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How to Create a Private Blockchain: All You Need to Know

How to Create a Private Blockchain: All You Need to Know

Blockchain
Reading time:
25 min
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2033
Published:
24.07.2024

Public blockchains grant access to anyone, whereas private blockchains restrict access to selected or authorized users. The majority of cryptocurrencies are created on open-source, public blockchains. Private blockchains allow anyone to use them but assign specific roles and restrict change to particular users. Such a type of blockchain is more widely used for enterprise applications. 

Private and public blockchains typically cater to organizations or businesses with distinct requirements. In this comprehensive article, we will consider the main distinctions between public and private blockchain networks. You will also learn why it is worth building a private blockchain and how to create your own blockchain itself. Let’s start!

Definition of blockchain

A blockchain functions as a decentralized digital ledger that securely and transparently records transactions. Operating without centralized control, it relies on a peer-to-peer network of computers. Each block in the chain contains a hash, akin to a unique digital fingerprint that ties it to the preceding block, forming a virtually immutable chain of blocks.

Transactions undergo verification by a network of nodes within the blockchain. Upon confirmation, the transaction is added as one more block to the chain. Every node maintains a copy of the blockchain, ensuring uniform access to information and eliminating single points of failure.

The blockchain technology market size was valued at $7.4 billion in 2022. It is promised to grow to $94 billion by 2027. The application of both private and public blockchains is gaining momentum. This shows the promising business opportunities for enterprises that adopt blockchain. 

The comparison between blockchain and private blockchain

Before we consider the specifics of public and private blockchains, here's an overview distinguishing these two primary types of blockchain networks.

AspectPublic blockchainPrivate blockchain
AccessibilityOpen for anyone to participate in core blockchain activities such as reading, writing, adding blocks, and auditing network activities.Accessible just to chosen and verified participants.
ControlIt operates decentralized and is managed by a community of users with no single controlling entity.When blocks are validated, entries are immutable.Operated centrally by a single organization, allowing them to redefine, edit, or delete entries.
TransparencyTransactions are transparent.They are visible to all network participants.Transactions are private and visible only to authorized users.
AnonymityUsers are able to remain anonymous.Identifies the participants involved in transactions.
Data visibilityAll transactions are publicly visible on the network.Access to the network is controlled and restricted.
SecurityHighly secure and resistant to attacks, leveraging decentralization and cryptography.Secured using cryptographic techniques.

Public blockchain

This type of blockchain operates as a secure, transparent, and decentralized method of logging transactions on a digital ledger. It serves as a robust foundation for developing decentralized applications and services that can be accessed by anyone with an internet connection. 


Participation in the network is accessible to all, allowing users to view data and contribute to transaction verification. Examples of public blockchains comprise Ethereum and Bitcoin. Notably, it is possible to build a private blockchain based on a public one. So, what is a private blockchain?

Private blockchain

This blockchain functions as a decentralized ledger accessible solely to a specific group of individuals or organizations. Controlled by a single operator or entity, it regulates network access, data visibility, and blockchain content creation. Access to the permissioned blockchain network requires invitation and identity verification.

In contrast to public blockchains, where participant identities are often anonymous, those involved in private blockchain networks are identified. Examples of private blockchains are Corda, Hyperledger Fabric, and others. Selected users maintain the shared ledger, with the owner having the authority to override, edit, or delete entries as needed.

An approved protocol or the network operator(s) employs smart contracts or other automated methods to validate and authenticate participant details. To initiate a transaction on a private blockchain, individuals submit it for network verification. When nodes confirm the transaction, it is written to the blockchain as an additional block.

