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On Public and Private Blockchains

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Vitalik Buterin


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On Public and Private Blockchains

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Over the last year the concept of “private blockchains” has become very popular in the broader blockchain technology discussion. Essentially, instead of having a fully public and uncontrolled network and state machine secured by cryptoeconomics (eg. proof of work, proof of stake), it is also possible to create a system where access permissions are more tightly controlled, with rights to modify or even read the blockchain state restricted to a few users, while still maintaining many kinds of partial guarantees of authenticity and decentralization that blockchains provide. Such systems have been a primary focus of interest from financial institutions, and have in part led to a backlash from those who see such developments as either compromising the whole point of decentralization or being a desperate act of dinosaurish middlemen trying to stay relevant (or simply committing the crime of using a blockchain other than Bitcoin). However, for those who are in this fight simply because they want to figure out how to best serve humanity, or even pursue the more modest goal of serving their customers, what are the practical differences between the two styles?

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

  • Public blockchains: a public blockchain is a blockchain that anyone in the world can read, anyone in the world can send transactions to and expect to see them included if they are valid, and anyone in the world can participate in the consensus process – the process for determining what blocks get added to the chain and what the current state is. As a substitute for centralized or quasi-centralized trust, public blockchains are secured by cryptoeconomics – the combination of economic incentives and cryptographic verification using mechanisms such as proof of work or proof of stake, following a general principle that the degree to which someone can have an influence in the consensus process is proportional to the quantity of economic resources that they can bring to bear. These blockchains are generally considered to be “fully decentralized”.
  • Consortium blockchains: a consortium blockchain is a blockchain where the consensus process is controlled by a pre-selected set of nodes; for example, one might imagine a consortium of 15 financial institutions, each of which operates a node and of which 10 must sign every block in order for the block to be valid. The right to read the blockchain may be public, or restricted to the participants, and there are also hybrid routes such as the root hashes of the blocks being public together with an API that allows members of the public to make a limited number of queries and get back cryptographic proofs of some parts of the blockchain state. These blockchains may be considered “partially decentralized”.
  • Fully private blockchains: a fully private blockchain is a blockchain where write permissions are kept centralized to one organization. Read permissions may be public or restricted to an arbitrary extent. Likely applications include database management, auditing, etc internal to a single company, and so public readability may not be necessary in many cases at all, though in other cases public auditability is desired.

In general, 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. However, to some degree there is good reason for the focus on consortium over private: the fundamental value of blockchains in a fully private context, aside from the replicated state machine functionality, is cryptographic authentication, and there is no reason to believe that the optimal format of such authentication provision should consist of a series of hash-linked data packets containing Merkle tree roots; generalized zero knowledge proof technology provides a much broader array of exciting possibilities about the kinds of cryptographic assurances that applications can provide their users. In general, I would even argue that generalized zero-knowledge-proofs are, in the corporate financial world, greatly underhyped compared to private blockchains.

For now, I will thus focus on the simpler “private versus public” blockchain discussion. In general, the idea that there is “one true way” to be blockchaining is completely wrong headed, and both categories have their own advantages and disadvantages.

First, private blockchains. Compared to public blockchains, they have a number of advantages:

