How Private Blockchain Systems Can Change The Way We Do Business

• By Mia Lewis
• 16-08-2021
• Blockchain

Blockchain as a group of technologies and solutions appeared almost 30 years ago, although it is also one of the most revolutionary technologies today. During this relatively short time, solutions based on a distributed ledger have appeared in every industry.

This is often referred to as the second coming of the internet and is already changing businesses worldwide. Various companies actively use blockchain technology. According to PwC, about 85% of large organizations are implementing it in their work.

The spread of this technology was facilitated primarily by the total mutual distrust of partners. The use of the blockchain excludes the possibility of making changes to the data. Therefore, the database is considered relevant at the time of access to it. Data storage takes place on different servers, changes are made in real-time, and it is impossible to falsify them.

The technology has become a tool that allows data to be stored in distributed ledgers. This allows for the maintenance of trust between the parties and eliminates corruption or human error.

Blockchain is an immutable, decentralized digital technology programmed to store transaction records for transparency and security. These records are called blocks, which are connected together using cryptography.

Each block is associated with a hash value, and each contains its own value and the value of the previous block. If any changes are made to the block, this will change the value of the hash function. This means that if someone wants to tamper with the data in one block, then they have to change the whole blockchain, which is almost impossible.

Blockchain is often aimed at ensuring equal opportunities for everyone on the network, as has been done on the Bitcoin network. But there are different types of blockchain technology that can differ in their approach. To achieve a quality result, you need to understand what type of blockchain each specific company needs.

What is Distributed Ledger Technology?

Distributed Ledger Technology (DLT) is a database that exists in multiple locations at the same time. All data is distributed, replicated, and synchronized between these locations. It does not have a centralized data store or an administrator.

The difference between distributed ledger technology and blockchain is that thу last one is essentially a type of DLT or digital ledger. Blockchain basically adds an additional set of features to distributed ledger technology. All data is shared among all participants in the blockchain and protected with a cryptographic signature called a hash. This makes the information stored on the blockchain unchanged, which improves security and integrity. Check a more detailed explanation of blockchain vs DLT here.

Blockchain is divided into private and public types. Both categories are decentralized P2P networks, which ensure that the stored data remains unchanged. Both types of blockchain guarantee a high level of security since data can be added to the ledger, but information cannot be changed or deleted. Despite the similarities, private and public types differ significantly in terms of the access rules for members.

Public blockchain

Public blockchains are open source solutions and allow anybody to participate as developers, miners, or users without restriction. Public blockchains do not provide for any division by access levels, and all users have the same capabilities and rights.

In a public blockchain, records are completely transparent, which means that anyone can view all recorded information about transactions. The most striking example of a public blockchain is Bitcoin, which can be freely used.

The public blockchain makes it possible to verify and clarify any information, helping to fight fraud and corruption. Here more participants can confirm transactions. At the same time, a high number of confirmations makes the chain more secure.

But the public blockchain has its drawbacks. The main cons of this type of blockchain are that transactions are slow compared to a private ledger. The number of transactions in each block is limited, and huge computing power is spent on their completion. In addition, the excessive openness of the public blockchain may become a disadvantage for some companies since there is no privacy due to the available transaction history.

Private or Permissioned Blockchain

A private blockchain is a decentralized network with limited reading and writing access, providing a consensus algorithm that supports a predetermined number of nodes. Permissioned blockchains impose certain privacy rules. For example, users require consent before participating in the network.

All transactions remain confidential to the outside world and are only available to people within the ecosystem. To become a member of such a blockchain, the user needs an invitation. Further, the invitation is approved by the creator, moderator of the network, or other participants. At the same time, only their direct participants have access to transactions.

One of the most important features of a private blockchain is that there is no need for a proof-of-work algorithm. It should only be used as needed to simplify auditing and improve network security. In this regard, the trust of network participants is not based on trust in a single center but is based on rigorous mathematical algorithms.

The private blockchain has a high transaction speed, so the number of transactions in the block increases. Also, there are no problems with its scalability in a private blockchain, regulations are much easier to enforce, and companies receive complete privacy.

The cons of a private blockchain are that it often does not have a high level of trust due to sensitive information that is difficult to access. Fraudulent transactions can go unnoticed, and some data can be changed. In addition, in such a blockchain, a security problem may arise, since due to the small number of participants, the risk of attacks on the registry increases.