Reasons to make your own blockchain

Developing a personal blockchain presents a range of benefits for enterprises seeking heightened control, efficiency, and security in their operations through blockchain technology:

  1. Enhanced energy efficiency: Mining bitcoins demands substantial processing power, whereas private blockchains offer pre-mined coins, making them more energy-efficient compared to public blockchains.
  2. Reduced volatility: Public blockchain cryptocurrencies are prone to volatility, with unpredictable price fluctuations. In contrast, owners have daily control over private blockchains, resulting in reduced volatility.
  3. Empowerment of enterprises: Private blockchain platforms are tailored to empower enterprises, focusing on organizational success over individual contributors, thereby fostering increased revenue and overall business growth.
  4. Robust security features: Permissioned access in private blockchains ensures that participants require authorization to join and operate within the network, thereby enhancing data security and privacy.
  5. Lower operational costs: Direct peer-to-peer interaction in private blockchains eliminates intermediaries, leading to substantial cost reductions for participating businesses.
  6. Transparency and controlled anonymity: Private blockchain platforms offer transparency where necessary, enabling stakeholders to view pertinent information while providing options for user anonymity based on business requirements.
  7. Performance and data integrity: Private blockchains offer flexibility in setting transaction rules and fees, resulting in faster transactions and enhanced data integrity compared to public counterparts.

In summary, creating a private blockchain is a viable option for enterprises looking to leverage blockchain technology effectively.

How to create a private blockchain?

Building a private blockchain presents a reliable method for businesses and organizations to efficiently and securely manage their confidential data and transactions. Below is a structured approach to constructing a private blockchain. Hiring an experienced blockchain development firm like Peiko can streamline this process, ensuring optimal resource management and perspective. So, how to create your own blockchain?

1. Define the purpose

Clarify the specific use case and aim to tailor the blockchain solution to meet unique business needs. This step enables the blockchain creation team to understand the intended application's challenges comprehensively.

For instance, you can consider using blockchain to enhance supply chain management, streamline securities trading settlements, or optimize customer loyalty programs.

Identifying the use case is crucial as it guides the specification of features and needs for your blockchain network. This clarity aids in selecting the right blockchain platform and development tools tailored to your requirements.

2. Choose the consensus algorithm

Select an appropriate consensus algorithm such as PBFT (practical Byzantine fault tolerance), PoA (proof of authority), or DPoS (delegated proof of stake) based on the requirements of the private blockchain.

  • PoA: It is a consensus algorithm where transactions are validated by approved network participants known as validators. Validators are typically identified entities with reputations to uphold. 
  • PBFT: This consensus algorithm is designed to achieve consensus in distributed systems prone to faults and malicious actors. PBFT ensures network reliability by requiring a two-thirds majority agreement among nodes before validating and committing transactions. 
  • DPoS: A consensus algorithm where network participants vote to elect a specified number of validators or delegates that validate transactions and maintain the blockchain.

3. Select the blockchain platform

Determine the suitable blockchain platform—such as Hyperledger Fabric, Ethereum, Corda, or Quorum—that aligns with business objectives and offers essential features for the private blockchain solution. 


When selecting a blockchain platform, it's important to evaluate factors like scalability, security, and developer friendliness. Additionally, assessing the compatibility of programming languages and development tools offered by the platform is essential. These considerations ensure you choose a platform that aligns with your project's tech needs and facilitates smooth development processes.

4. Establish the network

Set up a permissioned network where authorized participants act as nodes to validate transactions securely within the private blockchain environment.


Designing the network architecture must prioritize both security and operational efficiency. This involves specifying the consensus mechanism for transaction validation, determining the network topology, and establishing effective communication protocols. These components collectively contribute to a framework that ensures reliable performance and secure operations within the blockchain network.

5. Design smart contracts

Develop and deploy smart contracts tailored to automate agreements and processes within the private blockchain network.


Smart contracts represent autonomous, condition-based programs stored on the blockchain. They enable automated and secure transactions devoid of intermediaries. Within private blockchain development, these contracts are vital in optimizing business processes and minimizing transaction expenses.


The creation of smart contracts typically involves programming languages like Golang (Hyperledger Fabric) and Solidity (Ethereum). It's crucial to subject these contracts to thorough testing and rigorous audits to guarantee their proper and secure functionality.

6. Establishing nodes

After developing smart contracts, the subsequent task is configuring nodes. Each node must have the necessary software and hardware to engage in network activities. This involves installing blockchain client software.


