The ultimate guide to creating a private blockchain network

A private blockchain network allows companies to take benefits of decentralized services in a centralized way. 

Many companies are moving toward creating their networks to get custom blockchain solutions for their businesses.

Companies can get complete control of their network, which can help them get better security and performance to operate their business easily.

You can check in detail about how to create your network. However, it will be best for you to understand how a private network blockchain differs from a public network. 

What is a Private Blockchain?

A private blockchain, also known as a permissioned blockchain, is essentially a closed network. Unlike public blockchains, where anyone can join, only pre-approved users are allowed to participate. This control is maintained by a single organization that manages the network and sets the rules.

Since everyone on the network is known, transactions can be faster and more scalable compared to public blockchains. However, this control comes at the cost of reduced transparency, as some data on the blockchain may be hidden from certain participants.

How are private and public blockchain networks different from each other?

Check the difference between a private and public blockchain: 

Private blockchain	Public blockchain
High transaction speed due to the number of transactions involved	Anyone can use the decentralized public network.
Owned by a centralized authority.	Owned by no one.
Partially decentralized system	Fully decentralized system.
It consists of single nodes.	Copies of the entire network are stored on each node.
Allowed reversal and removal of transaction record	There is no possibility of reversing or removing transaction records
The owner can modify the entire data ledger	Lower transaction speed due to more number of transactions involved
Owner can modify the entire data ledger	Data cannot be altered
No rewards for maintaining nodes.	Each participant gets rewarded with their native cryptocurrencies or tokens.

Check-in detail about how private networks help you improve your business.

How do Private Blockchains Operate?

Unlike their public counterparts, private blockchains function as exclusive clubs with tightly controlled access. Imagine a shared record-keeping system, accessible only to pre-approved members. This is the essence of a private blockchain.

Operating under the control of a single entity or a consortium of organizations, these permissioned networks prioritize security and efficiency. Access rights are meticulously defined, allowing specific members to view or modify data on the blockchain. This contrasts with public blockchains where anyone can join and participate.

Here’s a glimpse into how transactions occur:

1. Permissioned Entry: Only authorized participants can join the network. This is unlike public blockchains where anyone can become a node (computer verifying transactions).
2. Controlled Access: The governing body manages the level of access each member has. Some might only be allowed to view specific data, while others can add new transactions.
3. Tailored Consensus Mechanisms: Public blockchains typically rely on complex algorithms like Proof-of-Work to validate transactions. Private blockchains, due to their controlled nature, can adopt simpler and faster consensus mechanisms, boosting transaction speed and efficiency.

In essence, private blockchains offer a secure and streamlined environment for information sharing within a predefined group. This makes them ideal for scenarios where data privacy and regulatory compliance are paramount.

Blockchain Technology Market Size & Trends

The global blockchain technology market size was valued at USD 17.46 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 87.7% from 2023 to 2030.

The need for secure and verifiable transactions is fueling the blockchain boom. This technology, with its decentralized and tamper-proof ledger, guarantees the trustworthiness and visibility of transactions. This makes it a perfect fit for industries like finance, healthcare, and supply chains, where these aspects are crucial. As a result, businesses in these sectors are rapidly adopting blockchain solutions to strengthen security and shed light on their operations.

How can private blockchain benefit your business?

These are the ways companies can benefit by creating their network.

1. Great security  

Allows organizations to restrict their network to verified users and staff to improve their network security.

Moreover, companies can get exact details about all the participants involved in their network and take quick action in case they catch any suspicious activities 

2. Low cost 

Since companies use their own network, they don’t need to pay any transaction fees or other charges involved in public networks. Moreover, companies can create apps on their network to get full benefits. 

3. More transparency 

offers better coordination and verification between companies and their members participating in a particular network. 

4. Data Privacy 

As a company’s network consists of authorized users, companies can ensure that their data are secure and shared only among trusted sources.

5. Better performance

It consists of fewer members than a public network resulting in limited activities such as transactions and verification. Moreover, all the transactions are automated with smart contracts, helping companies to get fast performance for business-related transactions.  

Less involvement in different activities puts less of a burden on the network, which can help them improve their performance.

However, to create your network, you should use Ethereum. 

Why should you choose Ethereum?

Ethereum is an open-source network that is used for creating dApps.However, there are many other reasons you should choose Ethereum to create your network.