There are also hybrid blockchain options that offer the perfect blend of privacy and transparency using both private and public blockchain features. This option is most popular with companies because it allows them to control which data is made public and which is kept confidential.

Practical Application of Private or Permissioned Blockchain

Most blockchain applications have nothing to do with virtual money today. Blockchain technologies are spreading to various industries. They have gone beyond banking and the cryptocurrency segment.

Under the influence of blockchain technologies, cloud computing industries are changing: auto-sharing, energy, online advertising, education, forecasting, property rights, and entertainment.

- BitShare network, which provides for a certain number of validators, each of which has its own private and public key. In the process of forming the next block, the sequence is observed. Therefore, if one of the nodes did not have time in the allotted time period, then it skips the cycle. Thus, you can determine who created the next block by the corresponding entry in its header.

- Mijin has a platform that allows you to create private blockchains. The system emerged as a fork of the NEM digital coin in 2015. Mijin provides the ability to create new systems that can replace existing databases. Usage of the Mijin power allows businesses to lower their costs by increasing the level of data security.

- Hyperledger is a project that aims to develop public and private distributed ledgers for companies of various levels. First of all, according to the development team, it is advisable to use such registers in the banking sector, the Internet of Things (IoT), manufacturing, and insurance.

- Spotify is a streaming service that lets you listen to music online. The company previously announced its acquisition of blockchain startup Mediachain Labs. Mediachain technologies help artists, and copyright holders better understand how their content is used on Spotify. The company has developed a decentralized database that combines applications and content and allows the direct sale of content using cryptocurrency.

- In the dating industry - Matchpool is a decentralized dating protocol that uses group dynamics to help members find new friends of interest. For example, online dating services, as well as Uber and Airbnb.

- In the car industry, this is Bitcar, which is a blockchain-based service that allows users to trade in expensive and exclusive cars.

- Use in data protection. Accenture owns an editable blockchain patent that allows users to modify data in the event of error or fraud.

- Online giant Alibaba is testing a blockchain program to help detect counterfeit food. Their initiative is called the Food Trust Framework and is a practical application of blockchain technology in the food industry.

- In the supply chain, an example of a blockchain application is the Morpheus Network SaaS platform, which provides participants in the supply chain with a wide range of functionality that fits their work. Smart contracts integrated into the platform automate the work with traditional contracts, transport, and customs papers and automate international payments in more than 1600 banks around the world.

- International payments are one of the most illustrative examples of the use of blockchain technology. The successful use of payment networks and protocols such as Stellar, Ripple, and the IBM Blockchain World Wire shows how well blockchain is suited to the finance industry. Blockchain platforms allow international transactions to be carried out almost instantly and with low fees due to the absence of the need for participants to contact any intermediaries, such as banks.

- In turn, banks and financial institutions can also improve the efficiency of their internal work due to the transition to decentralized systems within the bank between its various divisions and independent counterparties. This will help speed up payments and secure workflow, as well as increase trust between participants.

This Is How Blockchain Technology Is Changing Business

In a world that is changing right now before our eyes, blockchain solutions are also changing the way we do business in all sectors of the economy. Today, it even helps to fight the coronavirus COVID-19 because it is used to store and analyze research data with the MiPasa project from IBM.

The fields of insurance, oil, ships, gemstones, medicine, and many others are starting to adopt blockchain-based solutions. There are practically no limits to the use of private blockchain, which is already changing many industries.

To introduce automation for your business processes and increase workflow efficiency, with the assistance of blockchain technology, you can

- verify the data, having them non-disclosed;
- do the approval of the reports just as all the responsive managers gives their permissions;
- provide the access to commercial information to the verified members without compromising any passwords;
- decrease the routine operations and speed up the decision-making by implementing the agreement with the several representatives’ approval instead of long discussions on the board.

To leverage your business with the DLT, first of all, think about the bottlenecks of your management processes, discuss the problems with the development team, and let them streamline the processes.

Do not stay away from what is happening because no one can do it. If you are not moving forward, then you are rolling backwards. Start taking advantage of private or permissioned blockchain as early as possible and take the lead among your competitors. We are ready to help you with this.