Private Blockchains and Distributed Ledgers
This article is part four in our five-part series about blockchain technology:
Private blockchains, sometimes called “distributed ledgers”, are a form of blockchain wherein all of the nodes are controlled by single entity. While some correctly argue that private blockchains miss the point of the principles behind blockchain technology, private blockchains do have their uses. In this article we will explore how private blockchains work and some of their common uses.
Private Blockchains Put You In Charge
Let’s suppose for a moment that your enterprise has a business need for recording transactions in an untamperable manner. Moreover, the contents of these transactions need to be kept private and therefore the use of a public blockchain is simply not an option. In this case, you will need a private blockchain. Your options for creating a private blockchain are as follows:
- Create your own proprietary blockchain technology from scratch (something we can do for you!).
- Branch the open-source code for an existing blockchain technology such as Bitcoin or Ethereum and modify it to suit your needs (we can help you do this too)
- Use Ethereum out-of-the-box to create your own private blockchain with strict adherence to Ethereum protocol. (Yep, we can help here as well).
Once you have created your private blockchain, you will be the gatekeeper in charge of approving and adding nodes as participants in the chain. These “nodes” may live on employee machines, perhaps in regional offices, in partner or vendor offices; anywhere you like. You will also be in charge of setting the hashing difficulty and assigning hashing work to miners.
Basically running your own private blockchain puts you in charge of how the chain operates.
Murder, Evidence, & Private Blockchain
Imagine for a moment that a powerful local businessman is indicted for murder. The victim died of a gunshot wound but no murder weapon was found. However, the detectives did find gunpowder residue on the businessman’s hands and they placed a sample of that residue in the evidence locker at the local police station. Days later, the murder weapon is found in a nearby pond. The detectives are certain of the businessman’s guilt and they simply need to test the residue from the recovered gun’s barrel to see if it matches the residue found on the businessman’s hands the day of the murder. So they have the forensics team run the sample from the gun against the sample taken from the businessman’s hands and–they don’t match. How could that be?
It turns out that the businessman is a strong supporter of both the mayor and the police chief. The residue collected from the businessman’s hands was replaced by someone at the police department before the murder weapon was found. The chemical analysis of the residue originally taken from the businessman’s hands does not match the analysis of the fraudulent sample with which it was replaced. The forensics team runs a second chemical analysis, this time on the phony residue, and discover that the results do not match the analysis of the original test they ran against the sample–the real sample. Something is up.
Enter the private blockchain. Unbeknownst to the crooked individuals that swapped the residue sample in the evidence locker, the forensics team had hashed the chemical analysis values from the original residue sample and encrypted them into the department’s private blockchain. When swapped in the blockchain with the results of the original chemical analysis, the chemical analysis of the phony residue completely changes the most recent hash value of the chain. All of the scattered nodes in the chain–each bearing their own identical copy of the chain with timestamped evidence of what was hashed into it and when–reach a consensus that something has changed!
The forensics team knows that someone tampered with the evidence, but how do they prove that in a court? It will be their word against that of a very slick defense attorney who will try and convince the jury that the first time the forensics team ran the sample they were perhaps the victim of a faulty machine or maybe one of them made a mistake and analyzed the wrong sample.
Here’s the thing: recalculation of the chain after swapping the blockchain’s hashed value of the chemical analysis taken from the businessman’s hands on the day of the murder for with the hashed value of the chemical analysis taken from the murder weapon several days later, results in the same hash value on the end block for all participant nodes. The odds of that happening by accident make the implication unmistakable: someone tampered with the evidence.
Thanks to the proof demonstrated by the blockchain, the jury is convinced in no uncertain terms that someone had tampered with the evidence in order to help acquit the business man. With circumstantial evidence piling up against him, it becomes more difficult for the jury to ignore the businessman’s guilt.
Private blockchains and distributed ledgers do not have to carry all of the gravity of ensuring that guilty criminals are ultimately convicted. In regular enterprise use, you may need them to simply track custody and use of a piece of equipment, or the balance of raw materials on hand and into which products those raw materials were incorporated. Aside from being a tamper-proof snapshot of transactions, the clean structure of transaction data in blockchains lends itself well to data science and machine learning algorithms that can help you better manage your supply, custody, and distribution chains giving you insights that before now was impossible.
If you’d like to know more about how we can help you incorporate a private blockchain into your business, please contact us.