Some Thoughts About Private Blockchains

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In recent months, private blockchains have emerged as one of the most popular trends within the blockchain ecosystem. The challenges in the existing bitoin’s blockchain infrastructure as well as the rapid raise of movements like the blockchain as a service (BaaS) have contributed to the relevance of the private blockchain movement. Additionally, new software and services companies that are focusing exclusively in the implementation of private blockchain solutions.

While there are many arguments in favor of private blockchain models, there are no lack of detractors. The public vs. private blockchain debate is certainly one of the most interesting developments in the current blockchain community. From that perspective, the adoption of blockchain technologies can be categorized in three main groups:

· Public Blockchains: A public blockchain is open for read access to any application. In general, public blockchains are considered to be fully decentralized. The most notorious example of this model is the blockchain that powers the bitcoin crypto-currency.

· Private Blockchains: A private blockchain restricts the write permissions to a single organization and read permissions to an authorized group of third parties.

· Consortium Blockchains: A consortium blockchain is a blockchain infrastructure controlled by a set of nodes or organizations. This model is becoming a favorite in highly regulated industries such as finance or healthcare.

In some scenarios, consortium blockchains can be seen as a specific type of private blockchains. Undoubtedly, both models are attempts to address the limitations of the public blockchain. While these blockchain models have many apparent benefits, they also introduce plenty of challenges. Many detractors of the private blockchain model often compare it with the private network models that predated the emergence of the internet. In any case, there are plenty of arguments in favor or against the private blockchain movement. Instead of fueling this debate, I thought it would be interesting to summarize some observations about private blockchains that are relevant in the current state of the market.

Infrastructure and Development Platforms for Private Blockchains is Growing Faster

The private blockchain ecosystem is currently experience an explosion in the number of tools, frameworks and complete platforms that enable the implementation of blockchain-powered applications. From that perspective, the experience for developers building applications for private blockchains is very sophisticated compared to the public blockchain model.

Industry and Consumer Solutions are Growing Faster in the Public Blockchain

Most of the successful consumer and B2C solutions powered by the blockchain are currently relying in public models. Some examples might include decentralized eCommerce platform OpenBazaar or blockchain-base remittance app Abra. This type of solutions has helped to test public blockchains in highly scalable industry scenarios.

BaaS is Helping the Development of Private Blockchains

The BaaS model has been a tremendous validation of the private blockchain ecosystem. With companies like Microsoft, IBM and Amazon launching BaaS initiatives, millions of developers can now leverage private blockchain infrastructures in their favorite cloud platform. More importantly, BaaS provides the private blockchain with a most needed scalable and global infrastructure.

Fragmentation is a Challenge for Private Blockchains

There are more private blockchains that we can keep track of. That level of fragmentation is hurting the portability and interoperability of blockchain solutions. Not to mention that selecting a private blockchain platform is becoming a nightmare for most organizations.

Private Blockchains are Simpler to Verticalize

Private and consortium blockchain are a more popular option to build industry specific solutions. From that perspective, private blockchains are easier to extend and customize to support standards or specific components required in industry solutions.

Private Blockchains Haven’t been Battletested

Despite its recent popularity, private blockchains haven’t been tested in highly scale applications like bitcoin. From that perspective, the private blockchain model still needs a few year of evolution before it can process a volume of transactions compared to the public blockchain. However, is not crazy to think that public blockchains will remain a favorite of consumer or B2C solutions while private blockchains will be mostly adopted in industry specific or private enterprise

Written by

CEO of IntoTheBlock, Chief Scientist at Invector Labs, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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