How to use permissioned blockchain?

By Fire Labs Team | May 10, 2018

Next to so much beloved openness, accessibility, proletarian spirit, and seemed to be an absent weakness of public blockchain systems such as Bitcoin or Ethereum, the closed nature, and limitations of the permissioned blockchain look like nonsense.

Why would you build something the main power of which lies in decentralization and a large number of its users, and then limit this number?

There must be strong reasons for that. And there are some, make no mistake. To understand what they are and how to deal with them, some foundations have to be considered.

Blockchain cornerstones

A blockchain is a list of records (blocks) linked and secured by means of the cryptography (chain). The already formed ledger cannot be changed in any way except for being augmented by new records appearing with respect to a certain rule/algorithm.

It's a bit like a building — you cannot remove the already cemented bricks but you can add some at the top.

What makes sure that no blocks remain modified is the fact that the list of records is stored and concurrently processed in each (or a certain unknown number) of the participating computers.

Any form of cheating would require the amount of computing power that overcomes the accumulative potential of the chained CPUs. It makes the task quite complicated even if there are a dozen of users in the chain. Imagine thousands or millions — they form a plainly impenetrable wall for hackers.

The dark side of the chain

A conventional blockchain, however, is not perfect. Concurrent processing of the same operations on a selection of machines is not what you call efficient. Massive processing power is needed, a huge amount of energy is consumed and yet the transactions are ridiculously slow.

According to some statistics, Bitcoin mining (i.e. serving the Bitcoin network needs for a reward) consumes as much energy as Colombia or Switzerland does.

In addition to the energy and velocity issues, there is one connected with the management. Everybody knows that neither a Bitcoin nor an Ether is controlled — it's the exact reason why these two cost quite a lot of bucks these days. They are based on the algorithms designed so a node is not allowed to change them in any way.

It's exactly what you need for an expensive cryptocurrency, but it just won't work for an enterprise. Using the bitcoin-styled soft for the interactions inside your company is like being in a train without brakes — everything seems perfectly normal until you have another train in front or there is a guy that you need to pick up at a station.

That's to say that blockchain's security comes at a cost and you certainly don't want to pay it.

The good news is that you don't need to.

The only reason why Bitcoin has to be so secure is that it's a public blockchain — the system that is open to everyone, including those who don't feel like following any rules or laws. Nobody knows who uses it and how far is ready to go trying to hack it.

Building a private blockchain, you know exactly who're in and they know it, too. Because of the inevitability of punishment, no suspicious activity is likely to be conducted. But even if it's, such a system normally gives owners an array of tools for tracking and locking the access. Built properly, it may even do it automatically.

Thanks to that, demands imposed on the hardware are reduced, a ton of cash on electricity bills is saved and the overall performance of the system is boosted.

That's what a permissioned blockchain is capable of.

Permissioned niceties

Presumably, you've already guessed that the permissioned blockchain is called so because only the privileged ones can join it. Users can become a part of the chain with the help of a coded key or a sort of an invitation received from the masters of the given system.

In such a way not only an additional layer of security is formed, but the supervision over each of the links in the chain is provided. You can control everything — who, when, under which circumstances sees or takes this or that action.

You can also control who operates as a node and who only uses the products of the nodes' work.

In such a way, another one of the fundamental public blockchain issues is solved — scalability. Growing on its own, the network can become too demanding for the given hardware. The result is a woefully slow operation of the system ultimately bringing it to the dead stop.

Practical applications

Thinking that the corporate use of a blockchain isn't very spread now, you wouldn't be far from the truth. It's a fresh technology and there are not so many of those who have a clue about what to do with it.

However, it has already proven successful for a variety of tasks. The number of enterprises and governments implementing smart contracts, distributed ledgers, and other blockchain-based features is ever-growing.

The problem is that most permissioned blockchain clients prefer classifying even the fact of using corporate blockchain because it can give their competitors a hint about how to make things better.

For that reason, you won't find many permissioned blockchain case studies on the Internet. And you certainly won't find the statistics or any other sort of a verifiable detailed data about what impact this or that blockchain-built solution has on an enterprise.

Some applications, however, are known. They include:

· Data storage with smart access & secure corporate communication — an equivalent to a conventional network allowing us to be fully free from corruption, falsification, hacking, etc.

