Private blockchains

A private blockchain is a blockchain in which only certain individuals are permitted access. Private blockchains are also known as “permissioned” blockchains.

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Aren’t blockchains meant to be public?

At first glance, a private blockchain may seem like an oxymoron. After all, blockchains are meant to be public. They’re meant to be transparent (anyone can view transactions) and permissionless (anyone can participate). Of all things blockchains are not, “private” would seem to top the list. 

But blockchains have many known characteristics. For example, they’re:

• immutable (cannot be altered)
• fault-tolerant (another way of saying “resilient”)
• verifiable (transactions can be traced)
• consensus-driven (managed by network participants)

Since blockchains have so many characteristics, it follows that different blockchains can be configured in different ways–ways that strengthen some characteristics at the expense of others. 

In the case of private blockchains, security is strengthened at the expense of transparency and permissionlessness.

How are private blockchains more secure?

Private blockchains aren’t necessarily more secure than public blockchains. In fact, at first blush private blockchains are less secure since they’re centralized, and centralization’s fatal flaw is that it has a “single point of failure”—an Achilles heel that, if attacked, could bring the whole network down. 

And yet this centralization can be turned into a strength if it’s used to implement more stringent security measures. By restricting access to a trusted group and imposing more robust access control, a private blockchain can lower the risk of hacks like 51% attacks, where bad actors take over half a blockchain’s network in order to manipulate transactions.

In other words, private blockchains can be more secure than public blockchains if they’re managed well.

Private vs. public blockchains

Examples of private blockchains

Citi has introduced Citi Token Services, a permissioned blockchain platform that enables clients to interact with tokenized deposits, make cross-border payments, and automate trades.

JPMorgan, meanwhile, has launched Onyx, a permissioned blockchain platform that leverages smart contracts to streamline transaction processes. Introduced in 2020 following the launch of JPM Coin, Onyx has become a popular choice for banks and financial institutions seeking to efficiently move money, assets, and information.

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