Private blockchains: A contradiction in terms?

David Scheider: “Private blockchains are an oxymoron”

The word blockchain does not appear in the original Bitcoin whitepaper by Satoshi Nakamoto. It was only after Bitcoin was a few years old that the term “blockchain” even came up. Since then, more or less decentralized technologies that have implemented one or more aspects of the original Bitcoin system have been subsumed under this generic term. In the meantime, however, “blockchain” has degenerated into a fuzzy collective term that means all sorts of things: automation, decentralized database or simply protocol.

The problem with this is the following: Due to the absolute corruption of the term, the technology has degenerated into a marketing cliché. No one knows exactly what the purpose of this actually very sluggish decentralized database is. However, the term was driven ad absurdum by the emergence of so-called private blockchains. Only authorized persons have read and/or change access to the data stored there. Private blockchains are an oxymoron, a contradiction in terms.

After all, the blockchain thrives on the greatest possible decentralization. The blockchain can only prove its integrity if all participants reach an equal consensus on the status of the ledger. No, a blockchain is not a jack of all trades and nobody needs “private blockchains” anyway. Just use a database.

Moritz Wire: “The spectrum of action of the technology is illustrated by private blockchains”

The motivation behind the Bitcoin blockchain was a decentralized register visible to all and accessible to all. It makes no distinctions between origin, income or social status. Before the Bitcoin blockchain, everyone is equal – the open source idea is deeply rooted in the protocol. But what if information should not be shared with everyone or is not allowed to be shared at all?

Supply chains, patient information, tax returns: there are many reasons why companies, authorities, administrations, offices or institutions should decide against a public and for a private blockchain. In contrast to public blockchains, private blockchains – also known as “permissioned blockchains” – are only accessible to a selected group of participants. Depending on whether unauthorized participants can also track the data, a distinction is also made between open and closed private blockchains.

The advantage of private blockchains lies in the optimization for selected applications. Private blockchains can be tailored to specific use cases. Private blockchains are often the method of choice for data protection reasons alone. They also do not compete at all with public blockchain networks, which are essentially geared towards the transfer of tokens. They rather illustrate the wide range of activities of the technology. The decision whether to use a private or public blockchain is therefore not idealistic, but purely pragmatic.

Disclaimer: The article already appeared in the May issue of our BTC-ECHO magazine. This way to the shop.