  1. The consortium or company running a private blockchain can easily, if desired, change the rules of a blockchain, revert transactions, modify balances, etc. In some cases, eg. national land registries, this functionality is necessary; there is no way a system would be allowed to exist where Dread Pirate Roberts can have legal ownership rights over a plainly visible piece of land, and so an attempt to create a government-uncontrollable land registry would in practice quickly devolve into one that is not recognized by the government itself. Of course, one can argue that one can do this on a public blockchain by giving the government a backdoor key to a contract; the counter-argument to that is that such an approach is essentially a Rube Goldbergian alternative to the more efficient route of having a private blockchain, although there is in turn a partial counter-argument to that that I will describe later.
  2. The validators are known, so any risk of a 51% attack arising from some miner collusion in China does not apply.
  3. Transactions are cheaper, since they only need to be verified by a few nodes that can be trusted to have very high processing power, and do not need to be verified by ten thousand laptops. This is a hugely important concern right now, as public blockchains tend to have transaction fees exceeding $0.01 per tx, but it is important to note that it may change in the long term with scalable blockchain technology that promises to bring public-blockchain costs down to within one or two orders of magnitude of an optimally efficient private blockchain system
  4. Nodes can be trusted to be very well-connected, and faults can quickly be fixed by manual intervention, allowing the use of consensus algorithms which offer finality after much shorter block times. Improvements in public blockchain technology, such as Ethereum 1.0’s uncle concept and later proof of stake, can bring public blockchains much closer to the “instant confirmation” ideal (eg. offering total finality after 15 seconds, rather than 99.9999% finality after two hours as does Bitcoin), but even still private blockchains will always be faster and the latency difference will never disappear as unfortunately the speed of light does not increase by 2x every two years by Moore’s law.
  5. If read permissions are restricted, private blockchains can provide a greater level of, well, privacy.

Given all of this, it may seem like private blockchains are unquestionably a better choice for institutions. However, even in an institutional context, public blockchains still have a lot of value, and in fact this value lies to a substantial degree in the philosophical virtues that advocates of public blockchains have been promoting all along, among the chief of which are freedom, neutrality and openness. The advantages of public blockchains generally fall into two major categories:

  1. Public blockchains provide a way to protect the users of an application from the developers, establishing that there are certain things that even the developers of an application have no authority to do. From a naive standpoint, it may be hard to understand why an application developer would want to voluntarily give up power and hamstring themselves. However, more advanced economic analysis provides two reasons why, in Thomas Schelling’s words, weakness can be a strength. First, if you explicitly make it harder or impossible for yourself to do certain things, then others will be more likely to trust you and engage in interactions with you, as they are confident that those things are less likely to happen to them. Second, if you personally are being coerced or pressured by another entity, then saying “I have no power to do this even if I wanted to” is an important bargaining chip, as it discourages that entity from trying to compel you to do it. A major category of pressure or coercion that application developers are at risk of is that by governments, so “censorship resistance” ties strongly into this kind of argument.
  2. Public blockchains are open, and therefore are likely to be used by very many entities and gain some network effects. To give a particular example, consider the case of domain name escrow. Currently, if A wants to sell a domain to B, there is the standard counterparty risk problem that needs to be resolved: if A sends first, B may not send the money, and if B sends first then A might not send the domain. To solve this problem, we have centralized escrow intermediaries, but these charge fees of three to six percent. However, if we have a domain name system on a blockchain, and a currency on the same blockchain, then we can cut costs to near-zero with a smart contract: A can send the domain to a program which immediately sends it to the first person to send the program money, and the program is trusted because it runs on a public blockchain. Note that in order for this to work efficiently, two completely heterogeneous asset classes from completely different industries must be on the same database – not a situation which can easily happen with private ledgers. Another similar example in this category is land registries and title insurance, although it is important to note that another route to interoperability is to have a private chain that the public chain can verify, btcrelay-style, and perform transactions cross-chain.

In some cases, these advantages are unneeded, but in others they are quite powerful – powerful enough to be worth 3x longer confirmation times and paying $0.03 for a transaction (or, once scalability technology comes into play, $0.0003 for a transaction). Note that by creating privately administered smart contracts on public blockchains, or cross-chain exchange layers between public and private blockchains, one can achieve many kinds of hybrid combinations of these properties. The solution that is optimal for a particular industry depends very heavily on what your exact industry is. In some cases, public is clearly better; in others, some degree of private control is simply necessary. As is often the case in the real world, it depends.

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Vitalik Buterin

https://ethereum.org

Comments
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Author Braun Brelin

Posted at 9:22 am August 7, 2015.