Nodes should be interconnected within the network and fortified with essential security measures such as firewalls and encryption protocols. These precautions are pivotal in fortifying network security and shielding against potential threats.

7. Deploy and maintain the network

Deploy the private blockchain network and establish protocols for ongoing updates, maintenance, and various backup procedures to sustain operational continuity and security.


If you are searching for info on how to create a blockchain, turn to Peiko. We will build a solution that meets your enterprise's requirements. Our experienced private blockchain developers use the best Web3 tech stack to ensure your network's security and seamless performance. 

Examples of private blockchain

Private blockchains have found numerous applications across diverse industries, providing an authorized and secure access to trusted participants. This enables private blockchain companies to enhance data sharing, streamline operations, and foster stakeholder trust. 


Nowadays, more industries are interested in how to make a blockchain and choose private blockchain solutions to address specific business needs, thereby improving efficiency and security.

Hyperledger Fabric

It is a leading private blockchain solution widely adopted in supply chain management. It facilitates secure data sharing among businesses, simplifying the complexities inherent in supply chain processes.


For instance, Walmart implemented Hyperledger Fabric to enhance its food supply chain transparency. The private blockchain restricted access to authorized participants within a permissioned network, ensuring data accuracy and traceability. This initiative significantly lowered tracking time from a couple of days to seconds. Thus, the company enhanced food safety measures and expedited the identification of contamination sources. Thereby, Walmart boosted supply chain efficiency and clients’ confidence.

Corda

It is another prominent private blockchain utilized extensively in the BFSI (Banking, Financial Services, and Insurance) sector. Financial organizations apply Corda to securely share sensitive financial information, facilitating smoother transactions.

Quorum

It is one of the preferred permissioned blockchains for financial transactions. Many large corporations utilize Quorum due to its robust privacy and security features, offering a compelling alternative to traditional financial platforms.


These examples demonstrate how private blockchains cater to specific industry needs, enhancing operational processes, data security, and stakeholder collaboration. As more sectors recognize the benefits of private blockchain technology, its adoption is likely to expand, driving further innovation and efficiency improvements across various domains.

Tech stack for developing a private blockchain

When embarking on the journey of creating a private Ethereum blockchain, it's essential to align with a development partner who is well-versed in the essential technologies. It is vital to apply modern and powerful tools and frameworks for a robust development process. Let’s take a tech stack for the development of a private permissioned blockchain on Ethereum as an example.

  • Geth is used to implement the chain.
  • Golang is applied to add additional logic to Geth (Go Ethereum).
  • Solidity serves as the programming language for smart contract development.
  • Hardhat/Foundry is utilized for testing purposes.
  • Web3.js/Ethers.js connects the blockchain with off-chain software components.
  • Slither: A static analysis tool for Ethereum smart contracts written in Solidity, designed to identify vulnerabilities and potential errors in the code.
  • Echidna: A fuzz-testing tool for Ethereum smart contracts that generates random inputs to uncover vulnerabilities and anomalies in contract behavior.
  • In addition to these foundational tools, frameworks such as Node.js and React are employed to develop off-chain components.

These technologies collectively form the cornerstone of building a private Ethereum blockchain, ensuring scalability, security, and interoperability in the development of custom blockchain solutions.

Private blockchain use cases

Private blockchains have emerged as a robust solution for businesses aiming to enhance secure and efficient data management. These practical examples illustrate how private blockchain development can provide tailored solutions to meet unique business requests and foster innovation in the digital era. Below, we delve into various private blockchain use cases:  

  • Supply chain management: Private blockchains enhance supply  chain operations by providing a secure and transparent platform that ensures traceability of goods, effectively reducing fraud and counterfeit products.
  • Financial services: Private blockchains streamline cross-border payments. Individual blockchains facilitate secure data sharing among financial institutions and accelerate the settlement process.
  • Healthcare: In healthcare, private blockchains securely share patient data, enhancing interoperability and ensuring compliance with stringent data privacy regulations.
  • Intellectual property rights: Private blockchains safeguard patents and copyrights by offering a reliable ownership and licensing management platform.
  • Identity management: Private blockchains enhance identity management with secure digital identity verification, reducing identity fraud in web transactions.
  • Real estate: In real estate, private blockchains streamline transfers and improve property transaction transparency, mitigating fraud and optimizing property management.  
  • Insurance: Private blockchains in the insurance sector automate claims processing, enhancing data accuracy and fraud detection.  

