Best Practices for Implementing a Permissioned Blockchain

Blockchain
technology
has
emerged
as
a
transformative
force
in
the
world
of
financial
services
with
the
introduction
of

cryptocurrencies.
Over
the
years,
blockchain
has
developed
the
foundations
for
multiple
decentralized
systems
and
applications,
including

NFTs
and

DeFi
solutions.
One
of
the
most
important
trends
in
the
domain
of
blockchain
points
to
the
differentiation
between

permissioned
and
permissionless
blockchains.

If
you
are
here
looking
for
best
practices
for
implementing
permissioned
blockchains,
then
you
must
know
why
permissioned
blockchains
have
gained
popularity.
Blockchain
is
inherently
decentralized
and
completely
transparent,
thereby
allowing
anyone
to
check
the
data
on
the
networks.
However,
data
visibility
increases
the
risks
of
security
threats
that
can
damage
the
integrity
of
blockchain
systems.

Permissioned
blockchain
helps
make
blockchain
technology
more
appealing
to
businesses
with
the
assurance
of
better
control
over
data
visibility.
Some
of
the
common
permissioned
blockchain
networks
include

Hyperledger
and

Corda,
which
help
in
creating
blockchain
systems
for
businesses.

The
necessity
of
permissioned
blockchain
implementation

is
visible
in
the
case
of
businesses
that
emphasize
data
privacy
and
control
more.
However,
it
is
also
important
to
note
that
the
implementation
of
permissioned
blockchains
invites
multiple
challenges.
Let
us
take
a
look
at
the
best
practices
for
implementing
permissioned
blockchain
and
the
ideal
solutions
for
resolving
them.

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How
are
Permissioned
Blockchains
Better
than
Permissionless
Blockchains?

Before
you
find
the
answers
to
‘How
do
you
implement
a
permissioned
blockchain?’
you
must
be
aware
of
the
significance
of

permissioned
blockchains.
As
envisioned
by
Satoshi
Nakamoto,
blockchain
networks
should
allow
everyone
to
participate
without
any
censorship
and
guarantee
complete
transparency
of
data
on
the
networks.

However,
problems
with
lack
of
authorization
and
transparency
into
data
can
create
problems
for
businesses
that
want
to
keep
certain
data
confidential.
Permissioned
blockchains
are
different
from
permissionless
blockchains
in
terms
of
decentralization,
decision-making,
transparency,
speed,
and
anonymity.

In
permissioned
networks,
owners
or
administrators
are
the
ones
who
make
the
calls
and
allow
access
privileges.
However,
the
owners
and
administrators
also
gain
control
over
the
degree
of

decentralization
they
want
to
provide
with
the

blockchain
network.
Another
difference
with
permissioned
or
private
blockchain
implementation

is
the
control
of
owners
over
the
level
of
transparency.
Permissioned
blockchains
can
offer
restricted
exposure
to
certain
parties
and
maintain
complete
privacy
against
external
parties.

Permissioned
networks
also
compromise
identity,
as
users
have
to
provide
identification
and
personal
data
to
gain
access.
However,
the
limitations
on
decentralization
and
fewer
nodes
in
permissioned
blockchains
improve
the
speed
of
transactions.
With
limited
nodes
required
to
reach
an
agreement
on
legitimacy
of
transactions,
permissioned
blockchains
provide
faster
transaction
processing.

Why
Should
You
Know
the
Best
Practices
for
Implementing
Permissioned
Blockchains?

Public
blockchains
depend
on
a
self-sovereign
style
of
management
that
relies
on
complete
decentralization.
The
rules
for
governance
of
public
or
permissionless
blockchains
are
defined
by

consensus
algorithms.
On
the
other
hand,
a
permissioned
blockchain
implementation

has
a
completely
different
structure.
Permissioned
blockchains
follow
the
private
or
consortium
model
of
deployment,
and
the
participating
nodes
have
to
be
responsible
for
maintenance
of
their
nodes.
At
the
same
time,
they
must
also
work
with
resiliency
and
efficiency
in
an
interoperable
blockchain
network.