None of this explains how a private blockchain can emulate the greatest asset of the Blockchain, that of immutability. If, for example, the government of a country that wants to use blockchain technology to put their land registry on the network uses a private blockchain, how does that solve the problem that they’re trying to address, namely, corrupt actors modifying the information for their own gain?

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    Author sillytuna

    Posted at 9:58 am August 7, 2015.

    I think you’ve misunderstood the nature of the problem trying to be solved. With a consortium chain you have a number of entities whereby you trust the nature of consensus even if you think that maybe that one company are a little dodgy. The advantages over a regular public chain are stated by Vitalik – cost, privacy, additional technical options.

    On top of that, consensus can allow transactions to be reversed where a fraudulent action occurred – not a technical violation but the vastly more common action of routine fraud involving human beings. Similarly, court cases often move property – a court could require the consensus network to move an asset from Alice to Bob, whether or not Alice agrees.

    This isn’t always applicable or wanted which is why Bitcoin is censorship resistant, but in many industrial settings a public blockchain comes with too many issues, whereas a private one of some kind can resolve inter-company issues perhaps much cheaper than others.

    Also consider that a blockchain, even with limited data, is an open protocol (among the participants at least) meaning that they can keep their existing IT infrastructure and make minimal changes. This will allow them to interact with other parties (or their data) on the blockchain, whether they know or trust them or not. That’s how Bitcoin works 🙂

    So the proper answer to your question is that you need to know what problem you are solving by using a blockchain, and establishing if 1) that’s really a problem at all and 2) is a public, private, or consortium solution better than a centralised database, hiring IBM, or using a time stamp server + public key cryptography. As far as a private blockchain goes, with only one controlling entity, I’m far from convinced that it’s the best solution. The exception may be if the chain is handled by a single third party who contractually will not reverse transactions therefore the time stamped nature is conserved. As an internal company auditing device, the third party could be the IT division.

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Author HClivess

Posted at 9:22 am August 7, 2015.

intranet, intrachain

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Author sillytuna

Posted at 9:49 am August 7, 2015.

Great write up. I’ve been having this discussion countless times but a lot of people are blinded by the way Bitcoin currently works. Consortium blockchains can bring with them countless uses and also avoid potential legal pitfalls regarding data privacy.

I’m now concerned with where advantages can be gained by such systems given that (currently) the data that can be stored is still generally limited to hashes, although on a private chain the data could be made more extendable and pruned. Additionally, who manages the IT aspect, where are the chains hosted, who pays – is this a trade body project?

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Author World News Curator

Posted at 1:00 pm August 7, 2015.

Excellent article, this is the first well thought out piece of writing I’ve read on this topic. I wonder though, if atomic cross chain transfers of the kind being developed by both Ciyam and Blocknet may end up mitigating some of the network effect mentioned in the final point?

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Author pelias

Posted at 1:10 pm August 7, 2015.

Is correct this?:

eth.getBalance(undefined)

‘341312510000000000000’

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Author Perla

Posted at 1:20 pm August 7, 2015.

Private blockchains are completely pointless, since you can change the rules at will it is only useful for banks or financial institutions or corrupt governments in order to make more money from nearly zero fees and maintain his status quo in an orwellian surveillance state, they already print as much money as they want from thin air, is a shame see you promoting such of things, i’m sure there are ways to regulate a public blockchain without concede total control to a single entity or company, like a voting system where all the people involved in that chain can decide about every aspect in a truly democratic way under the norms already in place and the current law. Even the government should be attached at this system in order to remove the bad actors, there is none advantage in private blockchains, NONE, you can issue private contracts on public ledger but you can’t do the opposite. I supposed you are more intelligent than that.

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    Author sillytuna

    Posted at 4:14 pm August 7, 2015.

    They’re only completely pointless if you expect them to solve the problem you refer to. As you say, if your problem is an inherent distrust of banks or govs then a private blockchain is, at most, of limited use (not no use since the chain be read-only for the public).