1. Established blockchain network

Ethereum is one of the oldest networks that was developed in 2015. Being the oldest network offers many benefits to their communities, such as

• In-depth documentation
• Time-tested development tools
• List of great tutorials, and many development groups.

Since many private blockchains are developed with the help of Ethereum, it will be easy for you to tackle any challenges when developing your decentralized network on Ethereum.

2. Smart contracts 

Smart contracts are one of the major features of Ethereum. With smart contracts, you can automate transactions and other processes on your network that will execute after meeting the conditions you have set.

The popular standards for smart contracts available on the Ethereum blockchain are ERC-721 and ERC-2O.

3. Adoption on a big scale 

Many businesses are using Ethereum to create decentralized apps and smart contracts due to its vast popularity. Its wide adoption can help you quickly get blockchain developers to create private networks on the Ethereum blockchain. 

Their experience with creating different projects on Ethereum will enable them to create and offer customized blockchain solutions and networks for your business.

However, if you want to go for another option, you can choose Solana. Check this video to understand which blockchain will suit your project.

Steps to create a private blockchain

Let’s check the process to understand how to create your blockchain using Ethereum.

1. Understand your business goals. 

Knowing the purpose of creating a network for your business can help you strategize your business plan to achieve your business goals. Identify your target audience and understand what features and functionalities you can add to your network to make it worthwhile for your customers.

If you are targeting a particular niche, you can add features common to that particular network, such as healthcare, fintech solutions, gaming, etc.

Also, you can research a particular decentralized network relevant to your targeted industry.

2. Hire blockchain developers. 

You can hire blockchain developers to build your platform, starting from scratch. Creating a private blockchain requires extreme development skills only skilled blockchain developers can have. 

However, there are multiple ways you can hire blockchain developers, such as freelancers, in-house developers, or outsourcing your project to a blockchain development company.

To get the best output for your project, you should outsource it to experienced blockchain development companies. Those have already created many blockchain-based projects for their clients.

To hire the best blockchain developers, you can check whether they can:

• Integrate crypto wallets into blockchain platforms.
• Understand how to add advanced technologies to platforms such as AR, artificial intelligence, and machine learning. 
• Having knowledge of the latest trends that are going on in a decentralized world.
• Can overcome challenges when developing blockchain platforms, such as implementing your preferred consensus mechanism.

Moreover, it would be best if the team follows the Agile process to create personal networks. 

3. Build a private chain

After hiring a perfect blockchain developer team, you can go through the building process to create a private chain for your network.

I. Geth scenario 

In this, the team will use the Ethereum blockchain using GO Ethereum (an Ethereum implementation of the Go programming language.)

The team will install Geth to verify if they want to use the Homestead version of Ethereum or other Ethereum improvement proposals(EIP). 

The developers can create Genesis files and modify them using the Geth console(command line interface).

A skilled blockchain developer can easily handle this task. Here is the process of building a private chain: 

A. Configure chain parameter in the genesis block

In this process; you will decide the speed of your network. You can set the 0 difficulty level for block generation.

Next, pre-allocate addresses on your chain with fake Ether balances. The reason for calling ether fake is that you cannot transit without using the main Ethereum network.

However, you can assume the process is a dummy transaction for your network.

B. Create users’ accounts and smart contracts

The user accounts will act like crypto wallets where participants can transact on the network. For example, users can make payments in crypto to access services and products available on the network.

C. Start Ether mining 

The process involved distributing Ether among participants based on the business model the company has implemented in its network.

The network will immediately start Ether mining, where the node will do all the calculations while adding new blockchain nodes.

D. Include more nodes

You can assume nodes are servers running on networks or EVM (Ethereum virtual machines). There will be a requirement for enough nodes for participants to exercise equal rights over the product. 

Moreover, there is the possibility that blockchain developers will offer cloud services to run your network.

II. Fork Ethereum Scenario 

Forking Ethereum is another scenario where developers will talk about copying blockchain to create forks.

This approach will offer you more control over how your chain will operate. 

For example, you can implement another consensus mechanism you prefer for your network.

If you don’t know the consensus mechanism, it decides how the blockchain will validate its on-chain data to prevent fraudulent transactions. 

Proof of work and stake are some of the most popular network consensus mechanisms.

Moreover, when using the Ethereum blockchain, you must remove all the available decentralized apps you don’t need for your network to avoid resource and maintenance costs.

However, this approach will need more resources than the approach. 

