Note: This post has been written by Dr. Jiya K. Shahani as a part of the “WazirX Blog Contest”.
Privacy vs. Security in Blockchain Implementation for Businesses
Blockchain is essentially a unified network architecture of secured digital interactions enabled by a digital trust. This digital trust is meant to authenticate and authorize the transactions on a public ledger. Blockchain technology has a distributed database that registers and distributes transaction information. The infrastructure of blockchain technology necessarily consists of private key cryptography, a network of record, and a protocol platform. It is garnering considerable acclamation in the current times. Blockchain technology is believed to be rightly poised to introduce a paradigm shift in the manner in which businesses (via private blockchain) and individual users (via public blockchain) shape the nature and flow of monetary transactions.
The public blockchains, based on the distributed ledger technology, are in the public domain requiring no censorship or permission for access. This means that any user can download the protocol and authenticate the transactions. A wider consensus is a definite requirement in open-source, public blockchains to initiate any helpful updates. They are anonymously based on the incentive mechanisms but function slowly. Private blockchains are platforms that are faster, requiring explicit access permission to download the protocol. This set of blockchain operates in adherence to the regulations. It is resilient, centralized, and integrated. It offers the required scalability and supportability for enterprises.
Types of Blockchains
Blockchain technology applied to cryptocurrencies primarily has two spheres of existence: (i) public (bitcoin and ethereum); and (ii) private (ripple and hyperledger). In essence, the differentiating factors of a public blockchain from a confined private blockchain are participation or access, execution, and maintenance. The decentralized (distributed) nature of blockchain technology falls under the public sphere where, by adhering to the underlying rules of conduct, any individual user can write (a new block), read, or make valid changes, to the chain.
What this means is that the public blockchain keeps the platform open for users to peruse the transaction history, facilitate financial exchange, and develop smart contracts. In public blockchains, the network-connected nodes (miners — ensuring network security) encrypt the transaction facilitated under the protocol. The process of the transaction cannot be altered once verified on a blockchain. This system offers a robust security framework on the network.
On the contrary, since the business community has also expressed interest in benefitting from blockchain technology. The private sphere of the censored blockchain (shared ledgers for the enterprise) is preferred for their set of activities. What this has led to is the enterprises opting for privacy whilst leaving the security framework of the network fragile as compared to an immutable public blockchain. The business affairs of private enterprises have seldom been conducted publicly without any layer of privacy. The reasons are apparent: competition (business environment of operation) and confidentiality (corporate strategy).
Public vs. Private Blockchains for Businesses
In the current form, public blockchains limit scalability as they are incapable of managing the elevated load of transactions. This makes public blockchain restraining uniform approval. But, this doesn’t minimize the importance of trust and security that public blockchains offer. The public blockchain technology itself is nascent. In the near future, the public blockchain framework is anticipated to offer solutions to strengthen the scalability and privacy capabilities for enabling massive-scale adoption. Public blockchains make data sharing secure. They are also immune to DDoS (Distributed Denial-of-Service) events.
But, public blockchains are cumbersome to customize as time passes. This makes it difficult to inculcate any desired alterations subsequently. Doing so would again require the approval of all the members. The private blockchains are specifically inclined towards facilitating control (permissions and memberships), system updates, and customized integration. Since the operational environment of private blockchains is confined and controlled, it has a cost-benefit for enterprises (considering its low energy consumption).
This leads to operational efficiency gains and optimal resource utilization for the enterprises. But on the security front, it should be noted that public blockchains are based on a consensus mechanism. This prerequisite requires the miners with malicious intent to at least have control of 51% of the computing power or mining hash rate of the network. The permission requiring private blockchains also accounts for what is referred to as “consortium.” Particularly relevant for enterprises working as media content distributors or financial institutions needing transactional data secrecy. The consortium blockchains create a controlled ecosystem of consensus via select nodes to grant exclusive access.
Blockchain Technology: What is the Way Forward for Business?
The public blockchains have a long road ahead to integrate the concerns of privacy and speed expressed by the enterprise community. The private blockchains also prove to be cost-efficient for enterprises considering the fact that they consume comparatively less energy. But it is also crucial that the enterprises acknowledge the power of decentralized and distributed databases. As these networks and databases are too tough for hackers to control or manipulate.
The magnitude of activities performed by large business enterprises is massive and has a considerable impact on society as a whole. To have the future public blockchain technology position itself as a suitable alternative also for enterprise users. A spectrum of innovative feature solutions is required.
A consortium blockchain is a fusion of private and public blockchains that offers some level of trust and privacy. The industries in which the enterprises operate also have an influence on their preference of adopting either public or private blockchain technology. After addressing its shortcomings, for enterprises (scalability, compliance standards, privacy, and economy) and offering a wide spectrum of features to the comprehensive benefit of individuals, enterprises, and society. The game theory-based public blockchains would also appeal to the enterprises interested in striking a privacy and security balance in the near future.
Author: Dr. Jiya K. Shahani
An Independent Researcher, Writer-Editor, Graphic Designer, Translator, Interpreter, Modern Applied Psychologist, and an aspiring contributor to the Crypto world
Dr. Jiya is a science graduate turned Economist and has a decade-plus of research experience and more than 3 decades of health industry experience. Dr. has contributed book chapters, research articles, and journal papers in the area of Green Economics and some articles for humanities. Jiya K. Shahani is among the 18 winners (out of 256 participants) for the best research work presented at the HDCA 2012 conference.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.