    If, however, in your sector that’s not the kind of problem you’re trying to solve then it’s quite different. A private chain confers many advantages, some of which may even be a legal requirement due to privacy or data protection regulations.

    It’s also important to understand that blockchains don’t remove bad actors from a system, they’re just another component of a larger organism. In computer security, the reality is that the strength of your encryption is highly unlikely to be your real problem as the best way to defeat encryption is to bypass it altogether. That doesn’t mean you shouldn’t use strong encryption. Similarly with blockchains, they can do something very powerful in a censorship resistant manner, but human beings and hackers are still everywhere, doing whatever they wish. You’ve just added a constraint for them to work around.

    The printing money argument is highly application specific and it’s important not to confuse whatever one’s feelings are about blockchain use in that domain versus the many other uses which may not feature money or assets at all.

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    Author bruno cecchini

    Posted at 9:11 pm August 7, 2015.

    The real progress is a slow process, sad but true. We have to devolve user states function more effectively to just dream about what would come up next.

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    Author crainbf

    Posted at 6:16 pm August 9, 2015.

    This makes no sense. The use case for private blockchains is hardly currency issuance. The point is precisely that blockchains have explicit rules that cannot be changed at will and that this sort of thing has utility in all kinds of contexts, some warranting public blockchains and some warranting private blockchains.

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    Author Gabriel Wood

    Posted at 5:55 pm September 18, 2015.

    Do not agree with your statement that private blockchains are completely useless. For example, the new XS2A regulation in the EU requires banks to open up their customer’s account information to Third Party Providers (TTP). Obviously, this comes with a lot of challenges for each of the financial institutions. One of them is how to manage and distribute access rights to those TTPs. Using a private blockchain would definitely be beneficial in that case as it not only guarantees that all participants are known (higher trust) but also creates and audit trail. Also, it would secure information through multi signature addresses.

    What I am saying is that there are indeed many use cases where a private blockchain is the preferred and more suitable solution.

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    Author Richard Kastelein

    Posted at 1:36 pm December 26, 2015.

    Actually it’s possible for banks to back private or consortium blockchains and attain even more privacy than Bitcoin by destroying the ‘blocks’ when cryptocash reverts back to fiat currency and protecting all exchanges in standard RSA format and on elliptic curves created by bank’s HSM.

    As this cryptocash can be traded outside of the banking realm, it does allow for clearance and movement of cash in almost an instant as well as creating the potential for micro- and even nano-currency.

    Like or or not, quick and radical change is not likely to happen in the global finance system and currently, like it or not, banks are still considered trust agents by a large part of the population.

    If we are going to change the system we have to use baby steps to avoid anarchy and change it from within. And that’s kind of unfortunate but it’s a reality.

    I wrote about a Polish company here is working this angle that is EU compliant and backed by two banks. http://www.bit.ly/billoncash

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Author Sander van Loosbroek

Posted at 2:34 pm August 7, 2015.

I agree that there are multiple use cases for each scenario. The challenge is to determine what kind of blockchain best suits a business case that requires a level of decentralization. I have already encountered cases that would be best served with a private blockchain (think internal auditing) and I’m confident we’ll see more cases for every type of blockchain as described above.

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    Author sillytuna

    Posted at 4:16 pm August 7, 2015.

    With regard to internal auditing, the case for a blockchain has to stack up against a regular database and cryptography, and the overall internal mechanisms already in place. I think they may be useful but I haven’t yet confirmed that in the real world. In what kind of context have you see they definitely stack up vs databases + crytpo/time stamping?

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      Author Sander van Loosbroek

      Posted at 4:48 pm August 7, 2015.

      This relates to a case where the customer specifically rejected existing database approaches. We’re still in early phase discussion but the case looks promising and might become a good example of the benefits of a private blockchain. Can’t share anymore details ATM.

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        Author sillytuna

        Posted at 5:55 pm August 7, 2015.