Permissioned
blockchains
need
flexible
and
secure
governance
models
alongside
mechanisms
for
on-chain
collaboration
to
resolve
operational
issues.
Some
of
the
common
operational
issues
across
different
layers
of
permissioned
blockchain
networks
include
storage
management,
chaincode
distribution,
interoperable
connections,
and
membership
governance.
Businesses
setting
up
their
private
blockchain
networks
have
to
pay
specific
attention
to
certain
issues
and
resolve
them
to
achieve
efficiency.

How
Can
You
Implement
a
Permissioned
Blockchain
without
Challenges?

The
ideal
approach
for
answering
questions
like
“How
do
you
implement
a
permissioned
blockchain?”
would
involve
a
review
of
the
common
challenges
in
the
process.
It
is
important
to
review
the
most
prominent
issues
for
implementing
permissioned
blockchains
and
determine
the
best
practices
for
implementation
of
permissioned
blockchains.
Here
is
an
outline
of
the
best
practices
for
businesses
to
implement
permissioned
blockchain
networks.

• Data
  Backup
  and
  Recovery

One
of
the
foremost
questions
in
the
implementation
of
permissioned
blockchain
networks
is
data
backup
and
recovery.
Businesses
could
opt
to
create
a
new
node
for
data
backup
and
recovery
on
blockchain
networks.
However,
permissioned
blockchain
implementation
best
practices

would
suggest
that
it
is
impractical
to
wait
for
hours
as
the
node
syncs
up
data
from
all
the
nodes
and
transfers
configuration
metadata.

In
addition,
data
recovery
becomes
more
important
in
situations
when
you
have
to
migrate
data
across
different
data
centers.
Therefore,
it
is
important
to
look
for
tools
that
can
support
data
migration
or

blockchain
node
upgrades
without
any
service
disruptions.

• Byzantine
  Fault
  Tolerance
  Consensus

Byzantine
Fault
Tolerance
or
BFT
consensus
mechanism
is
an
advanced
algorithm
for
distributed
networks.
It
is
useful
in
situations
where
certain
nodes
fail
to
respond
or
provide
incorrect
information.
The
best
practices
to
permissioned
blockchain

deployment
focus
on
BFT
consensus
as
it
is
a
complex
consensus
algorithm.

Therefore,
it
is
important
to
choose
consensus
algorithms
based
on
academic
proof
for
effectiveness
and
safety.
Some
common
examples
of
such
algorithms
include
Algorand
and
Tendermint.
In
addition,
blockchain
architects
and
developers
could
also
explore
many
other
innovative
advancements
for
implementing
permissioned
blockchains
with
BFT
consensus.

Business-level
implementations
of
blockchains
must
ensure
that
the
consensus
mechanism
works
according
to
the
comprehensive
proof
requirements.
In
addition,
the
consensus
mechanisms
must
deliver
the
desired
operational
traits
such
as
resilience
and
performance.

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• Pluggable
  Implementation

Another
crucial
addition
among
private
blockchain
implementation

best
practices
points
at
pluggable
implementation.
It
is
important
to
account
for
the
regulatory
compliance
requirements
across
different
countries.
Different
jurisdictions,
such
as
Asia,
the
EU,
and
Russia,
require
blockchain
networks
to
follow
certain
crypto
standards.

Therefore,
implementation
of
permissioned
blockchains
requires
painstaking
effort
to
ensure
that
specific
libraries
and
aspects
of
the
blockchain
match
with
regional
and
national
blockchain
standards.
With
the
help
of
pluggable
implementations,
developers
and
architects
can
save
a
lot
on
programming.
It
would
also
help
in
the
promotion
of
open-source
technologies
for
permissioned
blockchain
compliance
in
a
larger
market.