       
Each use case underscores the transformative impact of private blockchain solutions in diverse industries, empowering businesses to innovate and outperform competitors in the digital age.        

Best practices for implementing private blockchains

Implementing an individual blockchain involves strategic decisions and meticulous planning to leverage its benefits effectively. Here are essential best practices for deploying and managing a private blockchain network:

Employ strong encryption

Protect sensitive blockchain data with robust encryption methods. You should secure key management practices to prevent any unauthorized access and ensure confidentiality within your blockchain.

Ensure network resilience

Build a resilient network infrastructure capable of withstanding disruptions and attacks. Implement disaster recovery plans, regular data backups, and protocols to mitigate potential threats and ensure continuous operation.

Maintain regulatory compliance

Adhere to legal and regulatory requirements relevant to your industry, such as AML (anti-money laundering) and KYC (know-your-customer) guidelines. Compliance helps build trust and legitimacy, especially in regulated industries.

Conduct regular testing and audits

Regularly test and audit your individual blockchain network through rigorous security testing, vulnerability assessments, and code audits. This ensures the robustness, reliability, and functionality of the blockchain system while identifying and addressing potential vulnerabilities proactively.

Provide maintenance and enhancement

Establishing a private blockchain network is a continuous endeavor that necessitates ongoing maintenance and enhancements to sustain optimal security and efficiency. This involves vigilantly monitoring the network for potential security risks and consistently upgrading both software and hardware to align with the latest innovations in blockchain technology.


By following these essential practices, organizations can effectively implement and manage private blockchains. Thus, enterprises can optimize operational efficiency, enhance security, and achieve their business objectives securely in various sectors.

Choose Peiko for top-quality blockchain development services

The Peiko team is an expert in developing reliable and secure blockchain solutions. We provide customized blockchain development services that address the unique requirements of various industries, from finance to healthcare, logistics to entertainment.

One of our notable fintech projects is Bitcoin Addition, a versatile mobile cryptocurrency wallet designed to streamline digital asset management. This wallet supports multiple cryptocurrencies, facilitates seamless transfers to contacts, and includes an offline payment feature for uninterrupted transactions.

In developing Bitcoin Addition, we focused on creating an intuitive tablet-optimized interface so that both experienced crypto enthusiasts and beginners can understand the user journey. 

We included a QR code generation feature for easy wallet address sharing, a unique "Shake-to-pay" function for user discovery and transfers, and synchronization of contact books for enhanced connectivity.

Security was a top priority throughout the creation of the Bitcoin Addition app. Our experts implemented rigorous security measures to ensure bank-level security standards. This included integrating robust processes to detect and mitigate vulnerabilities in the app lifecycle and continuously monitoring source code security.

At Peiko, we aim to deliver blockchain solutions that exceed expectations, offering top reliability, security, and innovation. We can create different crypto solutions, including crypto exchanges, dApps (decentralized applications), and others. If you are looking for how to create a blockchain solution or need skilled private blockchain developers, turn to Peiko, and experience tangible business results.

Conclusion

In summary, establishing a private blockchain requires a combination of technical proficiency and careful preparation. Businesses can receive a private blockchain that suits their requirements by setting well-defined goals, choosing appropriate consensus protocols, designing resilient infrastructure, and emphasizing stringent security measures. 

Collaborating with experienced blockchain development providers can help you successfully navigate the challenges of developing private blockchain solutions.

If you need professional blockchain development services, turn to a dedicated development firm such as Peiko, which is renowned for the successful deployment of numerous projects. Our team of specialists excels in crafting private blockchains tailored to tackle intricate challenges. We will create a customized solution that perfectly aligns with your unique business needs. Contact us today!

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