        I’ve also found a situation where a customer preferred blockchain approaches conceptually but in that case it was due to external audit capabilities. I assume you can’t divulge the type of reasoning involved but perhaps it’s where a dept has a high incentive to break rules & constant auditing may be useful – i.e. within some investment/trading contexts, or maybe energy industry health and safety.

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Author Joshua Unseth

Posted at 5:50 pm August 7, 2015.

Blockchains only solve one problem. They are instruments of regulatory arbitrage. If you are trying to use them for compliance, then you don’t know what you’re doing. But I wouldn’t expect Vitalik to know that. since he’s 16.

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    Author Harm van den Dorpel

    Posted at 6:28 pm August 7, 2015.

    Such bad form to put his age in the equation.

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      Author Frank Goertzen

      Posted at 7:20 pm August 7, 2015.

      Especially when the age is incorrect 🙂

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        Author Joshua Unseth

        Posted at 8:53 pm August 7, 2015.

        His age is correct. Most Bitcoiners are 16. I’m sure he’ll be 17 in like 10-15 years if he sits down and takes some advice from the older, wiser 18 year olds in Bitcoin.

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      Author Joshua Unseth

      Posted at 8:53 pm August 7, 2015.

      Bad form is my M/O.

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    Author Guest

    Posted at 6:47 pm August 7, 2015.

    ‘Regulatory arbitrage’? Banks wrote the book on it and also on regulatory capture (look it up). Consortium blockchains and private blockchains have many uses in industry/banking, most of which have noting to do with regulatory arbitrage but with instant clearing and settlement.

    Why does Vitalik’s youth matter? That’s just a cheap shot.

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      Author Joshua Unseth

      Posted at 8:53 pm August 7, 2015.

      You’re right. Banks are the masters of regulatory arbitrage, which is how I know they will end up back at BTC, because it is the only Blockchain that does regulatory arbitrage. They will learn this very quickly. That said, regulatory capture is not regulatory arbitrage. Arbitrage is riskless. Capture has with it a high degree of risk. Tbh, I’m not convinced that regulatory arbitrage ever actually existed in any real capacity until Bitcoin. The closest we have seen are AirBnB and Uber.

      Vitalik’s age matters because with youth comes unparalleled arrogance. He and his merry band of children have taken on the task of revolutionizing the world by taking $15MM and slowly running it down, all the while realizing that the 1) changing the world is not cheap, 2) project management is a skill and specialty unto its own, and 3) never listening to anyone else. Oh, let’s not forget the lesson that consensus is very very very hard. One can not simply declare that their blockchain is immutable or that it solves the BG problem. These problems are problems solved through hard fighting. The history of trying to solve the double-spend problem is rich and storied, and it wasn’t done by a 16 year old. It was done by a man who likely dedicated his life to understanding it, and then humbly pushing out a bit of code that he thought might work. The hubris in declaring that your code does work is a great indication of where the Ethereum is intellectually.

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        Author Guest

        Posted at 8:58 pm August 7, 2015.

        I think you are glitched.

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          Author Joshua Unseth

          Posted at 8:58 pm August 7, 2015.

          Everyone agrees with you. But I didn’t take $15MM from a community of naive children to build a perpetual motion machine.

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          Author Leonel More

          Posted at 9:32 pm August 8, 2015.

          Basic economics shows us how several companies take $15MM from naive buyers several times a day, just to buy a big house for a CEO (aka a mansion). In my humble opinion, Ethereum is far a better way to spend it.

          And is not just Vitalik, is a big team of very smart people working on it.

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          Author Joshua Unseth

          Posted at 9:58 pm August 8, 2015.

          A big team worked on it. Let’s leave it at that.

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        Author bruno cecchini

        Posted at 9:45 pm August 7, 2015.

        First of all, let me tell me you something. All the people that want to change the world for the better deserve respect. If you love the conventional wisdom, cool good for you, but we make the case to change the conventional wisdom and is pretty tough to fight bignumberlaw. I’m more then happy about Ethereum work, they inspire a lot of people to do better. You can go back drinking your 2x spending Kool aid we don’t care, the story is like in third grade, nobody like cry babies.

