Depending on an organization’s needs, a public blockchain may not be the right solution for them. If authority and speed are top priorities, a private blockchain may be the better route. 

Private blockchains have rules and regulations on who can see and write on the chain, and nodes are typically invite-only. It operates as a closed database, offering less flexibility but more immutability. There is a clear hierarchy of control on a private blockchain, with admissions limiting the number of users who can join the network. Private blockchains are governed by individuals that are part of the organization. 

Demonstration of how devices in a private blockchain network work together.

When to use a private blockchain 

Private blockchains are best for organizations that would like to reap the benefits of blockchain technology without being externally accessible. They offer a certain level of privacy combined with modern securities. Private blockchains typically have appointed users as validators. This means that a specific node is signing off on each block, ensuring consistency and trust with the data. If certain nodes were to act fraudulently, they would be removed from the network. 

Although common consensus algorithms have been proven to be wasteful of resources with high demand, they are often necessary for a public environment. With a private blockchain, networks are smaller and alternative consensus algorithms can be utilized, so the environmental threat is not as great. Consensus mechanisms are chosen to meet the needs of the organization. There can also be variations applied to common consensus algorithms to develop more custom solutions. 

Use cases for private blockchains

Typically, private blockchains are built specifically for performing certain tasks. This limits the adoption rate because there is not often a one-size-fits-all model. However, with the flexibility that blockchain technology has to offer, the variety of use cases for private blockchains is infinite. Organizations in the fields of finance, healthcare, manufacturing, and government operations can all benefit from adopting a private blockchain. The growing interest of CBDCs shows the potential success for private blockchain applications. 

Understanding these nuances between private and public blockchains will help business leaders determine the best course of action to take for their blockchain developments. The HELO™ blockchain will merge features of both public and private blockchains, creating a customizable solution for any business, organization, or individual. 

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