Confidential Transactions — At present, all Bitcoin transactions are completely public, albeit pseudonymous. Confidential Transactions, as the name implies, conceal the amount being transferred to all except the sender, the recipient, and others they designate. The resulting transaction size is significantly larger, but includes a sizable “memo” field that can be used to store transaction or other metadata, and is still smaller than eg Zerocoin.(Note that this isn’t as confidential as Zerocash, which conceals both the amount and the participants involved in any transaction, through the mighty near-magic of zk-Snarks. Mind you, Zerocash would require an esoteric invocation ritual to initiate its network. No, really. But that’s a subject for a separate post.)
Bitcoin’s block interval is ten minutes so it takes about five ten minutes on average for a new transaction to find its way into a block, even if it pays a high fee. This is too slow for some people so they have experimented with alternative cryptocurrencies, based on the Bitcoin code-base, which employ quicker block intervals [UPDATED 2014-10-27 to correct my embarrassing misunderstanding of mathematics…]
Write permissions are kept centralized to one organization. Read permissions may be public or restricted to an arbitrary extent. Example applications include database management, auditing, etc. which are internal to a single company, and so public readability may in many cases not be necessary at all. In other cases public audit ability is desired. Private blockchains are a way of taking advantage of blockchain technology by setting up groups and participants who can verify transactions internally. This puts you at the risk of security breaches just like in a centralized system, as opposed to public blockchain secured by game theoretic incentive mechanisms. However, private blockchains have their use case, especially when it comes to scalability and state compliance of data privacy rules and other regulatory issues. They have certain security advantages, and other security disadvantages (as stated before).
Let's explore if there is a hybrid blockchain concept (third type). A consortium blockchain would be a mix of both the public and private. Wherein the ability to read & write could be extended to a certain number of people/nodes. This could be used by groups of organization/firms, who get together, work on developing different models by collaborating with each other. Hence, they could gain a blockchain with restricted access, work on their solutions and maintain the intellectual property rights within the consortium.
And now for the second clever part. The logic above is symmetric. So, at any point, whoever is holding these coins on the sidechain can send them back to the Bitcoin network by creating a special transaction on the sidechain that immobilises the bitcoins on the sidechain. They’ll disappear from the sidechain and become available again on the Bitcoin network, under the control of whoever last owned them on the sidechain.
Sidechains with specific purposes could be formed with specific features while still enjoying the widespread adoption and value that Bitcoin holds. Most importantly it can add these features without consensus from the Bitcoin community. Sidechains have the potential to replace many Cryptocurrencies as it allows features that were previously unique to these currencies to be available on Bitcoin. It also allows developers to experiment with sidechains and scope its full potential while still keeping coins linked to Bitcoin.
Bitcoin está demostrando un potencial enorme, y desarrolladores de todo el mundo quieren llevar esta tecnología aún más lejos, por ejemplo con los smart contracts turing completo o las llamadas smart property. El problema es que Bitcoin tiene un lenguaje de programación deliberadamente limitado. Además sus transacciones se confirman relativamente despacio, cada 10 minutos. Y ya por último y muy importante, su cadena de bloques está saturándose de transacciones debido a la creciente fama de Bitcoin.
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Jump up ^ Iansiti, Marco; Lakhani, Karim R. (January 2017). "The Truth About Blockchain". Harvard Business Review. Harvard University. Archived from the original on 18 January 2017. Retrieved 17 January 2017. The technology at the heart of bitcoin and other virtual currencies, blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.
Sidechain is a chain of blocks based on the main parental blockchain. Sidechains realize the new financial ecosystems via integration into Bitcoin. Relatively new to Bitcoin, the sidechain is an extension that enables the ability both to build a link between BTC and an altcoin and to create new independent services that work via the main Bitcoin blockchain. Using sidechains allows for the creation of various types of smart contracts, stocks, derivatives, etc. It is possible to develop a limitless number of Bitcoin or Ethereum-based sidechains with different tasks and features, assets of which will depend on the main blockchain’s volatility. It allows traditional blockchains to support several kinds of assets, payments, smart contracts and also to increase the level of security and anonymity of transactions.
My chief concern is not with the concept of side chains per se (yet). I have still much to learn about how they are being considered. I am only concerned with the way the concept is being presented here. However, I am sure that much of this was due to space restrictions as much as anything. The concept of side chains is an intriguing one. It is also clearly attempting to address a major problem with the whole Bitcoin scheme- namely the verification latency it introduces for transactions. This is only one of the hurdles facing Bitcoins acceptance into the world of commerce, but it is a considerable one.
In private blockchains, only specific, pre-chosen entities have the ability to create new transactions on the chain (this is known as “write permissions”). Thus, a private blockchain is a closed network that offers constituents the benefits of the technology, but is not necessarily decentralized or distributed, even among its members. The extent to which each constituent can view (“read”) and create and validate transactions (“write”) is up to the developers of the chain.
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".
There are promising works in sidechains like there can be transactions at higher speed and volume. For example micropayments can be done directly with minimal fee by using Lightning Network side chain. You won't have to wait for 10 minutes for miners to create a block. Or we can have privacy in our transactions by Zerocash side chain. If you want privacy, you send your bitcoin to sidechain and use Zerocash protocol for sending bitcoin to your recipient. This protocol makes your transaction not to be seen in the transaction history, at the same time it won't damage the integrity and security of the Bitcoin. If you use Zerocash protocol in your sidechain, you cannot be tracked anymore. By the way, test results say that its performance is very poor now, but I believe it will be better in the near future.
Cohen recently noted that before blockchain is practical in retail, brands have to understand its relevance. NPD said it’s not just about payment methods or sourcing transparency. It also has the potential to touch all areas of a company. Cohen highlights a few areas where blockchain has the ability to impact retail including revolutionizing supply chain management, preventing against counterfeiting, simplifying payments and creating safer data security.
So if you want to create a more secure Sidechain, we would seriously need to have a look at incentivizing miners in other ways. These could include things such as the Sidechain raising outside funding from investors in order to pay the miners. Staggering mining award so miners have an incentive to keep mining as they will be paid later on rather than at the time or the Sidechain could issue its own mining award on top of the already existing transaction fees and essentially just become an Altcoin.
Similarly, a side chain is a separate blockchain that runs in parallel to the main chain. The term is usually used in relation to another currency that’s pegged to the currency of the main chain. For example, staying with the Starcraft motif, say we had an in-game currency called Minerals (oh wait, we do!). We could allow players to peg their Ether (or ETH) to purchase more Minerals in-game. So we reserve some ETH on the main chain, and peg, say 500 Minerals to 1 ETH.
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:
– The manipulation of the blockchain: It is indeed possible to come back at any time on the transactions that have already been added to the blockchain and therefore change the balance of the members. In a public blockchain, such operation would require that 51% of the hashing power (i.e capacity to mine) is concentrated in the hands of the same entity. This not theory anymore since it happened beginning 2014 when the cooperative of GHash minor reached the 51% threshold.
Blockchains that are private or permissioned work similarly to public blockchains but with access controls that restrict those that can join the network, meaning it operates like a centralised database system of today that limits access to certain users. Private Blockchains have one or multiple entities that control the network, leading to the reliance on third-parties to transact. A well-known example would be Hyperledger.