Is A Private Blockchain the way to go?

 In Blockchain, Technology & Design

Blockchain are certain to disrupt almost all industries fundamentally. Though there are technical issues, the idea of utilizing a blockchain to prove ownership, to prevent double spending and to establish trust and transactions in an otherwise trust-deficient world, is gaining excitement and acceptance. More and more enterprises are getting curious about the blockchain and are willing to start investing in learning, prototyping, and building on top of the blockchain technology.

Starting out with the blockchain requires investment in a building the domain expertise, establishing the identity, establishing the infrastructure and deciding the blockchain that the enterprise wants to work with.

Among these decisions is the question: Should the enterprise choose a public blockchain or a private blockchain. Both have advantages and disadvantages and the question can often come down to what are the short term goals and potential applications that the enterprise wants to build on the blockchain.

Public BlockChains

The default option when considering blockchains is the public blockchain. This is the blockchain that is truly decentralized, leverageable for any type of transaction and in the case of the Ethereum blockchain, offers SmartContract authoring capability that makes the blockchain very attractive for building contracts that reflect the needs of the real world.  However, for an enterprise deciding between public or private contracts, there are some considerations that require attention.

Speed and Scalability

Public blockchains tend to be slower as they are limited by the number of transactions that can be verified every second and confirmed every 10 minutes. There are several efforts underway to make blockchains faster and more scalable however those will take time to get implemented. Speed and scalability will continue to be an issue and contracts and applications that require instant or near real time execution will suffer from this lack of speed and scale.


Certain enterprise scenarios require secrecy and public blockchains are completely transparent and make all details of every transaction recorded in the blockchain visible. Even though the identity of the enterprise participating in the transactions is not public as every entity or party is identified by a unique identity protected only by a password that the enterprise maintains, the transaction details can be used to determine not only the identity but also transacting behavior. This can be unacceptable for certain enterprises for a subset of their transactions.

No Central Authority

Because Blockchains are completely decentralized, there is no single company, developer, team etc. responsible to define the roadmap, make the design and architecture choices and maintain the code base. In addition, the “miner” nodes that verify transactions on the public blockchain seem to be getting concentrated in China thereby increasing the potential of hacking attacks or collusion that can delay or change how the blockchain and its distributed ledger is updated.

Private Blockchains

Private blockchains can be a very attractive option for enterprises looking to leverage distributed ledger technology but doing so in an environment that they can scale and support, have more control on the software and be satisfied with the confidentiality and secrecy they need for their smart contracts and other blockchain applications.

Ideal for Two Party or Multi-Party Contracts

Private Blockchains are ideal for two or multi party contracts where two or more enterprises need to transact in a secure manner without delays in settlement, processing and the cost involved with supporting these transactions or arbitrating any breaches of contract. A private blockchain with each enterprise as a party can be used to setup smart contracts that execute when certain conditions are met and ensures that the transactions are verified instantly by each participating party to everyone’s satisfaction.

A Replacement For Database Copies

Private blockchains provide a solution for encrypted, shared data stores that otherwise can prove too expensive, risky and brittle to setup especially when the copy of the database needs to be on a different network architecture, outside of an enterprise’s network or requires data to be transferred over the public internet. Private blockchains can make it much easier to securely share the master copy of the data instantly across multiple networks.

Instant Visibility for Audit, Compliance and Regulatory Processing

Private blockchains have a very strong benefit in their ability to easily enable another internal or third party to quickly become a party on the blockchain to not only be able to audit and check for compliance across all transactions but also potentially as a verified or approver of a transaction often done so programmatically. This ensures that checks such as for Know Your Customer (KYC), Anti-Money Laundering (AML), various government regulations can be encoded as smart contracts in the blockchain, customized for the enterprise’s needs and deployed to auto execute with required minimal intervention.

Private blockchains offer several advantages in terms of speed, scale, flexibility etc that can be hard to achieve on the public blockchain while offering a faster go to market with blockchain applications even if the ulitimate goal for the enterprise to be to transact on the public blockchain. Private blockchains can be considered as a production quality, equivalents of the public blockchains or as a sandbox/test environments as a launchpad for migrating to public blockchains. 

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