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          Author Joshua Unseth

          Posted at 4:36 am August 8, 2015.

          @brunocecchini:disqus, I urge you never to have a “first of all” without first considering that you should also have a “second of all.” Bad ideas are bad ideas my friend. No one paid $15 million to be inspired. This isn’t a freakin’ Deepak Chopra festival. That said, I appreciate the empty assertion that Bitcoin is a double spend playground. Have you evidence for that? That would seem pretty important. Until evidence, I’ll just assume in you a high degree of simplicity combined with a low degree of rational thought and a strong desire to be told what to do and believe.

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          Author bruno cecchini

          Posted at 5:00 am August 8, 2015.

          Like I say nobody like crybabies, just move on.

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        Author Richard Kastelein

        Posted at 1:50 pm December 26, 2015.

        Billon is a prime example of attaining ‘regulatory arbitrage’ by finding a way to tie fiat currency with cryptocash in building a consortium Blockchain that meets EU and national (Polish) regulations.

        Actually it’s possible for banks to back private or consortium blockchains and attain even more privacy than Bitcoin protecting all exchanges in standard RSA format on elliptic curves created by bank’s HSM and by destroying the ‘blocks’ when cryptocash reverts back to fiat currency (thus avoid the colossal chain issue).

        The cryptography community in Warsaw is rather active shall we say. But you can read more here. Chew on this. http://www.bit.ly/billoncash/

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    Author JoseKollamkulam

    Posted at 10:34 am August 14, 2015.

    Can you explain why “blockchains” are instruments of regulatory arbitrage ONLY and cannot have any other functionality. Why cant it meet compliance needs? Could you clarify? Apologies for my naivete and ignorance

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    Author Vitalik Buterin

    Posted at 9:28 am August 15, 2015.

    The people I’ve been talking to in governments about private blockchain applications beg to differ. And if we’re going ad hominem, I think I trust government officials and university professors over people who go around putting captions over divorce court photos on imgur 😀

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Author Paul Paschos

Posted at 8:54 pm August 7, 2015.

I see that the scalability paper is coming along nicely. Koodos to Matthew Wampler-Doty and John Cohn and for their contributions to the blockchain space.

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Author Andrey Zamovskiy

Posted at 9:18 pm August 7, 2015.

Let’s just admit that blockchain is simply a new type of replication algorithm for a database cluster. That’s it.

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    Author Vitalik Buterin

    Posted at 9:30 am August 15, 2015.

    Correct. Plus Merkle trees. The Merkle trees are actually important.

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      Author Andrey Zamovskiy

      Posted at 1:27 am August 18, 2015.

      Merkle trees have not been invited with bitcoin, they’ve just got an adoption. And this is not an essential part of the cryptocurrency. We can use facebook or twitter accounts for the same purpose.

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Author Donald McIntyre

Posted at 9:54 pm August 7, 2015.

Valid arguments, this helps separated the concepts and demystify the threats and opportunities of both models. Good and timely post!

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Author gadgetcoin

Posted at 1:56 am August 8, 2015.

Thanks for this great write up.

At GadgetCoin we have been using the public/private blockchain concept and it is operational at http://wallet.gadgetcoin.org.

The idea behind of utilizing the private/public blockchain concept was the assumption that it is not the business of e.g. user “B” that how much money was collected by user “A” by providing e.g. Internet of Things connected camera service to user “C”. Therefore the data about the transaction is available for the involved parties user “A” and “B”, but user “C” (and other users of the network) have very limited information about the transaction. However, when there is a dispute or law enforcement action the private blockchain information is accessible to designated observers. So the data is in the blockchian but as Vitalik said, the access is restricted to certain parties.

When we designed the system we came cross with requests from business and we heard that it is simply unacceptable that others would have access to their transaction information (which is the case with Bitcoin), so we thought to protect privacy it is essential to implement the private/public blockchain concept.

