Enterprises need to ensure some level of security, privacy, compliance, and performance. These processes are very complex and time-consuming. Problems frequently emerge with data incompatibility or lack of trust. How can blockchain help in such situations?
Blockchain is a distributed, decentralized public ledger. To picture it, it can be described as a constantly growing list of transactions stored on devices on the network called nodes. Cryptographic protocols connect the nodes and keep transactions confidential.
All the data on this network is visible to users and each is responsible for their actions. Data is immutable and not controlled by one central authority. But what in the situation where we want to have control over who is in our network and we want to keep all our data confidential from the outside world? For this, use a private blockchain.
What are private blockchains and what are their benefits
Private blockchains are either open-source, consortium, or privately developed. There are several options for a private blockchain, but the most popular ones are the Linux Foundation’s Hyperledger Fabric and R3’s Corda.
One feature that sets private blockchains apart is that network participants can limit — or permission — access. Network administrators have to invite you in. Limiting access to the network ensures private transactions. Only the entities participating in a transaction will know about it. To get a higher level of privacy, it’s enough to limit the read permissions and this gives us a high level of data protection.
Hyperledger Fabric scalability depends on many factors. Software infrastructure design and complexity impact performance. The Hyperledger Foundation claims that its private blockchain is more scalable and allows more transactions per second compared to public blockchains. A 2019 study by Christian Gorenflo, Stephen Lee, Lukasz Golab and S. Keshav even claims to have achieved 20,000 transactions per second.
One major tradeoff for higher rates of transaction processing is that private blockchains are more centralized. Rather than public proof-of-work consensus — which Bitcoin and Ethereum use, Hyperledger Fabric uses Raft consensus.
To reach consensus in Hyperledger Fabric, you need an odd number of nodes and there needs to be a simple majority of those working to confirm transactions. For example, if there are seven nodes in a network, four would need to be working to verify new transactions. However, having such a limited number of nodes also comes with risk.
Giving permission to actors in a network give them a lot of power — so be sure it’s someone you trust. Blockchain developer Tomasz Kaliszuk explained that “Raft [consensus] may lose more nodes and it will continue to work. It is less secure because it does not protect against ‘bad actors,’ that is, these ‘bad nodes,’ so it’s very important in enterprise blockchains to trust that such bad users will not gain access. Raft, however, is faster, much more scalable when it comes to network expansion.”
When designing a network based on Hyperledger Fabric, we not only try to approach it from a technical point of view, but also from the business logic. We try to understand how our client’s business works, what problems we solve, how we can combine technology and business to optimize processes, and bring tangible benefits to clients.
What is Hyperledger
Hyperledger Fabric supports transaction validation. It is characterized by a modular architecture that breaks down transaction processing into phases. This separation is intended to optimize network scalability and performance.
Distributed ledger technology includes blockchain technologies and smart contracts. Moreover, we can build a traditional application using blockchain.
Hyperledger is highly secure. Due to competitiveness, protection laws and personal data confidentiality rules, concerns about confidential data leaks and the need to manage private data, which can be achieved by partitioning the data in a blockchain.
I would like to show you the case of a recent project based on Hyperledger Fabric. On high-level architecture above you can see the structure of the decision-making process before the implemented changes. Making and confirming a decision or confirming a document requires that all parties must communicate with each other in order to agree to the changes at the same time.
Communication between the systems of partners or branches in one organization was without a central trusted data source that would guarantee that the transaction confirmation of all members of this network would be fast and saved information in the database would be the same. With this structure, it’s convoluted and time consuming.
We can add a backend system with a database as a central solution as shown in the diagram above. This solution can improve the process between participants in this network but we still have a problem with distrust and a lack of immutable data, as the data transferred between participants can be changed without the consent of the settling parties. The lack of trusted data affects future transactions and will not resolve our problems. That way we should use DLT as a private blockchain with smart contracts to resolve these problems.
A private blockchain is the most relevant solution in this use case. We solved this problem based on one central data source in which all saved changes are visible to users. Each participant of the network can be transparent with others.
By implementing Hyperledger as a private blockchain, the client gained a common, central, trusted database with consistent data, solved the problem of lack of trust, and by optimizing current manual or semi-automation processes decision-making time has been shortened, which also reduced costs.
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