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What is a Private Blockchain?

A private blockchain is a blockchain technology that is not generally open to public. This is where public blockchains differ, which are accessible to anyone and can be operated by everyone — private blockchains create a safe space for authorized entities alone. In this guide, we will talk about the definition of private blockchain, how it works and when you can take its advantage.

What Does Private Blockchain Mean?

Private blockchain, often called permissioned blockchain, is simply a decentralized network in which the governing body controls who can participate in or perform the task of validating transactions and who can access data on their blockchains. This control provides more privacy and security, making it a good option for a business or institution that still needs to have some semblance of control over their blockchain.

Key Features of Private Blockchains

Access Control

Eligible parties—an organization, individual, or business that has been allowed to enter the network—are limited in their access to a private blockchain.


Every transaction on a private blockchain is only visible to those who have permission. That way, confidential data can be seen only by your users, not the public.

Centralized Control

In layman's terms, private blockchains are more like distributed state databases that work in a decentralized manner (by using multiple nodes to participate) where all nodes must agree or meet certain rules but validation of the chain can be accomplished by some authorized nodes as they may have full control over the network.


Private blockchains are designed to work more efficiently than public blockchains when processing transactions because they involve fewer people and can tune the consensus mechanism for speed and performance.


A private blockchain can be customized to the unique requirements of a specific organization, including trade rules, consensus mechanisms and data access policies.

How Private Blockchains Work

  1. Invitation and Permissions: Since only the invited members can participate in a private blockchain and hence it offers access control. The network's governing body must give permission to any entity looking to join. Permissions can be full, allowing total control over the blockchain.
  2. Consensus Mechanisms: Private blockchains can use faster and efficient consensus mechanisms as compared public ones. Some common mechanisms for this are Practical Byzantine Fault Tolerance or Raft, which in fact still have limitations: that they should work well on small number of nodes because the controlled environment where they were supposed to operate has not many nodes.
  3. Transaction Validation: The amount of time and computational resources required for the validation process can be lowered, since we know a priori an upper limit on the number of participants that will come to participate.
  4. Data Privacy and Security: Data on a private chain is encrypted and only available to the legitimate user which protect it from security breach. This is an excellent way to make sure that only the people who are supposed to see your sensitive information do so, and no one else can tamper or read it without proper authorization.
  5. Governance: Private blockchain is managed by one or many entities which decide what happens on the network, including updates and access control (in certain use cases, compliance could also be important).

Lists of Private Blockchain Platforms

  • Hyperledger Fabric: This is a permissioned private blockchain framework developed by the Linux Foundation that can be customized as per the need for an enterprise. It allows smart contracts and is exceptionally flexible to cater for different industries such as finance, supply chain and health care.
  • Corda: Corda was developed by R3 specifically for enterprise businesses, and is a private blockchain solution. Hedera aims what it calls a hash graph, a version of blockchain, at privacy and interoperability to enable businesses to transact directly with one another.
  • Quorum: Quorum is a collaborative work by J.P. Morgan that can be called an enterprise version of the Ethereum Blockchain. It provides better privacy features and optimizes for use on financial applications.

Benefits of Private Blockchains

  • Enhanced Privacy: Only authorized parties can transact privacy is guaranteed and sensitive data may be protected.
  • Regulatory Compliance: It can be designed as per the requirement and compliance of notorious regulations particularly Financial, & Healthcare industry.
  • Efficiency and Scalability: Private blockchains process transactions faster than public blockchains, for two main reasons: they have fewer nodes and because the consensus mechanism is streamlined.
  • Customizable: As per their industry-specific requirements enterprises can customize private blockchains with enterprise specific transaction rules, data access policies and consensus protocols.

Challenges of Private Blockchains

  • Centralization: As opposed to public blockchains, private blockchains will have fewer nodes and potentially more centralized entities which kind of undermines one of the reasons for using blockchain in the first place.
  • Limited Transparency: Access and visibility are limited, which in turn reduce transparency compared to a public blockchains that is likely an important consideration for stakeholders hoping for open verifiable systems.
  • Trust: Because a single entity or consortium controls the private blockchain, participants must trust the governing body to follow its own pre-defined rules.

Use Cases for Private Blockchains

  • Supply Chain Management: Private blockchains ensure the transparency and traceability of supply chain processes by maintaining a secure and immutable record of product movements and transactions.
  • Financial Services: Private blockchains can be used in banks and financial institutions for process optimization, anti-fraud mechanisms, compliance with legal standards.
  • Healthcare: Through private blockchains, patient data can be secured and integrity in terms of data assured as well allow the sharing of medical records between certain authorized parties.
  • Corporate Governance: Companies will be able to use private blockchains to execute their internal such as voting, audit trails & compliance monitoring squad.

There is also private blockchain which allows companies to benefit from blockchain features and at the same time be able to decide who are the users, and how data privacy will be protected. Since private blockchains are used in various industries, and the modulality and adaptability to individual requirements and compliance restrictions are great.

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