Public vs. private blockchains: It could all prove a bit like the cloud
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Public vs. private blockchains: It could all prove a bit like the cloud

Blockchain is one of those hot new areas which an awful lot of companies are getting interested in. Yet there is still an often misunderstood difference between a public blockchain and a private one. Put very simply a public blockchain has full open access and is associated with famous cryptocurrencies like Bitcoin. While the private variety is shut – you need permission to join – and acts more akin to a safe ‘walled garden’ or ‘intranet’ for companies.

“Permissionless [public] blockchains are much more disruptive and difficult to fit into existing legal and business frameworks,” summarised Smith and Crown in an article around the difference and advantages of each. “Their strongest argument is that blockchains are like the internet: they need to be open to benefit from innovation.”

This means many technology firms are working to develop saleable private blockchain services to meet specific business needs while potential customers – like banks – are looking to find ways to utilise them. In fact, a recent report by Infosys Finacle suggested that, out of a small sample, 69% of banks surveying blockchain were interested in private blockchains, 21% hybrid models and only 10% public blockchains.

So, what does this mean for the future deployment of blockchain? Well, Brian Donegan, head of e-business operations for the Isle of Man Government’s Department of Economic Development tells us that the high profile security breaches faced by public blockchain over the last year “prompted a spike in interest for private permissioned Blockchain development especially from within the financial services community”. He adds “I see enterprises diverging away from public usage towards private usage given the greater security benefits of private.”

But this could be just a short term phenomenon. Peter Loop, AVP and principal technology architect, at Infosys believes “in the long run, as the technology and governance improves, a public Blockchain will be viewed as a public good, much like TCP/IP, and will serve as a foundational element. Adoption will follow a pattern like on premise> private cloud > public cloud. Several hurdles need to be cleared at each stage – and there is lots of room for hybrid models along the journey.”

To get a wider gauge of opinion on all this we asked a variety of individuals three simple questions about how they thought public and private blockchain might be used in the future. Four short, lightly edited Q&As can be found below.

 

Four short Q&As around public vs. private blockchain usage in future

 

BTL Group: Public and private blockchain will have distinct uses

A Q&A with Guy Halford-Thompson, CEO at BTL Group

How will the public variety mostly be used in future?

Public blockchains are opening up new ways for us to interact with our assets, allowing us to deal directly with one another in a trusted environment, without requiring a centralised intermediary. As blockchain technology industry matures, we will see an increase in peer-to-peer transactions. We are already starting to see an increase in peer to peer adoption amongst financial transactions, but as public blockchains become more prominent, we will start to see many of the transactions that today we do through centralised parties, move onto the blockchain.

Will the main reality of future blockchains be a series of commercial, private blockchains?

Like the internet, blockchain technology can be beneficial in many different ways. Public blockchains will provide huge benefits and opportunities for peer-to-peer transactions, whereas private blockchains will enable companies to transact directly with their counterparties in more efficient ways. Commercial, private blockchains are just one part of the solution.

Overall, how will private and public blockchains diverge and pan out in usage?

Private and public blockchains have different features and use cases. Public blockchains will be more prominent in situations where consumers are interacting directly with other consumers and looking to disintermediate centralised parties. Private blockchains will focus more on enterprise industry solutions where privacy and scalability are the primary concerns. However, we will see crossover between the two, private blockchains will be able to interact with public blockchains and vice-versa.

 

Imperial FX: Most future blockchains will be commercial and private

A Q&A with Omar Mohamed, operations and financial marker analyst at Imperial FX 

How will the public variety mostly be used in future?

Public blockchains will no doubt continue to be used in financial institutions as well as developing into some ecommerce platforms. Whilst I think there is a definite place for both public and private blockchain. The open nature of being able to both publicly read and write will be a huge advantage for countries or firms which lack the infrastructure required to complete standard payments.

Will the main reality of future blockchains be a series of commercial, private blockchains?

The short answer is yes. Whilst a decentralised block chain has huge advantages. Having a private blockchain controlled by an organisation allows for certain rules to be put in place. Things such as reverting a fraud transaction are possible where a completely public blockchain would not.

Private blockchains present an opportunity for businesses to take the first step towards using blockchain technology in a similar controlled way in which the world is used to. One of the biggest advantages of a private blockchain is that the identities are known and cryptographic auditing is used – essentially, data cannot be altered and mistakes can be traced back. Private blockchains are also cheaper and faster, whilst keeping a company’s privacy secure.

Overall, how will private and public blockchains diverge and pan out in usage?

Speaking from personal insight, the money transfer market will be required to take further steps to adapt to blockchain technology. Whilst they won’t overtake traditional transactions overnight, financial institutions should be aware of the changes that blockchain presents and look at how this will directly affect the work they carry out. For example, blockchain has the potential to create new peer-to-peer models for financing and recording of corporate actions, create more accurate actuarial risk reports, change reporting to a real-time model enabling better regulation or practices, improve the speed and cost of payments. 

