What is a Private Blockchain? Beginner’s Guide


This article will cover all the fundamentals of private blockchain technology and dissect how it works.

When we are talking about the blockchain technology, we always hear one thing in every single article – it’s decentralized. We at times think it’s a major movement against the money-hungry corporations. But is it though? Maybe you are not familiar with the term – private blockchain.

It’s time you dig a bit deeper into the world. We all have heard the name of Satoshi Nakamoto. He is the mysterious figure behind the cryptocurrency world. No one is sure if Satoshi is a boy, a girl or an organization. Though we the common people always credit Satoshi for creating Bitcoin, his greatest ever innovation is the blockchain.

Blockchain technology can simply be identified as a single digital ledger where all the transactions within a cryptocurrency ecosystem are recorded. Here the system keeps all the transaction in a chronological order and open for public eyes.

But not all the blockchains are the same. There are public blockchains and the private blockchains. However, both are decentralized, still, they have a fundamental difference.

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What is Private Blockchain?

Private blockchain is developed and maintained by a private organization who has the authority over the mining process and consensus algorithm. The private organization decides who can join the network and have the access download the nodes.

Yeah, it doesn’t sound so decentralized now! No one can read, write or audit the blockchain anytime. Moreover, the governing organization can override the blockchain command or delete whenever they please!

Rather than calling it a public ledger, you should call it a “distributed ledger” which is shared with its chosen users.

Yes, the ledger is still cryptographic and no one can keep an eye on your money. So, the basic purpose is still the same.

One of the private blockchain examples is Ripple platform.

private blockchain

Some Notable Characteristics

  • Only selected individuals or entities have right to view the nodes of the network.
  • Mining opportunity is not public. Some cryptocurrencies are even pre-mined!
  • Review and auditing rights are reserved for selected persons only.
  • Decentralized and allows P2P transactions.
  • They are mostly immutable.

Why Use Private Blockchain?

The blockchain technology is simply out of the world. The technology shows potential to change the very world as we know it. The traditional financial system may crumble as it fixes all the flaws in it.

Understanding the limitless potential of the system, many corporate giants took a keen interest in the tech. Companies like Microsoft, IBM, Alibaba and so on have been actively investing in the technology.

So, what does it mean? Do you fear that the corporates will destroy the integrity of the whole concept of the decentralized currency?

Well, no actually. In fact, a lot of the flaws of the public blockchains get resolved. So, let’s see what are private blockchain use cases.

Want to learn more about the use cases? Here’s a guide to companies using blockchain technology to get you started.

Not a Power Killer!

We all know, mining bitcoins takes an unimaginable amount of processing power. Thus, it consumes a great amount of power. As the private blockchains provide pre-mined coins, we can call it energy efficient compared to the public.

Less Volatile

You will find lots of videos on YouTube, saying that Bitcoins are risky business. Well, it actually is! No one can predict if the price will skyrocket or bite the dust. Owning organizations regulate the private blockchains on a daily basis and that’s why it’s less volatile.

Work Together for Betterment

A lot of these private ones allow users to work side by side with the banks and financial agencies. This makes the technology more practical and usable. Why should you quarrel if you can be friends with the system?

No Illegal Activity

The best part about private blockchain is that it doesn’t have any possibility of allowing criminal activities. The issue is Bitcoin is a popular platform, but it’s also responsible for any illegal activities.

Thus, it has a bad reputation. But private blockchains are very selective. As a result, the only authorized person can enter the platform, which limits criminals.

Empowering Enterprise Companies

Usually, the private network is for empowering enterprise companies. It focuses on the overall benefits of an organization rather than focusing on individuals. Thus, it’s evident that it will ensure increased revenues and increase the overall growth of a company. It can also help in developing enterprise blockchain platforms.

Public Vs Private Blockchain

There’s always a debate on which one is the best – private or public blockchain. In reality, neither is good or bad for any particular reason. There are different types of blockchain technology and all are suited for different purposes.

But to calm your minds, let’s see the comparison of Public Vs Private Blockchain.

 Public BlockchainPrivate Blockchain
AccessAnyoneSingle Organization
AuthorityDecentralizedPartially decentralized
Transaction SpeedSlowFast
ConsensusPermissionlessPermissioned
Transaction CostHighLow
Data HandlingRead and Write access for anyoneRead and Write access for a single organization
ImmutabilityFullPartial
EfficiencyLowHigh

The Final Idea

So? Did you get the basic understanding of the private blockchains? Although the idea derails from the basic ideology of the cryptocurrency, it is still more practical. Its less volatile nature makes it more desirable for common users who want use the platform for daily activities like paying utility bills and more.

If you interested about blockchain and want to understand how these various types of blockchain comes into play, then we recommend starting with our free fundamental course.


About Author

An engineer, a gadget-freak, and a perfection fanatic – the ideal combination of a tech-nerd! This Enterprise Blockchain Analyst seems to have an unfathomable interest in blockchains, which makes him perfect for sharing his new discoveries on 101 Blockchains.

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