• Governance
  Model

Permissioned
blockchains
are
the
first
choice
of
businesses,
and
every
business
follows
its
own
governance
model.
Therefore,
the
best
practices
for
permissioned
blockchain
implementation

must
emphasize
the
selection
of
a
complex
governance
model.
Governance
is
a
critical
factor
in
consortium
blockchain
implementation
models
used
for
permissioned
blockchains.

Lack
of
governance
could
lead
to
significant
challenges
with
real
applications
such
as
policy
definition,

smart
contract
deployment
and
upgrades,
agreements
on
addition
of
new
members,
or
creation
of
new
challenges.
In
the
case
of

consortium
blockchains
with
multiple
members,
it
is
impractical
to
achieve
consensus
at
scale
across
different
organizations.
It
is
important
to
look
for
practical
solutions
for
addressing
such
issues
by
utilizing
on-chain
mechanisms
that
can
offer
audit
trails
for
governance-related
agreements.

Another
important
highlight
among
permissioned
blockchain
implementation
best
practices

is
the
use
of
automation
through
chaincodes.
The
automation
by
chaincodes
could
help
in
reaching
agreements
by
utilizing
voting
and
other
instruments.
It
can
be
supported
through
a
special
governance
channel
for
existing
transactions,
policy
evaluation
results,
and
votes,
and
the
channel
must
be
similar
to
the
one
used
for
governance
of
ordering
services.

In
addition,
permissioned
blockchains
can
also
improve
their
governance
by
using
a
Governance
System
Chaincode
or
GSCC.
Businesses
can
also
opt
for
external
decentralized
governance
systems
offered
by
vendors.
Stronger
and
more
flexible
governance
mechanisms
can
help
in
extending
the
functionalities
of
governance
to
other
users.
For
example,
users
can
vote
for
addition
of
new
members,
evaluate
proposals
against
policy
requirements,
and
track
proposals.

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• SQL
  and
  Smart
  Contract
  Problem

The
use
of
SQL
for
data
queries
in

smart
contracts
leads
to
a
significant
challenge
for
permissioned
blockchain
implementation

on
networks
such
as
Hyperledger.
It
is
evident
in
the
queries
for
key
or
value
data,
which
applies
conditions
to
the
values.
However,
industry
experts
believe
that
SQL
language
can
support
rich
queries
in
smart
contracts
for
permissioned
blockchain
implementations.

It
is
a
useful
recommendation
for
businesses
who
want
to
migrate
existing
business
logic
in
SQL
to
blockchain
smart
contracts.
The
use
of
extensive
SQL
SELECT
features
reduces
the
complexity
of
the
code
and
uses
a
single
query
for
aggregating
results.
As
a
result,
permissioned
blockchains
would
not
need
multiple
queries
through
multiple
network
hops.

One
of
the
examples
of
leveraging
the
SQL
and
smart
contract
combination
is
the

Oracle
Blockchain
Platform.
It
offers
SQL-Lite,
which
helps
users
enjoy
the
power
of
SQL
alongside
achieving
more
transaction
processing
speed.
In
addition,
it
is
also
important
to
note
how
it
supports

interoperability.
Oracle
Blockchain
Platform
offers
support
for
CouchDB
query
language
in
the
chaincodes
over
Berkeley
DB
world
state
database.

• Pruning
  and
  Archiving

The
challenges
for
implementation
of
permissioned
blockchain
also
focus
on
pruning
and
archiving.
Businesses
seeking
answers
to
“How
do
you
implement
a
permissioned
blockchain?”
must
deal
with
the
challenges
of
larger
transaction
volumes.

For
example,
a
maritime
shipping
network
that
tracks
millions
of
shipments
every
year
on
a
permissioned
blockchain
would
exceed
three
billion
transactions
in
a
year.
According
to
the
payload
size
alongside
the
growing
number
of
digital
signatures
with
the
transaction,
the
storage
requirements
would
increase
to
unmanageable
levels.

