Public or Private Blockchain?

What questions must be addressed when making a rapid initial analysis of whether a public or private blockchain is an appropriate solution for the use case?

These seven questions are typically important in deciding which blockchain structure to use for a particular project. Note, this list is not intended to provide a final authoritative answer, but to assist in a rapid initial analysis.

To help determine the answer to this, consider the following questions.

1. Is there a blockchain consortium or trade partnership that is already active in the industry or specific to the use case? If so, decision-makers need to think hard about whether they wish to deviate from it. It is often substantially cheaper and less time-consuming to accept an imperfect solution over a custom one. After all, the latter tend to become useless in cases where a consortium solution eventually morphs into an industry standard. Obviously, if organizations believe they can mount a credible challenge to existing solutions, gain critical mass to make them successful, and possibly become dominant in the marketplace, a custom build is a viable strategic option. To a lesser degree, the same is true for projects within organizations. If there are ongoing blockchain projects or deployments within an organization, it is often easier, faster, and more cost-effective to leverage the underlying technology before embarking on a second or third project that leverages Inclusivity

2. Is shared data proprietary and confidential? If so, then the decision turns to how much and which data needs to be kept on-chain. As soon as shared confidential data is written to a blockchain, a private configuration or hash-based solution on a public blockchain can be one way to handle this situation. In cases where proprietary databases can keep shared and confidential data secure, a public configuration may be better positioned for an organization. Public blockchains are also exploring innovative privacy measures, which means that their value proposition can develop over time as stakeholders prioritize data protection. Zero-knowledge proofs are one such example. If a project requires the handling of confidential and proprietary shared data, combined with public verifiability as well, a public permissioned system will likely be required.

3. Does data contain personal information? In cases where personal data is involved, data protection and data privacy laws like the European Union’s General Data Protection Regulation (GDPR) need to be considered. Because anyone can join a public permissionless blockchain, it is difficult to ensure that blockchain network participants comply with necessary rules around the protection of personal data. As a result, if data must be kept on-chain, the permissioned blockchains are more likely to be designed towards a GDPR-compliant blockchain solution. However, using private chain, by design, will not alone guarantee a GDPR-compliant solution. For more details see the module Personal Data Handling.

4. Is trusted time-stamping, proof of existence, or proof of provenance enough for the use case? Time-stamping builds trust, fosters higher levels of accountability, and serves as a great way to resolve conflicts and disputes. If this suffices, a solution in which a hash is written to the blockchain and used to validate that documents have not been altered is suitable. In these situations, a public blockchain is typically faster to implement and the variable cost of writing data can be contained through the aggregation of entries. For example, you can take a contract and store its hash on blockchain. Then, if there is a dispute about which contract is real, you can do a hash match to the one stored on the ledger. That said, some warn that you can run into a lot of challenges standing up a new public blockchain for one-off use cases.

5. Does the solution require smart contracts? Use of smart contracts is not limited to private blockchains; however, some public configurations need to be augmented through an additional technology layer to add smart-contract capabilities where they do not exist. A good example is what Rootstock (RSK) does for the Bitcoin blockchain. There are also public blockchains that support smart contracts natively, without additional layers, as the Ethereum protocol. More importantly, given the nature of supply-chain use cases, it is likely that you will need to input sensitive business data into smart contracts, if your solution is using them. Since the data input to smart contracts are visible to all users, a public blockchain may not be a good solution when you want to limit visibility to a transaction but still reach consensus.

6. Does the solution require near real-time processing or does it need to handle large datasets? In either case, private configurations are likely a much better solution. Public blockchains – at least as they exist today – are severely constrained when it comes to file size, processing speed, number of transactions, and the cost of processing each transaction.

7. Is it necessary to have a high degree of control over blockchain governance? Blockchain governance refers to the mechanisms by which decentralized node networks adapt and change over time. This includes decisions like changes in block sizes, data storage formats, smart-contract execution protocol, consensus mechanism, and more. If you do not require control over such decisions, and the way a blockchain configuration works today is sufficient, then reputable public blockchains are often superior as they are less prone to drastic governance changes. Reputable public blockchains are more stable because of the large numbers of users who need to agree to governance changes. In cases where your organization requires more control over the network governance or requires control over business processes, data formats and transaction processing, a private chain is likely the better choice.

It is always useful to analyze current solutions/examples to common problems.

Below is a list of real-life examples applied across various business scenarios:

Port of Valencia: Improving container management The Port of Valencia solution, called GESPORT 4.0, aims to digitize documentation, increase process efficiency and ease communication. The port experimented with public and private chains and recently developed a private permissioned solution for container management that is based on Hyperledger Fabric. The organization selected a private permissioned blockchain solution for several reasons, including the existence of sensitive data, the need for governance via a community of stakeholders, the ability to store data and the avoidance of convoluted consensus mechanisms. In addition, decision-makers looked into performance, transaction volume, system scalability, and security prior to their commitment to Hyperledger Fabric.

Key considerations: Access to data, control over governance, personal data protection, system performance

Everledger: Making a private chain a diamond’s best friend Everledger, a private blockchain solution focused on diamond traceability, uses high-resolution imagery at every touchpoint along the supply chain to uniquely identify each stone and record its characteristics, serial number, chain of possession, location and condition, along with certificates of authenticity and payment documents. The solution requires privacy, not least because the whereabouts of high value items needs to remain concealed.

Key considerations: Access to data, system performance, data integrity, availability, and security

Truckl: eliminating costly mistakes along the supply chain In Truckl’s solution, all participants in a transaction share the required documents while carriers collect data before, during and after a load is delivered. Information updates are made available on a dashboard and when exceptions occur, they are documented, and all parties receive instant alerts and notifications. Every aspect of a transaction ranging from documents to photos, signatures or location data is recorded in a transaction file, which is then hashed and written to the blockchain.

This provides visibility focusing on eliminating errors, miscommunication and exceptions in transport transactions. Users capture several benefits from the use of blockchain, amongst others that participants are encouraged to act honestly and openly, there is a single source of truth for documents, and transaction files are valuable as soon as disputes or insurance claims occur. Each authorized party has access to the documents and can audit transactions using Truckl’s blockchain features. The company determined early on that its users do not need to share information directly on the blockchain and subsequently implemented a hash-based solution so that customers and business partners can validate documents (proof of existence) on the public Ethereum blockchain. The solution is censorship-resistant, and the public nature of blockchain means that Truckl has no power to interfere.

Key considerations: Access to data, data integrity, availability, security, and system performance

Tradewind Markets: Provenance management for precious metals Tradewind Origins is a provenance application that unlocks the latent value of precious metals by delivering data on how, when, and where assets were sourced. It links detailed information about the provenance of precious metals to digital records of ownership to distinguish sellers and buyers based on their unique characteristics. Tradewind selected R3’s Corda due to its ability to isolate data, offer privacy, and provide a developer-friendly technology. The organization decided on a private permissioned blockchain to meet the strict data privacy requirements of the platforms’ users, and the ability to share information on a need-to-know basis amongst different supply chain participants. The desire for confidence around data confidentiality and ensuring no reputational risk for clients was a key driver. In addition, the ability to use a private platform to create enterprise tokens to represent precious metals as digital assets was key. The organization also considered cloud deployment options, performance, and security prior to its commitment to Corda.

Key considerations: Access to data, control over governance, system performance

Source "Redesigning Trust: Blockchain Deployment Toolkit" by World Economic Forum.