Private blockchains have a few crucial differences from public blockchains, which begs the question: why not use a database? We examine both sides.
Bitcoin uses a public blockchain, where anybody can be a node and all data is publicly accessible. All transactions ever made since the genesis block are available to look at using a block explorer.
Read more about public blockchains here.
A business may want to use a blockchain but it might not want all its data publicly accessible. A public blockchain could breach data protection acts or give away business secrets.
Public blockchains carry risks because the miners could collaborate and alter the blockchain. This is known as a 51% attack. This could be damaging for a business if it held assets on it and they were deleted or stolen.
Did you know?
Ethereum miners altered the blockchain following the DAO hack in order to rewrite history so it never happened. Some felt this broke the immutable principle and decided to continue using the old chain, now called Ethereum Classic.
A private blockchain is a distributed ledger that is controlled by a single entity. The owner controls access to the blockchain. This means they select who can mine it, who can use it and who can see it.
They are sometimes called permissioned blockchains.
Private blockchains have many advantages, primarily for business use-cases. These include:
Private blockchains are not without their critics. Here are some issues:
Private blockchains have several advantages over databases for specific use-cases:
The Linux Foundation’s Hyperledger Fabric is a permission blockchain framework. It is an open source protocol used by the IBM Blockchain Platform and others in delivering blockchain-for-businesses services.
Read more about Hyperledger here.
Blockchain consortium R3 has developed Corda Enterprise. It’s used in industries from financial services to healthcare and insurance. It has support for oracles.
Private blockchains could be used to track a product across its entire supply chain, across several different companies. This could enable much safer product creation as it allows for greater oversight over the whole process.
They could also be used for a global finance payments system, as IBM hopes with its Blockchain World Wire which runs a private blockchain on the Stellar platform. This would enable much cheaper and faster cross-border payments. This can be done using public blockchains but businesses may require the greater control and oversight that private blockchains offer.