Is your business thinking about leveraging blockchain technology? The type of blockchain a company builds upon is entirely dependent on the needs of the company. There are many different options, but each blockchain comes with its own pros and cons and sometimes a customized blockchain is needed.
Here are a few topics that companies need to consider.
In 2017, people were launching a “blockchain” project even when blockchain was not a necessary component. Publicly traded companies got in on the hype surrounding the new technology, for example, Long Island Ice Tea changed its name to Long Blockchain Inc. and saw its stocks spike 500% in one day and Kodak’s stock prices tripled after announcing they were launching an ICO. In retrospect, Long Island Ice Tea simply changed its name to make money. Kodak, on the other hand, launched a functional product and held a private ICO. Long Island Ice Tea was merely doing a PR stunt, while Kodak was doing business and improving their company.
The SEC has clearly warned against using statements about blockchain to increase their stock prices. If blockchain is not going to be used to improve business processes or provide an industry solution, you may want to reconsider using a blockchain.
If blockchain is a reasonable component to a project that you are building, what exactly does your blockchain need to be able to do? Ethereum has emerged as the most widely used platform, but other popular platforms include Neo and Stellar. The Waves blockchain now has data transaction capabilities and will be launching non-turing complete smart contract capabilities this year (2018). The user-friendliness of the Waves blockchain and continuous development will likely position Waves as a powerful competitor to Ethereum. If a private blockchain is selected, one of the popular options is IBM’s Hyperledger. If none of the existing blockchains meet your needs, you always have the option to build your own.
If your intended userbase is going to include the cryptocurrency community and individual users, it is unadvised to use anything other than a public blockchain. This target market wants transparency and they want control over their digital assets.
If your intended userbase is traditional businesses and large corporations, they would likely be more receptive to a private blockchain, such as IBM’s Hyperledger. When the focus is on improving internal business processes, a private blockchain allows for more corporate control but sacrifices the benefits of using a public blockchain.
It is extremely important for companies to put together a strong team for the project. The technology is still extremely new and rapidly expanding. The open source aspect of blockchain allows for participants from all over the world to strengthen existing and new systems. Having a team that keeps up with the developments and guides the project in the right direction is crucial for success.
The role of a private blockchain and its related cryptonomy
Private blockchains are not really blockchains at all. According to Investopedia, “A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions.” A private blockchain leverages some of the cryptographic aspects of blockchain technology, but if you are not allowed into the network, you do not have permission to interact with the data on the private blockchain ledger.
Private blockchains can still provide important value to companies. Companies can use private blockchains to solve many internal problems and inefficiencies. Private blockchains used only by one organization can be modified more easily than a public blockchain. Private blockchains can also provide more privacy by only giving permission to read to individually selected nodes. Tokens are used in private blockchains to send a transaction or as an access key that proves permission to view the data on the private blockchain.
Many large companies are turning to private blockchains because of the security, accuracy, and efficiency offered by them. The reason many companies are rushing to and exploring private blockchains is the same reason they utilized intranets.
Public vs. Private
Public and private blockchains have many similarities. They are both decentralized peer-to-peer networks where participants each maintain a ledger of all transactions that take place on the blockchain. Each ledger is maintained individually and transactions are verified as individual ledgers on the network come to a consensus.
The primary difference between a public and private blockchain is that anyone in the world can participate in a public blockchain whereas a private blockchain is a permissioned network where only those who receive permission may participate.
Public blockchains are at the mercy of the community. Since they are open-source, the code is public and some might say they are more susceptible to attacks. However, you could also say that public blockchains become “forged in the fire” as the community works together (and against one another) to attack and improve the blockchain in an endless cycle. This helps ensure that the blockchain is always at the forefront of technology. Private blockchains are closed off from the public, and as such, have a team that works on them without outside influence. Public blockchains are extremely powerful wherever transparency, democracy, and collaboration are required while still maintaining a high level of security and immutability.
Decentralization and the core values of transparency, freedom, and neutrality are foundations of blockchain technology and why it was created. A way to examine the core differences between public and private blockchains is to compare them to the internet and intranet. Intranets typically result in high cost, due to the infrastructure needed to maintain them, and have historically fallen behind the security and performance of the internet. Part of the reason for this was that intranets were maintained by a core group of people while the internet was being maintained by the entire user base.
Traditional businesses will likely be more inclined to adopt blockchain technology in an environment where they feel safe and in control, just like what occurred with the intranet. We do not expect this to impact the growth of public blockchain solutions. Just like the internet, blockchain technology is expected to grow and improve because of the users. Private blockchains will provide solutions to the needs of companies, but it is unlikely to overtake the use of public blockchains.