Pruning
solutions
have
become
an
important
technique
for
managing
permissioned
blockchain
storage
through
archiving
old
content.
In
addition,
decentralized
storage
systems
can
also
offer
an
exclusive
answer
to
the
storage
requirements
of
permissioned
blockchains.

• Blockchain
  Network
  Performance

The
discussion
about
transaction
volumes
draws
attention
to
blockchain
network
performance
issues
in
permissioned
blockchains.
Most
of
the
private
blockchain
implementation

use
cases
revolve
around
the
objective
of
achieving
better
performance.
However,
issues
in
interpretation
of
performance
metrics
could
present
a
formidable
challenge
for
deployment.

Some
of
the
performance
metrics
in
blockchain
networks
include
latency
and
throughput.
The
metrics
would
vary
significantly
in
different
network
sizes
and
hardware
configurations
alongside
tradeoffs
made
between
latency
and
throughput.
However,
the
evaluation
of
permissioned
blockchain
use
cases
in
different
industries
shows
that
each
industry
has
its
distinct
requirements.

The
ideal
suggestion
in
such
cases
is
to
look
for
practices
that
can
support
optimization
of
performance
from
a
systematic
view.
For
instance,
chaincode
could
process
many
calculations,
and
the
ledger
would
require
storage
that
could
subsequently
affect
the
network
latency
required
for
consensus.

Permissioned
blockchains
need
effective
performance
optimization
solutions
according
to
the
business
requirements
and
platform
architecture.
In
addition,
effective
tracking
of
all
factors
that
influence
the
payload
size,
network
capacity,
and
throughput
can
help
address
customer
requirements
effectively.

• Data
  Privacy
  and
  Confidentiality

The
list
of
challenges
in
the
practices
to
permissioned
blockchain

implementations
also
includes
data
privacy.
It
is
a
major
bottleneck
in
the
domain
of
blockchain.
Businesses
that
want
to
share
confidential
business
data
should
be
concerned
regarding
the
confidentiality
among
certain
participants.

It
can
also
help
shield
data
from
other
participants’
access.
As
the
scope
of
blockchain
adoption
continues
to
grow,
it
is
important
to
understand
that
there
are
multiple
approaches
to
ensuring
data
privacy.
However,
there
is
no
specific
solution
that
you
can
call
the
perfect
tool
for
ensuring
data
confidentiality.

One
of
the
solutions
in
permissioned
blockchain
implementation
best
practices

is
the
use
of
blockchain
nodes
as
managed
cloud
services.
Users
could
only
access
the
nodes
through
event
subscriptions
and
APIs,
thereby
ensuring
easier
management
of
data
privacy.

It
is
easier
to
set
the
channel
access
policies
to
prevent
unauthorized
members
from
viewing
the
detailed
block
content.
As
a
result,
the
authorized
members
could
only
upgrade
or
deploy
chaincode.
On
top
of
it,
access
control
lists
or
ACLs
in
smart
contracts
can
also
offer
an
effective
solution
for
data
privacy
in
permissioned
blockchains.

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Final
Words

The
best
practices
for
implementing
permissioned
or

private
blockchains
showcase
that
you
can
achieve
the
best
results
by
fighting
the
challenges.
It
is
important
to
achieve
the
desired
results
of
private
blockchain
implementation

by
reviewing
challenges
in
data
backup
and
recovery,
regulatory
compliance,
and
data
privacy.
As
businesses
explore
new
use
cases
of
blockchain
technology,
the
elements
of
interoperability
and
performance
will
also
gain
the
limelight.
Learn
more
about
permissioned
blockchains
and
how
they
work
to
understand
the
best
ways
to
create
and
deploy
them.

*Disclaimer:
The
article
should
not
be
taken
as,
and
is
not
intended
to
provide
any
investment
advice.
Claims
made
in
this
article
do
not
constitute
investment
advice
and
should
not
be
taken
as
such.
101
Blockchains
shall
not
be
responsible
for
any
loss
sustained
by
any
person
who
relies
on
this
article.
Do
your
own
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