We explain this in our whitepaper http://www.gadgetcoin.org/Content/docs/whitepaper_v_1.0.pdf

Based on what we here from real world businesses I would agree with Vitalik that “private blockchains are unquestionably a better choice for institutions”, in fact in many cases that’s the only acceptable choice.

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    Author altcoinUK

    Posted at 2:26 am August 8, 2015.

    Yeah guys, I am glad to see that you have put already this in practice at GadgetCoin. I fully agree, a ledger that expose the transaction information to the public is not usable for business purposes. My bank don’t disclose my account balance in a public ledger, digital currencies shouldn’t disclose it as well.

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Author Malcolm Mcewen

Posted at 10:45 am August 8, 2015.

“In general, so far there has been little emphasis on the distinction between consortium blockchains and fully private blockchains,” Why lump consortium (which is what successful block chains will be!) with ‘Private when you identify consortium as “a hybrid between the “low-trust” provided by public blockchains and the “single highly-trusted entity” model of private blockchains” .. if that’s your definition (it’s not mine btw) then you could as equally weight your argument the other way… so far there has been little emphasis on the distinction between consortium blockchains and fully public blockchains…. ummmm… ??? .. it implies you don’t like consortium chains which rather than being liberal private are in fact efficient public… that’s the message you need to promote!

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Author Adi

Posted at 4:21 pm August 8, 2015.

Interesting post. I like the definition of Consortium Blockchains – this is what we’ve been referring to as private blockchains, since they are not connected to the public network.
I would add to the advantages of private/consortium blockchains scalability. When you write a smart contracts application that you know if going to run on every Ethereum node you must be very economical in the resources you consume (and pay for them of course). This isn’t the case with a private/consortium blockchain. You will be able to define the capacity of your nodes, and you will not be taking on the load of the rest of the network. This gives a lot more freedom to create more complex smart contract applications.

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Author Leonel More

Posted at 10:07 pm August 8, 2015.

Excellent piece, Vitalik. Adds clarity to the literature for the non-experts like me. Thank you!

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Author David

Posted at 10:11 pm August 8, 2015.

I think that while the private blockchain has an initial appeal for a consortium such as immutability, cheaper and timely auditing while maintaining more control the trade off though is security, I think we will find that the cost associated with securing a private blockchain will far outweigh the cost to secure a well established public blockchain. It will take only a couple of hacks (51% attacks) on a private blockchain to call it into question. Though if set up correctly a 51% attack will be much more difficult then a centralized database, and I am sure Accenture and other IT consulting firms will be more then willing to charge you millions to reduce risk :-).

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Author Zer0CT

Posted at 3:45 pm August 10, 2015.

I can’t understand people who are such blinkered and short sighted. Knives aren’t evil because somebody kill with it. Please, read your comments five years from now… (Just some months ago, people wrote that Ethereum is a scam and never release any useful thing. They were wrong.)

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    Author Vitalik Buterin

    Posted at 9:29 am August 15, 2015.

    Eh, 6 months from now people are gonna start calling ethereum 2.0 vaporware 🙂

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Author SocialTechno

Posted at 5:08 pm August 11, 2015.

We need different kinds of blockchains because the original Bitcoin was set up to work like the US political system, and not everybody likes that. (There are other use cases, starting with partnership between equals.)

@Perla explains it very well. You cannot change the rules of a blockchain unless you have consensus. But on the Bitcoin blockchain, consensus is not 51% of the people, it’s 51% of the power. You have a vote, I have a vote, and somebody has a million votes. But people feel free, because they have all been told, you don’t trust people, you only have to trust the algorithm.

