January 16, 2018
Blockchain development has been in the spotlight in 2017, and will definitely continue to gain more attention in the coming years. Blockchain, a decentralized public ledger system for sending and receiving data will bring about amazing opportunities thanks to its allowance of increased transaction speeds, security and transparency. The blockchains used for familiar cryptocurrencies like Bitcoin and Ether are all considered public blockchains because anyone can access, read and create the data-containing blocks (a process known as mining). However, with traditional businesses and governance models, there are reasons to not decentralized control and security. To address this situation, private and consortium blockchains were developed.
A public blockchain is a blockchain that anyone in the world is free to read, submit transactions to and participate in the mining process for. Platforms such as Bitcoin, Ethereum, Monero, Dash, Litecoin or Dodgecoin all employ the public blockchain that is transparent, but anonymous. Meanwhile, a private blockchain, the inverse of a public blockchain in almost all key attributes, allows organizations or individuals to control who can see what transactions, and when those people can see them. With private blockchains, writing permissions are retained by a single person or organisation. This allows them to carry out the wishes of an individual while keeping certain transaction information private. A typical example for a private blockchain is MONAX, an open platform for developers and devops to build, ship, and run blockchain-based applications for business ecosystems (2).
So what is a consortium blockchain versus a fully private one? To solve the confusion, Vitalik Buterin, co-founder of Ethereum as well as Bitcoin Magazine, provided a straightforward definition: “So far there has been little emphasis on the distinction between consortium blockchains and fully private blockchains, although it is important: the former provides a hybrid between the “low-trust” provided by public blockchains and the “single highly-trusted entity” model of private blockchains, whereas the latter can be more accurately described as a traditional centralized system with a degree of cryptographic auditability attached (1).
” In other words, consortium blockchains do not allow any person with an internet connection to participate nor do they grant full control to a single entity but rather a group of approved individuals. They therefore provide the efficiency and security of public blockchains while still allowing for some degree of central control, monitoring and safeguarding. Consortium blockchains are most often the banking sector, for instance Quorum is an Ethereum-powered consortium blockchain created by JP Morgan to service the needs of financial industries and beyond. Another example, Hyperledger, open source collaborative effort that unites finance, banking, Internet of Things, supply chains, manufacturing and Technology on a consortium blockchain.
While private blockchains have the advantage of extreme security, they are also slower and more wasteful because of the need for only certain verified individuals to perform activities. Public ones, while not as secure, in removing the need for approved authors, operate with greater speed and efficiency. Consortium blockchains, considered as “partially decentralised”, however, combine the beneficial attributes of both. Consortium blockchains have the advantages of a public ledger while operating under the leadership of a group instead of a single entity which thus, supporting organizational collaboration and removing the dangers of rogue actors.
Advocates of private blockchains say that they are the easiest platforms to control and modify. They outweigh the pubic version in which the organization can change the rules of a blockchain, revert transactions, modify balances and so on. There is no need to get involved in protracted discussions with other companies/individuals whenever changes need to be made (4). Therefore, private blockchains are suitable for entities that are reluctant to relinquish control such as governments, financial institutions, national land registries and so on.
Similarly, the benefits that consortium blockchains may bring about are potentially enormous. Companies can consider their needs to adopt it or not. Having both features of public and private blockchains, consortium blockchains owns the recipe of cost-saving, flexibility and privacy to nurture a healthy blockchain development.
Infinity Blockchain Labs (IBL) is a visionary R&D company engaged in intermediary and RegTech services employing blockchain technology. We focus on forming alliances with established businesses and regulatory institutions across various industries, as well as providing collaborative incubation for early stage blockchain projects. We aspire to empower Vietnam to become a global leader in blockchain development. In our attempts to nurture a community which can leverage blockchain’s exceptional features, we are delighted to share and discuss blockchain knowledge and potentials in countless industries. As blockchains become more complex and more people seek knowledge, we hope to provide foundational articles such as this one examining public, private and consortium blockchains. With this knowledge people will be confident in adopting, employing and using the technology.
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