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Private Blockchain Meaning

Dec 27, 2023 | Updated Dec 27, 2023
A private blockchain is a type of blockchain owned or controlled by a single entity. Access to it is restricted to specific users.

What is a Private Blockchain?

A private blockchain, also known as a “trusted” or “permissioned” blockchain, is a closed network that is accessible to authorized or select verified users only. They are often owned by companies or organizations, who use them to manage sensitive data and internal information. The owners have the privilege to edit, add, override, or delete records on the blockchain as they see fit. As such, only a handful of people are authorized to access information on the blockchain. 

Now that they are owned by a central entity, how are they still blockchain networks?

The logic behind trusted networks is to maintain information privacy, either for competitive or regulatory reasons. Hence, private networks are centralized but distributed, where participating nodes maintain a copy of the blockchain. Since they only cater for a few users, only a few nodes manage the blockchain’s security as compared to public blockchains. This means that it has a limited number of validators or miners to confirm transactions. It also implies that only a few nodes receive, submit, propagate, and verify communications within the permissioned environment.

Simply put, trusted blockchains are designed to meet organization-specific tasks and needs. They prioritize achieving immutability and efficiency and focus less on promoting transparency and protecting user identities. And since only a few individuals can access it, it provides a high level of discretion and privacy. However, they are less secure than blockchains with a massive number of participating nodes. This is because the entire model relies on trust, which makes them susceptible to data leaks and breaches. 

While the limited number of validators required to achieve a consensus makes transaction processing faster and reduces delays and network congestion, it also makes them targets for malicious attacks, such as the 51% attack.

Permissioned Vs Permissionless Blockchain

Some of the differences between the two include:

  • Public blockchains are permissionless and trustless, enabling universal access, while private networks rely on trust and permission to participate.
  • Transaction processing in public networks is much slower when compared to private networks. This is because it may involve competition among many participants to win the opportunity to validate transactions. Permissioned networks can simply appoint validators to validate transactions.
  • Public blockchains are highly transparent, allowing anyone to view transactions and participants’ addresses, while private blockchains maintain high levels of privacy.

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