Most people discuss blockchains in a purely financial manner thanks to Bitcoin, but the technology has uses far beyond the financial industry. As blockchains are simply a way of storing information, and with records unable to be erased, it can help to document events digitally to provide more accurate reporting.

 

Gemalto: The majority of future blockchains will be private, but not necessarily commercial

A Q&A with Joe Pindar, director of product strategy and CTO at Gemalto

How will the public variety of blockchain mostly be used in future?

One of the main characteristics of public blockchain is that it is easily accessible, and usually anonymous. It allows individuals to come together, conduct transactions and then disperse again – without ever knowing the identity of the counterparty. For certain transactions, anonymity and accessibility will continue to be attractive qualities. One common example would be the process of reporting criminals to law enforcement, through services such as Crimestoppers.

Will the main reality of future blockchains be a series of commercial, private blockchains?

The vast majority of future blockchains will be private, but not necessarily commercial. For most business use cases and applications, it is necessary to know the individuals involved. This means that blockchains need to be ‘permissioned’, and a central authority – or committee – needs to run an identity and authentication service. For people to commit to providing such a service requires self-interest, which leads to establishing private blockchains. The exception to this would be government-based blockchains where national identities would be used.

Blockchain – and its ability to decentralise trust – is a useful characteristic for many use cases and industries. From a commercial perspective, finance and insurance organisations can streamline the processing of financial transactions and back office functions through blockchain. However, aside from commercial offerings, IoT devices can use blockchain to take actions based on what data parts, or all, of the connected IoT network is receiving.

Overall, how will private and public blockchains diverge and pan out in usage?

One emerging analogy is that the future of blockchain will be similar to a computer network. Everyone will have a small private network at home – where you connect your laptop, iPad and games console. Companies will have private networks where employees connect their work PCs. Both of these private networks would then connect to a much larger, public network – the internet.

One potential future of blockchain is where IoT devices at home, such as heating systems or entertainment systems, use a private blockchain to make decisions. Building on this, companies could use private blockchains to work with their partners and suppliers. These blockchains could provide selective/sanitised data to a public blockchain that is used to collect economic data (supply chain usage) and consumer data (entertainment systems) as part of a census.

 

DocuSign: The usage of private and public blockchain are not mutually exclusive

A Q&A with Ron Hirson, head of product at DocuSign

How will the public variety mostly be used in future?

The nature of public blockchain lends itself to use cases around currency and financial transactions, both between people and between companies. Whist this is likely to remain a core usage of public blockchain, it is difficult to predict how the technology’s implementation will evolve in the future. It is dependent upon a number of factors, including whether the parties involved in private blockchain usage will choose to migrate to a public distributed ledger.

Will the main reality of future blockchains be a series of commercial, private blockchains?

The usage of private and public blockchain are not mutually exclusive. In fact, in many cases, the usage of both makes sense. For example, DocuSign developed a proof-of-concept app that works with Visa’s connected car prototype to simplify the process of leasing a car by automating all the steps in a completely secure electronic environment – right from the driver’s seat.

The app uses blockchain methods to bring together the eSignature solution and API with the Visa Token Service for secure payment processing. In this instance, a smart asset (the car) registers itself on the public blockchain so that the smart contracts, the car and payments can all use the distributed ledger to talk to each other and take actions.

Overall, how will public and private blockchains diverge?

This isn’t clear at the moment, but we are seeing a lot of traction with private smart contracts that are self-enforcing and connected to the internet for purpose-built transactions. Overall, the differentiating factor between public and private blockchain is that public blockchain enables open standards for lots of companies to get involved with, whereas private does not.

 

Also read:
Hype vs. reality: We investigate the potential in blockchain

What can Blockchain bring to security?

What’s a blockchain? And is it heading for prime time?

VCs share their perspectives on the Blockchain investment space

UK government continues its blockchain lead

New blockchain tech partnership aims to trace child porn peddlers

Start-ups vs. big banks: What is the future of money 2026?

Windbags withstanding, blockchain isn’t a panacea for world ills

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Kathryn Cave

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Vince Smith on April 10 2017

With the Linux Foundation Hyperledger frameworks, although they are designed to provide private blockchains, they are open governance, open standard frameworks. Innovation is part of its design, which is why in just 15 months the Hyperledger community has grown to more than 120 members.

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Vince Smith on April 10 2017

With the Linux Foundation Hyperledger frameworks, although they are designed to provide private blockchains, they are open governance, open standard frameworks. Innovation is part of its design, which is why in just 15 months the Hyperledger community has grown to more than 120 members.

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