Benefits of Private Blockchain Networks

By Nick Roquefort-Villeneuve, Global Marketing Director – Amalto Technologies 

Amalto: Benefits of Private BlockchainBlockchain is about eliminating intermediaries by powering a peer-to-peer ecosystem, where data is validated by participants to the network, whoever and wherever they are. Blockchain is about decentralization, since each partaker has authority over his or her own node, which infers that there isn’t a single authority or a central point of control. Now, most B2B use cases that pertain to Blockchain technology are about the construction of a private or permissioned network. How does a private or permissioned Blockchain actually work?

Private Blockchain in a Nutshell

As opposed to public Blockchains, private Blockchains are… private and permission-based. This notion infers that an entity or organization must be invited to become part of the private network. Private Blockchains are perfect for creating a closed B2B transactional ecosystem among a few customers who evolve inside a same vertical and their suppliers.

Let’s take the example of Ondiflo. Ondiflo has built a layer of privacy around Ethereum to build a private Blockchain for selected operators in the Oil and Gas industry, so they and their suppliers can benefit from the functionalities Blockchain technology offers (transparency, security) to transact seamlessly with one another. In other words, Ondiflo acts as a Blockchain gateway and manages the private and permissioned aspect of the network. What does this mean? Managing the private aspect of the network signifies that Ondiflo controls who can participate to the ecosystem. Managing the permissioned part of the network infers that Ondiflo engages in what we can refer to as “controlled visibility.” Ondiflo indeed validates the communication between the different parties and their ability to access and update specific instances of smart contracts. To summarize, on the private Blockchain network, only certain companies can participate. And within that network, a given participant can only see a given instance of a smart contract.

Advantages of Private Blockchains

The entity that acts as Blockchain gateway controls the access to the network as well as the participants’ visibility. The former form of control infers faster transactions. Private Blockchains have much less nodes than their public counterparts, therefore the performance is faster. The latter form of control allows partakers to transact seamlessly, without running the risk of having a competitor access or make sense of their data. Participants are indeed granted permissions to access certain types of data and complete specific functions, which certainly adds an extra security layer.

Generally, private Blockchain networks start on a small scale, with only a few participants. Naturally, the goal is to expand the ecosystem by including more trading partners and their respective node over time. The smaller size of a private Blockchain compared to a public Blockchain network offers two main advantages in terms of manageability: downtimes are reduced while uptimes are maximized, and scalability is facilitated. It is indeed unlikely that large groups of participants be included at once.

To Conclude…

To build a private Blockchain goes far beyond the realms of selecting a platform of reference and coding. This is still a new technology and developers always end up being confronted to major obstacles, simply because the technology doesn’t have a response to all those questions and concerns participants raise along the way. For example, how can participating entities get the assurance that their existing systems and data won’t be compromised by the implementation of a private Blockchain? This is a concern our partners at Ondiflo have signaled to us, and which has forced our developers to build applications off the chain that bring sustainable solutions.