Public blockchains , such as Bitcoin and Ethereum, are not always the most convenient option . If you have concerns about anonymity, privacy, and the cost of using intensive cryptography, a private blockchain network may be the best solution.
Although Bitcoin is on everyone’s lips, at Wolox we know that blockchain technology goes far beyond cryptocurrencies. This secure way to send assets is ideal for eliminating middlemen and reducing costs.
The main advantage of a private blockchain is the possibility of sharing a database between several organizations that do not necessarily trust each other. To avoid delegating that power to an intermediary, a secure system is needed that guarantees each transaction.
Being a decentralized peer-to-peer or P2P network, blockchain technology is presented as an intelligent solution. Each organization has a replica of the shared ledger or accounting book where digitally signed transactions appear. The replicas are kept on the network and kept synchronized thanks to a general consensus based on a protocol ( proof of work, proof of stake , etc.). Even if there were participants with bad intentions, the inalterability of the book is guaranteed by the network. Thanks to this system, the blockchain represents a great solution to optimize transactions between various organizations.
The public blockchain under the magnifying glass
However, blockchain technology often cannot be used in public networks due to certain problems:
- Scalability: Networks like Bitcoin or Ethereum are still far from being able to satisfy a demand of hundreds or thousands of transactions per second.
- The cost: In the case of microtransactions, storing large amounts of data, or very complex smart contracts, the cost of each transaction with Bitcoin or Ethereum can be prohibitive.
- Price volatility: The cost of transactions depends on how many people are on the network. Additionally, it is difficult to determine future costs and service availability.
- Anonymity: Although transactions on public networks are anonymous, it is possible (although complex) to associate them with an address that can be identified. This is especially the case for transactions that come from addresses managed by centralized exchange sites, such as Coinbase, which by law must provide the government of its country with information about the identity of its customers.
What is a private blockchain ?
A private blockchain imposes restrictions on who can participate in the network. In these types of systems, organizations need permission to join.
How do you access the network? There are many possibilities: current participants can decide who future entrants will be, a regulatory authority can issue participation licenses, or a consortium can make these decisions. When a new organization joins the network, it also maintains a node on the decentralized blockchain .
Uses of private blockchains
Banks
One of the drawbacks that bank customers have are the fees for international transactions. Sending money from San Francisco to London can cost a base fee of $25 per transfer, plus additional fees. In this case, not only does your bank take a cut: you also have to pay the bank that receives the money. Additionally, the transaction may take a week to complete.
According to a CBS Insights report , the average cost per transaction for the money issuer is 7.68%. That’s why international transactions are a big source of revenue for banks: in 2016, they generated 40% of global payments transactional revenue.
By using P2P payments, the blockchain development services eliminates intermediaries and creates a more secure and lower-cost system. With a decentralized private blockchain network , there is no need to place trust in third parties to verify transactions. It can be done on a public network like Bitcoin, but the cost would be much higher. With a private blockchain , the nodes are very few, and the verification process is faster and does not require as many resources.
This technology can help banks change the international transaction market, and customers make payments in a 21st century way. An example of using a private blockchain for global payments is offered by Ripple . This company created a network with optional access to a faster and more scalable digital currency for making payments: XRP .
Retail
A blockchain is based on a secure database that keeps a record of all transactions made between authorized users, and each of them has access to this database to verify the validity of each block in the chain. As you may have noticed, tracking – one of the most interesting features of blockchain technology – can bring surprising new advantages to the supplier chain.
For example, it can take weeks for a supermarket to determine the exact point at which a product is contaminated in a global food chain. Indeed, every year, one in ten people gets sick – and around 400,000 die – due to the consumption of spoiled food.
Blockchain is ideal to help address these challenges because it establishes a trusted environment for all transactions. If it is a global food supply chain, all participants (farmers, suppliers, producers, distributors, retailers, regulators and consumers) can have access to known and reliable information regarding the origin and status of food in your transactions.
With this in mind, IBM partnered with Walmart, Unilever and other international food companies to study how blockchain technology could be used to make the food supply chain more secure. In this video you can see how they tackled the challenge:
Logistics
It is difficult to imagine that international trade, with its immense, colorful containers, can be reduced to an abstract blockchain network. However, transportation giant Maersk, along with Microsoft, auditing firm EY, and cybersecurity company Guardtime, set their sights on applying distributed ledger technology to the transportation industry.
As in the food supply chain, international logistics is based on a million transactions around the world carried out by different organizations such as transport companies, intermediary agents and insurance brokers. They all use a shared blockchain development company database that updates across the network in real time. In this way, they can process and arrange transactions through smart contracts without the need for third-party verification.
The 400-year-old marine insurance sector was one of the most inefficient areas of the insurance industry, according to global insurance company EY. Today, thanks to blockchain technology , the logistics industry can automate manual processes, avoid errors and reduce costs.
How are YOU going to take advantage of blockchain technology ?
All of the above cases are concrete examples of how this innovative technology is being used to transform traditional industries, bringing them closer to a more agile, easier and profitable future. Do you have a brilliant idea to apply blockchain technology , but you don’t know if it will work? At Wolox , our Product Thinking department can help you launch your project and make it a reality. Do you have a specific idea that you are sure will transform your industry? Get in touch with us, we would love to work with you and co-create a truly innovative digital product for your business.
