It’s safe to say that blockchain and distributed ledger technologies picked up traction with the rise of Bitcoin and other cryptocurrencies. Because of that, the enterprise world was quick to disregard the technology as it gained popularity amongst “cyberpunks”, digital natives and non-believers in the financial system. The truth is that cryptocurrencies are just one application of blockchain technology. In fact, the biggest field for reaping the benefits of the technology is by far the enterprise sector. Enter private blockchains.
Hold on, what is a private blockchain?
So Bitcoin, Ethereum and most cryptocurrencies run on public, a.k.a. permissionless blockchains, meaning everybody can access the ledger, and therefore read and write transactions. While cryptographically secured, transactions are fully transparent. Needless to say, that’s a no go for enterprises. A private, a.k.a. permissioned blockchain, on the other hand, is open to select participants only, allowing businesses to reap the benefits of distributed ledgers without opening up their transaction ledger to the public.
What exactly are the benefits of private blockchains?
Reduced operational costs and optimized business processes
Smart contracts are an essential part of any blockchain. Those are self-executing contracts that enable businesses to automate mundane manual tasks like making payments and processing claims among many others. For example, insurance giant AXA launched a product called Fizzy by AXA, which enables airline passengers to buy insurance against flight delays and cancellation. Thanks to an Ethereum-based smart contract, passengers can buy single-flight insurance and instantly get compensated if their flight is canceled or delayed with more than 2 hours.
(Disclaimer: This is an example running on a public blockchain, but smart contracts are identical on private ledgers as well)
Increased level of trust
Private blockchains are immutable and distributed amongst select participants. This way, instead of storing transactions and data on a single enterprise server, business counterparties access a shared ledger that acts as a single source of truth. Immutability ensures that no transaction can be changed once written on the blockchain. Moreover, private blockchain protocols like Hyperledger Fabric support “channels” which enable information exchange between only two (or more) participants, even if the shared ledger is accessed by a larger number of participants.
Enhanced information security
By design, blockchains are a novel, more secure way of storing data. Regardless of whether the blockchain is a public or a private one, the stored information is cryptographically secured. In addition, the shared ledger is distributed amongst participants, rather than stored centrally, thus making it an overall more secure way of storing information.
So are there any real-world applications of private blockchains?
You bet! Household names like Walmart, P&G, Nestle, and FedEx among others, realizing that private blockchains are a game-changer, have already begun implementing the technology in some of their business processes. At LimeChain, we’ve helped companies implement private blockchains for Supply Chain, Manufacturing and Claim Management for example.
In supply chain management, a blockchain can store data about any event related to a product’s origin or even shipments of any kind. This way, when stuff goes wrong, the information is already available for the relevant participants.
Claim Management is another complex business process that is already being disrupted by blockchain. Processing claims and following disputes is a labor-intensive task, driving up operational costs. By storing contacts metadata on a blockchain, smart contracts enable enterprises to automate large parts of claim management, essentially reducing operational costs and increasing trust between trade counterparties.
These are only two of the more obvious private blockchain applications in the enterprise segment. As companies continue to experiment with the technology, it’s safe to say that we’ll be hearing more about it, as mainstream adoption is now on the horizon.
For questions and inquiries about blockchain, don’t hesitate to get in touch via limechain.tech