It will be better for you to take advice from blockchain developers to select the best approach for building your network.

4. Plan for required decentralized apps

Creating your own blockchain platform alone will not be enough, and you will need some apps to fulfill your business needs. 

On your blockchain platform, you can create apps to enable crypto transactions and store data records for different purposes.

Two essential components are required for creating dApps on your networks, i.e.,

• Smart contracts (to automate transactions and other processes.)
• Platform UI (allowing users to interact with your network).

5. Start prototyping 

Instead of directly jumping on creating your network, you can build a prototype to check all your network’s features and UI functionalities.

The prototype can help you understand how your platform will look after its launch. Moreover, creating changes in UI functionality and other blockchain-based components is easier than making modifications on a fully developed network.

6. Create the backend part

In the backend development part, you will be involved in all the features, APIs, and other functionalities that will make your network fully functional. When working on the development part, you can decide on:

• Creating your native cryptocurrency 
• Offering support to multiple crypto wallets 
• Smart contract functionality.

There are many other important parts that blockchain developers will guide you with when creating your network.

7. Deploy apps to your blockchain

Once the dApps are ready, you can deploy their smart contracts and the rest of the required app components to your network. 

Make sure your partner blockchain developers are properly following Agile methodology to help you stay updated with your project enabling you for apps’ further maintenance and upgrades after its launch.

However, there are a few limitations of networks. Let’s check all these limitations. 

What are the limitations of private blockchain development?

Along with benefits, there are a few limitations to the networks that you must understand.

1. Less Uptime 

Due to the low availability of blockchain members, there is no guarantee that your network will have 100% uptime as compared to other popular public networks. 

You have to take care of your network’s chain integrity and security to ensure enough independent nodes to validate on-chain transactions.

2. Compromise in anonymity   

Users will not get complete anonymity on your network due to its great transparency feature. However, you can adjust the privacy level on your network to help users feel safe and secure on your network. 

For example, if you are a healthcare provider, you can make your patients’ data anonymous from the rest of the network unless they are open to accessing their data.

3. Have to manage access

Limited members in your network will need you to redeploy smart contracts if they have to agree upon some options. 

However, you have to manage to access rights to different categories of users using your network. For example, using your network, you can allow more access to your staff members than customers.

What tools and technologies will you need to create your network? Let’s check.

Required tech stack to create private Ethereum blockchain

Tech stack	Purpose
Go Ethereum (Geth)	For implementing the chain
Solidity (programming language)	For creating smart contracts
Remix	Creating an environment for smart contracts
Truffle suite	For testing blockchain
Infura	For deploying nodes
Web3.js	For connecting the chain with off-chain software
Node.js, React, etc.	For developing off-chain components

What is the best way to create a private blockchain?

Hiring blockchain developers is the best way to ease the process of creating a decentralized network for your business.

There are multiple ways you can hire blockchain developers, such as in-house, freelancers or outsourcing your project to a blockchain development company.

However, the best way we can suggest to you is to outsource your project to blockchain development companies, as they have experience creating blockchains for different industries.

You can best check the past projects they have made for their clients to help you get an idea about their skills and expertise in blockchain development. 

Contact Idea Usher to create your private blockchain

Due to the high demand and low availability of blockchain developers, you can face challenges in starting your blockchain development. 

However, you can finish your search for finding good blockchain developers by contacting us regarding creating your network.

Our team is experienced in creating a decentralized network and can offer you help with customized blockchain-based development services such as creating cryptocurrencies, metaverse, dApps, etc. 

FAQ

Q. What is a private blockchain network?

A. Think of it as a secure digital record-keeping system, accessible only to invited members. Unlike public blockchains (like Bitcoin), where anyone can join, a central authority controls who can see and participate in a private blockchain.

Q. Example of a private blockchain?

A supply chain network might use a private blockchain to track product movement between companies. Each participant can see what they need to, but sensitive information remains confidential.

Q. How do I create a private blockchain network?

A. Building your own blockchain requires technical expertise. There are also blockchain-as-a-service (BaaS) platforms that offer private network options with varying levels of control and setup complexity.

Q. Why use a private blockchain?

• Control & Privacy: Ideal for businesses needing control over data access and ensuring confidentiality of sensitive information.
• Efficiency: Transactions can be much faster on private blockchains compared to public ones.
• Scalability: Private blockchains can be tailored to specific needs, making them suitable for various use cases within an organization or group.