy with blockchain decentralization benefits
- High performance with low transaction expense
- High transaction speed
- Scalable
- Less Volatile network
- Organization Empowerment
- Robust Network regulations
Cons
- Permissioned (Invite-only). No public access
- Not complete decentralization
- Security concerns
- Partial Data integrity
In Conclusion
Permissioned blockchains have their own use cases and applications. It is more inclined toward private organizational needs with security. Hope you learned from reading this article. Do share your comments and queries in the link below.
Check out: Blockchain Interview Questions
FAQs
What are Consensus Mechanisms?
It helps the network to keep synchronized. Itu2019s a state of agreement where all the network participants decide on a network update.
What is Public Blockchain?
Public blockchain as the name suggests is open-source, public, and permissionless. Anyone can read, write and participate in public blockchain networks.
What is Private Blockchain?
Private blockchains are closed, trusted, and permissioned system that stays among a few institutions which donu2019t allow external members.
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