Private blockchains are a subject of controversy among the experts of the technology. While some of them consider them useless due to their centralized nature, others deem them necessary for institutions and businesses who require a centralized-decentralized nature of operation.
What are private blockchains? A private blockchain is pretty similar to a public blockchain, except that they are a bit centralized comparatively, not everyone can join the network at will as permission from the central authority is required. Due to this, its access is limited and a combination of a centralized-decentralized system is formed. A common example of this would be a hyper ledger.
Why are they necessary? Why centralize, when the basic promise of blockchain was decentralizing. The answer to this might be pretty simple, the use case. Institutions and businesses who require systems that are permissioned and decentralized so that their privacy and security remains intact while the system remains transparent might see private blockchains as their way to go. Banking systems could use permission blockchains for their records and transactions. Ian Kane, the COO, and founder of TERNIO also had similar views relating to the use case of permission or private blockchains. He stated,
Private or permission blockchains have their place specifically in an enterprise environment. Companies will not want to put sensitive data on a public blockchain, because of competitive intelligence issues. I think the future of blockchain will be a combination of both public and permission blockchains that have interoperability.
Similarly, recognizing the use case of private blockchains but realizing that they might be more centralized than what is required, Shannon Grinnell, the founder, and host of SOC (Speaking of Crypto) podcast stated,
Private blockchains, being highly centralized are not what the hard core Libertarians are excited about, but they are a way to bring the technology to the public to the public’s advantage.
While there are a huge amount of experts who support private blockchains and believe that they play a role in mass adoption of blockchains by providing institutions with the specific use cases they require, there are still others who believe that private blockchains merely take the essence of blockchains away. Jeremy Epstein CEO of Never Stop Marketing stated, talking to BlockPublisher,
Private blockchains are bullshit. They aren’t real blockchains.
Similarly, having a similar stance on the topic, Brendan Lee, the Bitcoin expert said,
Private blockchains are borne about through people’s misunderstanding of what Bitcoin at scale can be. They aren’t needed, they aren’t useful, and they can never be as cost effective or as secure as bitcoin.
All in all, private blockchains might have their own pros and cons, but with their presence, it is hoped that institutions and businesses would use them as an entry into blockchain and would explore the space more afterwards.