· Financial transactions — Ripple does the same what the SWIFT technology allows, except it's faster and cheaper;

· Logistics — Maersk and IBM are building a blockchain-based supply chain to boost the efficiency of transportation;

· Medicine — easily and quickly accessible database ensuring the privacy;

· Government — the corruption-free ledger of land property;

· Energy supply — the decentralized system uniting private sustainable energy sources and ensuring the smart distribution of the extracted energy.

Permissioned, selected

Essentially, the process of acquiring a corporate permissioned blockchain looks like this:

1) You outline a range of tasks that are to be solved;

2) You choose the platform;

3) You hire a team to work on the platform;

4) You get your product.

Yes, you can develop your own blockchain instead of using one of the existing SDKs, but it doesn't make a lot of sense — it will be massively more expensive while giving you no advantages whatsoever.

With the first step typically leading to the decision to actually opt for a permissioned blockchain, the second and the third ones are crucial for the success of the venture.

Getting the understructure right

Choosing among over a dozen of blockchain platforms available currently, you have a myriad of specific features to consider. Saving for the purposes you set, there is a budget, time limitations, expected functionality, and so on and so forth.

The tricky thing is that you can get what you want using virtually any of the existing private blockchain kits. With a wrong one, however, the endeavor will cost you a massive amount of time and money - way more than you'd spent having chosen the right one. And the result will still be falling well short of the performance expectations.

You can save months and hundreds of thousands of dollars by just choosing the correct starting point.

The platforms suitable for permissioned blockchain building can be divided into those based on Ethereum and those aren't. They all are free (you spend on the adaptation only). They all feature their own pros and cons.

Ethereum-based solutions include:

· Hyperledger Burrow from MONAX — the toolkit giving you a sheer functionality and the simplest launch possible. The trick is that you will eventually find out that the project cannot be finished without direct support from… MONAX, which means you will spend a whole lot more than you've planned;

· Ethermint from Tendermint — a highly versatile platform giving your developers as much documentation as they can read, delivering a high-performance soft and costing not that much in the end. The underside is that it's not as secure and is not very friendly from out of the box;

· Quorum from J.P.Morgan — the only feasible solution if you need anonymous transactions. However, the ultimate product will be slow, outdated and you will spend a fortune developing one.

Non-Ethereum platforms are:

· Hyperledger Fabric from IBM — based on bitcoin-styled protocols, it's the simplest, the quickest to launch, and one of the cheapest. The flip side is that it's hugely outdated and its functionality is poor;

· Hyperledger Sawtooth Lake from Intel — based on the PoET (Proof of Elapsed Time) protocol and launched recently, it's the most progressive and the most advantageous in terms of the speed of transactions. For now, though, it lacks adequate documentation and use cases;

· Exonum from… Exonum — high performance and massive functionality. However, because it's written on the rare Rust, it's like with MONAX — you're forced to deal with the parental company. You just won't find other Rust coders because there are a few of them.

Since the selection of a blockchain foundation is so important and those who take the decision need to consider quite a lot of what they tend to not know, consulting companies are in demand. You pay for experience in the area that is unfamiliar to you hence ensuring that the path you've chosen is the correct one.

Construction erection

Having selected the ingredients, you need somebody who knows how to make a dish out of them.

With the technology possessing the potential of being highly secure, convenient, and quick, it's the development team that determines whether the ultimate product will be like this or not.

Much like with a safe or an alarm system, those who create permissioned blockchain for your enterprise have to be trustworthy and, well, they have to know what they're doing. The only realistic way a blockchain net can be hacked is by using wormholes left at the stage of development.

They can be left mistakenly. They, however, can also be incepted intentionally — your corporate secrets may cost way more than you pay the one(s) you confide in.

For that reason, engineers have to be selected thoughtfully and it's more reasonable to opt for a reputable company rather than just finding a guy at UpWork.

The Bottom Line

Permissioned blockchain can provide what no other IT solution does. It's an innovative approach in business optimization and most of its potential is believed to remain unexplored.

However, much like anything else of a progressive nature, it demands a substantial amount of skill, knowledge, and experience to be implemented and operated.

All you need is to gain these.

Once you've done, benefits are not far off.

Have a question?

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