Public and private blockchain

Over the past year, the concept of “private blockchain” has become very popular in the broader blockchain technology discussion. Essentially, enough Using public, uncontrolled networks and state machines secured by cryptoeconomics (e.g. proof-of-work, proof-of-stake) to create systems that have tighter control over access permissions and who has permission to modify or read the blockchain state is also possible. it’s possible. It has a small number of users while still maintaining the kinds of partial guarantees of authenticity and decentralization that blockchains provide. These systems have been a major focus of financial institutions, sparking a backlash in part from those who see these developments as undermining the whole point of decentralization or as a desperate act by dinosaur-like middlemen to stay relevant. commit a crime by using Blockchains other than Bitcoin). But for those of us who engage in this fight simply because we want to figure out how to best serve humanity, or even to pursue the more humble goal of serving our customers, what are the real differences between the two styles?

First, what exactly are the currently available options? To summarize, there are generally three categories of blockchain-like database applications:

• public blockchain: A public blockchain is a blockchain that anyone in the world can read, anyone in the world can send a transaction, expect the transaction to be included if it is valid, and anyone in the world can participate. consensus process – The process of determining which blocks are added to the chain and what their current state is. Public blockchains that replace centralized or semi-centralized trust are secured by cryptoeconomics. That is, it combines economic incentives and cryptographic verification using mechanisms such as proof-of-work or proof-of-stake, guided by general principles about how much someone can own. Their influence on the consensus process is proportional to the amount of economic resources they can afford. These blockchains are generally considered “fully decentralized.”
• Consortium Blockchain: A consortium blockchain is a blockchain in which the consensus process is controlled by a pre-selected set of nodes. For example, you can imagine a consortium of 15 financial institutions. Each financial institution operates a node, 10 of which must sign every block for it to be valid. The right to read the blockchain can be public or restricted to only participants, or there is also a hybrid route where the root hash of a block is made public, along with an API that allows members of the public to perform a limited number of queries. You receive back a cryptographic proof of a portion of the blockchain state. These blockchains can be considered “partially decentralized.”
• Fully private blockchain: A fully private blockchain is a blockchain in which writing permissions are centralized and maintained in one organization. Read permissions can be public or restricted to an arbitrary range. Possible applications include database management, auditing, etc. within a single company, so public readability may not be necessary at all in many cases, but in others public auditing is necessary.

In general, there has been little emphasis so far on the differences between consortium blockchains and fully private blockchains, but they are important. The former provides a hybrid between the “low trust” provided by public blockchains and the “high trust single entity”. “While it is a private blockchain model, the latter can be more accurately described as a traditional centralized system with some degree of cryptographic auditing attached. However, there are some good reasons for focusing on consortia over private and replicated states. Machine functions aside, the fundamental value of a blockchain in a fully private context is cryptographic authentication, and there is no reason to believe that the optimal form of providing such authentication should consist of a series of hash-connected data packets containing the Merkle tree root. Generalized zero-knowledge proof technology It opens up a much wider range of interesting possibilities for the kinds of cryptographic assurances an application can provide to its users. In general, I would argue that generalized zero-knowledge proofs are very important in the world of corporate finance. exaggerated Compared to private blockchain

So for now, let’s focus on the simpler “private vs. public” blockchain discussion. In general, the idea that there is “one true way” to blockchain is completely false and both categories have their pros and cons.

First, it is a private blockchain. It has the following advantages over public blockchains:

1. A consortium or company operating a private blockchain can easily change the rules of the blockchain, revert transactions, modify balances, etc., if they wish. The National Land Registry needs this capability. There is no way that a system would be allowed to exist where Dread Pirate Roberts could have legal title to land in plain sight. So any attempt to create a land register that the government has no control over will actually quickly turn into a land register that it does not. This was acknowledged by the government itself. Of course, one could argue that this could be done on a public blockchain by providing the government with contract backdoor keys. The counter-argument is that such an approach is essentially a Rube Goldbergian alternative to the more efficient route of having a private blockchain. Of course, there are also partial objections that will be explained later.
2. Since the validators are known, the risk of 51% attacks arising from the collusion of some miners in China does not apply.
3. Transactions are cheaper because you only need to verify on a few nodes that you trust to have very high processing power, and you don’t need to verify on 10,000 laptops. This is a very important concern right now, as public blockchains tend to have transaction fees exceeding $0.01 per tx. Scalable blockchain technology This promises to lower public blockchain costs to within 1 to 2 times that of optimally efficient private blockchain systems.
4. Nodes can be trusted to be very well connected and errors can be corrected quickly through manual intervention, allowing for consensus algorithms that provide finality after much shorter block times. Improvements to public blockchain technology, such as the Uncle concept in Ethereum 1.0 and later proof-of-stake, could bring public blockchains much closer to the “instant confirmation” ideal (e.g. 15 seconds rather than 99.9999% finality after 2 seconds). (gives full finality in seconds). But still, even private blockchains are always faster and the latency difference never goes away. Unfortunately, according to Moore’s Law, the speed of light does not double every two years.
5. With limited read permissions, private blockchains can provide a higher level of privacy.

Taking all of this into consideration, it may seem that private blockchains are undoubtedly the better choice for institutions. But even in an institutional context, public blockchains still have a lot of value, and indeed this value is largely rooted in the philosophical virtues that public blockchain advocates have promoted all along. The most important of these is freedom. Neutrality and openness. The advantages of public blockchains generally fall into two main categories:

1. Public blockchains provide a way to protect application users from developers, ensuring that there are certain operations that even application developers do not have permission to perform. From a naive perspective, it may be difficult to understand why application developers would voluntarily give up power and hamstring themselves. But more advanced economic analysis provides, as Thomas Schelling puts it, two reasons why weakness can become strength. First, when you explicitly make it difficult or impossible to do certain things, other people are more likely to trust you and interact with you because they are convinced that it is less likely to happen. Second, if you are personally under coercion or pressure from another entity, saying “I want to do this, but I don’t have the power to do this” is an important bargaining chip because it dissuades that entity from trying to force you to do it. “Censorship resistance” is closely tied to these kinds of claims, as the main category of pressure or coercion that application developers are at risk of is by governments.
2. Because public blockchains are open, they are likely to be used by a very large number of companies and may achieve some level of network effect. To give a concrete example, consider the case of domain name escrow. Currently, if A wants to sell a domain to B, there are standard counterparty risk issues that need to be addressed. B may not send the money if A sends first, and A may not send the domain if B sends first. To solve this problem we central escrow brokerBut these costs 3-6% commission. However, blockchain has a domain name system and currency. same blockchain, smart contracts can reduce costs close to zero. Person A can send a domain to a program that immediately sends the domain to the first person to send program funds, and the program is trustworthy because it runs on a public blockchain. For this to work effectively, two completely different asset classes from completely different industries need to be in the same database. This is not a situation that can easily arise in a private ledger. Another similar example in this category is land registration and title insurance. It is important to note that another path to interoperability is to have a private chain that the public chain can verify. btcrelay stylePerform cross-chain transactions.

In some cases these benefits are not needed, but in others they are very powerful. It gives you 3x more verification time and is powerful enough to be worth the money. $0.03 (or when scalability techniques are applied)$0.0003 for transactions). Various hybrid combinations of these properties can be achieved by creating privately managed smart contracts on a public blockchain or by creating a cross-chain exchange layer between public and private blockchains. The best solution for a particular industry will largely depend on what the exact industry is. In some cases, public is clearly better. In other cases, some degree of personal control is required. As is often the case in the real world, it depends.