How permissioned private blockchain is differ from centralised system?

Question

What is the difference between private blockchain and centralised system. Both seems to be same especially in case of permissioned private blockchain. If there are not many nodes, What is the need to create a decentralised system.

In case of public blockchain it seems to be a good idea not to have a centralised architecture as there are many identities involved.

Answer 1

In my opinion most people confuse "private blockchain" with the fact that it would be held within a single organization/institution, but "private" does not necessarily mean there is only one identity involved, all the interest is that it can be precisely shared between multiple entities (but still private), making a member not being able to modify data without others seeing it (transparency = trust). You may also have a lack of trust between different entities within the same organization, and a private blockchain could help with this.

Each member of your private blockchain will hold the ledger, so no need to trust a central authority (again even within the same organization) :

And even if there are "not many nodes", it is still better to have to trust 51% of multiple decentralized nodes than 100% of a single centralized node.

We often see allusion to distributed databases, which are closer to private blockchains. But actually the closest technology would be rather distributed ledgers like Corda, IOTA (which uses a "tangle" and not a blockchain), etc. so blockchain is just another form of distributed ledger, but by far no more complicated to set up.

Compared to a distributed database, in my opinion the blockchain brings you immutability, transparency (native history, no need to implement it), better security and greatly simplifies synchronization (no need for jobs, materialized views, triggers, scripts, etc.). And especially removes centralized control (any provider of a centralized solution can technically and more or less easily alter your data without leaving a trace (delete logs, backups, etc.), in a blockchain it is very difficult). We could also talk about higher availability and certainly lower implementation/maintenance cost.

Private blockchains can also be "permissioned" or "permissionless", following this anonymity/trust schema :

In permissioned blockchains, permissions and roles management is interesting because in addition to the application level, they are controlled at the persistence level for each transaction, so it is not limited as often to a technical user used to access the database. Thus an invalid transaction will be automatically refused by the network even if your client application has a security breach.

Then you have many other interesting things like smart contracts that allow you to guarantee an immutable process. You can for example formal audit a contract with other entities in your network, or with a customer, and confirm with him that the data processing will be done in such a way and only in this way, or even trigger actions at a specific date, etc. In some private blockchain like Hyperledger Fabric you also have the concept of channels if you still need some confidentiality within the same blockchain (isolation of transactions), which again would not be easy to set up in a distributed or even centralized database.

Blockchain is a hot topic at the moment and everyone is trying to get in for anything and everything (FOMO), but of course if you don't need that points (trust, immutability, etc.) you may still go with a traditional central database, which will not require new skills and probably be more performant (even if private blockchains can reach several thousand transactions per second). Also permissioned blockchains are not intended for use with a very large number of participants (you have to identify them), so you may again fall back to a database or a private permisionless blockchain like Hyperledger Sawtooth.

Answer 2

A blockchain as always more secure than a Centralized system and is beneficial for several reasons. If you have some sensitive data you don't want to loose it. Blockchain can act as a backup service for your data. A node goes down the data is still there, that easy. For a private blockchain it builds trust. Imagine a finance company or a bank. Since the customers have a copy of the data and it's not centrally controlled by the bank they would trust it more. Also have a look at smart contracts. They are one of the key points what makes a private blockchain extremely powerful.