If you have heard of bitcoin then you are familiar with blockchain. Blockchain is technology that makes bitcoin work, and naturally like any business there is a public and a private side to blockchain. Blockchain technology remains the same on both sides in that; both operate on a peer to peer network.  All information on the chain is contained in all blocks on the blockchain via replication. Both of them use a protocol called consensus to sync up the blocks on the blockchain (Jayachandran, 2017). The private and public block chains maintain the same level of security meaning that information stays accurate by way of confirmation with all blocks in the blockchain.

While they may be similar in some cases, there are differences between private and public blockchain. The main difference is that public block chain is accessible to everyone, meaning it allows all users and entities to validate and participates in the consensus process. Private Blockchain is not accessible to all; it requires that the person joining the blockchain have a special invitation. Joining the private blockchain requires one to have validation from the person who started the blockchain, or follow a set of rules until he or she is validated. For a public blockchain, you join without having to go through any validation whatsoever. A good example of a private block chain where validation is given by following a set of rules is the Hyperledger fabric hosted by the Linux Foundation (Jayachandran, 2017). Public blockchain removes the middle man in a transaction while private blockchain lets the middle man in to a certain extent. Public blockchain only allows a transaction to move forward after it has been validated by all blocks on the block chain (Thompson, 2016). This makes transactions happen at a slower rate compared to private blockchain, where transactions can be validated by the starter of the blockchain.

Let us explore how private blockchain can be beneficial to organizations

Security

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When dealing with the internet, security is an issue that will always be a challenge. Highly sophisticated security systems can be put in place but absolute safety is never a guarantee. However, a major upside to a private blockchain is if the organization was hacked, they would know where to start looking for the perpetrator, since the number of people on the blockchain is limited and the person would need an invitation (special permission to gain access) (Buterin, 2015). Access to the blockchain is permission based, therefore, only those deemed as trustworthy can participate in the validation and consensus process. This makes customers trust an organization with this kind of a blockchain more.

There is information that cannot be shared with the public for example weapon schematic designs which in the wrong hands might prove disastrous for the public domain. This kind of information is the kind that is supposed to be on a private blockchain due to its limited access.

Fast and Cheap Services

Private block chain ensures fast delivery of services since the number of validators is lower compared to public blockchain which has a high number of validators. A high number of validators also mean that the service being delivered is expensive. Private block chain provides a solution to this problem just by having fewer trusted validators (Kohut, 2017). It has a steady and controlled transaction flow, which means convenience for the customers being served.

Change Transactions

Imagine that you have bought a property, but even if you have paid in full, the property could not be under your name because the system could not change the name of the person to whom the property originally belonged to and the cash is not refundable. This is an example of a problem that may arise if all our systems were on a public blockchain. There would be no transfer of property. A private block chain allows information on the block chain to change and this works well for example for banks (Buterin, 2015). It works well since information in a bank is constantly changing. It would allow banks to change information on an account based on how the owner of the account is using his or her account.

Discretion

Public block chains allow persons to join them without invitations therefore information is available to any person that is on the blockchain. Private Block chain requires permission therefore the number of persons who have access to the information on the blockchain is limited. This brings an element of privacy therefore it is convenient for organizations that want to maintain the element of privacy for their clients. This works well with law firms who need to maintain attorney client privilege and hospitals for patient confidentiality.

The law

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Private block chain allows institutions which are regulated by certain laws to still enjoy the privileges of a blackchain. This mostly applies to institutions that are bound by confidentiality laws. Examples of such institutes include law firms, hospitals, security agencies and some research institutes. There have been allegations that cryptocurrency on public blackchain such as bitcoin have been used for illegal purposes, like money laundry, purchase of illegal firearms and so on. This has been possible because public blockchain is unregulated (Demush, 2017). However, a solution to this problem is provided in private block chain since the starter of the blockchain can set rules that comply with protocols such as AML (Anti- Money Laundering) and KYC (Know Your Customer).

In conclusion, Private block chain is growing and will continue to grow. I, therefore, recommend that institutions that want to venture into the blockchain business consider private blockchain. This will attract customers who want to feel that their information is safe and protected. It will attract customers that value convenience as well as cost effective services. If there is still any doubt left about private blockchain, then Microsoft investing in a private blockchain should be a pretty good indicator that private blockchain is here to stay.

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References

Buterin, V. (2015, August 7). Ehtereum Blog. Retrieved from On private and Public blockchains: https://blog.ethereum.org/2015/08/07/on-pub

Demush, R. (2017, july 27). Perfectial. Retrieved from How Companies Can Leverage Private Blockchains to Improve Efficiency and Streamline Business Process: https://perfectial.com/blog/leveraging-private-blockchain

Jayachandran, P. (2017, May 31). IBM. Retrieved from Blockchain Unleashed: IBM Blockchain Blog: https://www.ibm.com/blogs/blockchain/2017/05/the-difference-between-public-and-private-blockchain/

Kohut, I. (2017, September 28). How Companies Can Leverage Private Blockchains to Improve Efficiency and Streamline Business Processes. Retrieved from perfectial: https://perfectial.com/blog/leveraging-private-blockchains-improve-efficiency-streamline-business-processes/

Thompson, C. (2016, October 26). Blockchain Daily News. Retrieved from The difference between a Private, Public & Consortium Blockchain.: https://www.blockchaindailynews.com/The-difference-between-a-Private-Public-Consortium-Blockchain_