Public vs Private Blockchains - Bitfury Group & Jeff Garzik

Public versus Private Blockchains - Bitfury Group in collaboration with Jeff Garzik

This article is reprinted from a Bitfury research white paper published on 20 October 2015 by the BitFury Group in collaboration with Jeff Garzik, (@jgarzik) a leading Bitcoin core developer and futurist:

"Blockchain-based solutions are one of the major areas of research for institutions, particularly in the financial and the government sectors. There is little disagreement that backbone technologies currently used in these sectors are outdated and need an overhaul to conform to the needs of the times. Distributed or decentralized ledgers in the form of blockchains are one of the most discussed potential solutions to the stated problem.

We provide a description of permissioned blockchain systems that could be used in creating secure ledgers or timestamped registries. We contend that the blockchain protocol and data should be accessible to end users to provide a higher level of decentralization and transparency and argue that proof of work could be effectively used in permissioned blockchains as a decentralized and auditable means of providing and diversifying security. We describe merged mining and blockchain anchoring concepts, which would be instrumental in implementing proof of work security for permissioned blockchains.

There is currently an ongoing debate whether the existing blockchain-based systems (such as Bitcoin and other cryptocurrencies) can be utilized as is in proprietary contexts, and whether their openness and censorship resistance are fitting properties in this case. We provide arguments for the use of permissionless blockchains and open, standardized blockchain protocols in creating ledgers and registries, devoting particular attention to the Bitcoin blockchain as the most commercially successful and secure permissionless blockchain. We argue that many permissioned applications could be effectively implemented using existing technologies on top of existing permissionless blockchains:

• Colored coins protocols could provide a means to encode transfer of arbitrary assets into ordinary transactions, thus extending the utility of public blockchains for financial institutions.
• Similar protocols could enable timestamping documents, assisting in development of decentralized timestamped registries.
• Payment channel networks could streamline payments by creating a scalable peer-to-peer layer on top of permissionless blockchains.
• Sidechain technology could be used to integrate permissionless and permissioned blockchains into a single interconnected environment. Sidechains could be used in cases when the protocol of the underlying permissionless blockchain is too restricting (e.g., in terms of transaction throughput or the required maximum settlement period).
• Transaction processing by known validators could be used to achieve regulatory compliance."

Download full document:

Public versus Private Blockchains Part 1, Permissioned Blockchains   (Private Blockchains)
Public versus Private Blockchains Part 2, Permissionless Blockchains (Public Blockchains)

Source: Public versus Private Blockchains 20 October 2015 ©2015 Bitfury Group LLC