If you want to run a social network where there are fifteen nodes, and each node has one vote, you need a different kind of blockchain, as @Vitalik explains.. And there are plenty of use cases for collaboration Bitcoin’s ‘proof-of-work’ regime means that the people with the biggest rigs will always be in control, because they control consensus. (I think Satoshi must have read Chomsky, )

Bitcoin is resilient against bad actors, but only if they are attacking the system from the outside. Any corruption within the system will be unpunishable, as long as the ‘bad actors’ control consensus. Just like Wall Street, FIFA, and the Republican Party.

On the Bitcoin blockchain, Goldman Sachs will always be able to shut down Occupy. If you want a network that supports different outcomes, you need to design it differently. @Vitalik has made a good start.

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Author Bruce Swanson

Posted at 8:38 pm August 13, 2015.

I think a lot of bitcoiners are sensitive about private/consortium blockchains because of the perception that they threaten the growing popularity of the bitcoin blockchain and thus the potential price of their bitcoin early-adapter investment. But the last paragraph of Vitalik’s article tells us that the more blockchains there are, the better for the bitcoin blockchain and, by extension, the bitcoin price. Also, isn’t it likely that non-public chains that the BofA and Wells Fargo might use would be backed up onto the bitcoin blockchain because the low cost of doing so would invite such use? Indeed such use might even become a requirement imposed by banking regulations as private chains become widespread. The purpose would be to ensure that there is an ultimate unalterable public database beyond anyone’s control — the data cannot be altered, even as it remains encrypted to public eyes.

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Author Cyrus Maaghul

Posted at 1:40 am August 16, 2015.

Public block chains have a huge role to play in healthcare in areas including consumer identification, privacy, and interoperability and consortium block chains in areas including healthcare fraud mitigation, compliance, and intervention. Lots of play for both characters.

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Author wur

Posted at 10:04 pm August 30, 2015.

Does anyone here has more information or references on what in the article is mentioned to as “more advanced economic analysis”? I could use these further reads. Thanks.

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Author Simon

Posted at 1:41 pm December 31, 2015.

Bitcoin is designed specifically for decentralization, and is shit for a centralized design.
You want centralized then just do a simple design, no need for a blockchain. Then you have full control, no constraints, easy scaling. Yes you need trust in your organisation but hey, you need it with your “private blockchain” too !

There is no such thing as “fully decentralized” and “partially decentralized”. Only decentralized and centralized.
A consortium of 15 banks is an authority, it is centralization.
Failing to understand that for the creator of Ethereum … does say a lot about Ethereum.

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Author Raghuveer csk

Posted at 4:13 am March 15, 2016.

Can you please explain where is the “Chain” in a private blockchain ? Isn’t it just a big shared database asking to be hacked !
I can’t understand what is the specific use case that a consortium block chain is addressing. All the blogs seems to be scratching on the surface and saying there are advantages like more control blah blah, but nobody wants to go into the details – step by step as to how exactly blockchain is solving a problem which other existing mechanisms can’t solve and also doing it cheaply.

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Author Alexander Orlov

Posted at 1:45 am May 13, 2016.

Are you going to introduce some kind of “generalized zero knowledge proof technology” to Ethereum? Currently everybody can see everything what is going on which is also kind of an advantage for some use cases.

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Author Lawrence A dasilva

Posted at 5:09 am September 17, 2016.

get into any bitcoin reserve , email , bank account ,Cash Flip and any espionage you can think of whatever it is //consultant//hackers// at// outlook// dot// com// is the man for the job when you need someone to get shit done !

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Author KD

Posted at 12:56 am September 20, 2016.

Hi All, you all seem to be the one of the most knowledgeable group I found on this topic. Could you please advise me regarding One Coin. They are claiming to have a blockchain with 120 billion coin capacity, currently private, closed source, allowing only investors to mine the coins. They are promising to get merchants on board by the end of the year. I understand Bitcoin miners resistence towards a non-public, centralized block chain. But want to know in your unbiased opinion if it’s possible to have a blockchain kept private initially, like of One Coin that can be publicized later? In other words, is the company making legitimate claim or are they scamming non-tech savvy crowd?

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