3 things to know about internal blockchain
Tags: Blockchain, Blockchain Technology, Cryptocurrency, Blockchain Startup, Technology

An internal blockchain is a shared database that can help in improving efficiency for any financial institution and a great first step towards a more cryptographic future. The biggest advantage of implementing internal blockchain, as compared with centralized databases, is that it provides cryptographic auditing. No one is able to tamper the data, and mistakes can be traced back. In comparison to an external blockchain, it is much faster, cheaper and respects the company’s privacy.

Any organization that wants to implement internal blockchain, must know about the following three features of an internal blockchain.

CONFIDENTIALITY IN INTERNAL BLOCKCHAIN

In a private blockchain, confidentiality is a core demand. This is because many solutions and proposals are in play, and confidentiality facilitates an authenticated environment that allows for greater flexibility in the private blockchain. Confidentiality can be incorporated in a private blockchain by encrypting the data on a chain. In on-chain encryption, data is simply encrypted and can be assessed by intended participants who can decrypt it. The benefit of this approach is its simplicity. Internal blockchain does not destroy the desired advantages of a blockchain; this means that as all data is still on the ledger, participants are able to maintain an identical copy of the encrypted data, thereby eliminating concerns over disaster recovery.

MULTI-CHAIN TOKENIZATION

This is a long-standing technique using which a blockchain-verified value is used to anchor some other transaction. The main functionality of this technique is to uniquely identify and record the transaction in some verifiable system of record. Tokenization provides a way to link multiple chains together as a multi-chain. Multi-chain can be used as a confidentiality solution. In this solution, separate blockchains are created for each combination of counterparties, thereby preventing transmission of transaction data to foreign chains.

BLOCKCHAIN MESSAGING

A private blockchain can help in providing authenticated and notarized messaging services. There are two main uses of messaging. Firstly, it can be used to add important context in a financial transaction on the blockchain, such as a contract, receipt or invoice. Moreover, it can also be used for pure notarized communication with no related movement of funds. Thus, it helps in enabling both the sender and receiver in proving the timing and content of the correspondence that took place. Each message consists of an associated hash. A hash is a long number that uniquely fingerprints its content. Given any input data and a particular hashing algorithm, it becomes easy for participants to calculate the corresponding hash. The process of blockchain messaging goes like this:

The originating multi-chain node sends a message transaction to the recipient that contains its IP address and a hash of the message’s content. The receiving node receives the transaction and then decodes the metadata. After this step, the receiving node contacts the original node via its IP address for retrieving the message, signing the request in order to prove its identity as the intended recipient. The receiving node then verifies the message’s validity by checking its hash against the hash embedded in the original transaction. If the message is valid, then the receiving node completes the loop by sending back the second transaction to the sender, which contains the same message hash.

With capabilities such as high-performance and confidentiality, a private blockchain can help organizations in keeping their data safe from exposure, while still perfectly replicated. Also, companies can search for use cases for building proprietary systems based on internal blockchain, and reducing the costs, while at the same time increasing their efficiency.