"I see quite a few use cases for private blockchains, and they definitely have their place. Traditional institutions won't switch to a completely public blockchain from one day to the other. A private blockchain is a great first step towards a more cryptographic future. The biggest advantages of private blockchains in comparison to centralized databases are the cryptographic auditing and known identities. Nobody can tamper with the data, and mistakes can be traced back. In comparison to a public blockchain it is much faster, cheaper and respects the company's privacy. As a conclusion, it's better to rely on a private blockchain than no cryptographic system at all. It has merits and pushes the blockchain terminology into the corporate world, making truly public blockchains a bit more likely for the future."
– we provide no uniqueness of names, unlike the domain registrars, social networks, namecoin, onename.io, etc. There is no uniqueness of names in real life either. Instead the identity is just a hash of a [json] object that contains a public key. Identity object can not be modified directly, but a new version of it can be created, pointing to a previous version. The owner of the identity object can optionally connect it with the real life credentials, e.g. the social account, internet domain, email, etc. by proving the proof of ownership of that account the way onetime.io does it, the way Google Analytics does it, etc. This allows a spectrum of identities from fully anonymous to fully disclosed and verified. This also allows a person to have multiple identities, for work, for social, for gaming, for interest-specific forums. To simulate OAUTH2, a new site-specific identity can be created and signed with person’s other identity.
The information on every public blockchain is subsequently replicated to sometimes thousands of nodes on the network. No one power administers it centrally, hence, hackers can’t destroy the network by crippling one central server. Read this article “What is Blockchain technology? A step-by-step Guide For Beginners”, for a more detailed description of the technology.
Plasma is a proposed framework for incentivized and enforced execution of smart contracts which is scalable to a significant amount of state updates per second (potentially billions) enabling the blockchain to be able to represent a significant amount of decentralized financial applications worldwide. These smart contracts are incentivized to continue operation autonomously via network transaction fees, which is ultimately reliant upon the underlying blockchain (e.g. Ethereum) to enforce transactional state transitions.
Bitcoin blockchain design has been done for a specific purpose, and this is a money (crypto currency) transfer. But what will we do, if we want to change or add some functions of the bitcoin blockchain? What if we want to transfer other assets rather than money, what if we want to do transactions automatically when pre-determined events occurred. Or what if we don't want other people see our transactions, or track our transactions' history. You can ask countless of what if questions and every answer to these questions drive you to a different blockchain or configurations
Smart contracts are immutable pieces of code and their outcomes are irreversible. Hence, formal verification of their code is very important before deploying them. It’s very hard to verify smart contracts in the Ethereum Virtual Machine (EVM). A business can’t afford to deploy faulty but immutable smart contracts and suffer the consequences of their irreversible outcome. This article details the challanges: “Fundamental challenges with public blockchains”.
Byzantine fault tolerance (BFT) is what keeps the blockchain fundamentally secure. For simplicity, let’s say there were 100 nodes in a blockchain network (there are currently about 10,500 full Bitcoin nodes in the world). What happens when one node wants to tamper with the latest block and say other Bitcoin users sent him a whole bunch of Bitcoin when they really didn’t?
The words block and chain were used separately in Satoshi Nakamoto's original paper, but were eventually popularized as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014. The Economist described one implementation of this second-generation programmable blockchain as coming with "a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level."
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Function Transactions executed between the locks and unlocks of the main chain tokens don't bloat the main chain. As the technology of a side chain is connected to its main chain, it can be used to build on the developments of the main chain and introduce new features to the market. Child chains serve as the transactional chains of the parent-child architecture, as the parent chain retains minimal features.
It doesn’t matter if you’re moving $1bn or 0.01c across the Bitcoin network, you get the same security guarantees. And you pay for this in fees and time. What if you were prepared to trade safety for speed? Today, your only real option is to send the coins to a centralized wallet provider, whom you must trust not to lose or steal your coins. You can then do all the transactions you like on their books, with their other customers and you never need touch the Bitcoin blockchain. But now you lose all the benefits of a decentralized value-transfer network.
Private institutions like banks realized that they could use the core idea of blockchain as a distributed ledger technology (DLT), and create a permissioned blockchain (private or federated), where the validator is a member of a consortium or separate legal entities of the same organization. The term blockchain in the context of permissioned private ledger is highly controversial and disputed. This is why the term distributed ledger technologies emerged as a more general term.
Open blockchains are more user-friendly than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain. Proponents of permissioned or private chains argue that the term "blockchain" may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases. Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.:30–31 Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision. Nikolai Hampton of Computerworld said that "many in-house blockchain solutions will be nothing more than cumbersome databases," and "without a clear security model, proprietary blockchains should be eyed with suspicion."
“Further, contribution is weighted by computational power rather than one threshold signature contribution per party, which allows anonymous membership without risk of a Sybil attack (when one party joins many times and has disproportionate input into the signature). For this reason, the DMMS has also been described as a solution to the Byzantine Generals Problem[AJK05].”
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.
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As an engineer and an entrepreneur, I truly believe blockchain technology is going to revolutionize the world. One of the biggest hurdles we need to tackle in the blockchain industry is scalability. Ethereum can only handle 15 transactions per second. I previously wrote about why that will prevent blockchain from going mainstream and how DAG could potentially be a winner.
Thus Tradle set out to build a meta-protocol that saves the data in the overlay network, and only puts minimal referencing data on the blockchain. There is a general grumpy consensus among bitcoin core devs and mining pool operators on allowing one small data chunk, a hash, per transaction. Many devs say it is not possible to secure this second overlay network. I agree, unless we use the blockchain to help with the task. We have a partial solution working, and are preparing a new design to improve it (partial, as it can not yet handle all known attacks). We are actively sharing the designs at various meetups (and on the github) and are inviting devs to find attack vectors and propose solutions. Tradle’s protocol not only relieves the pressure on bitcoin’s blockchain but is also able to handle larger transaction sizes than Counterparty and Mastercoin, so it can be used for complex identity, supply chain management and many other applications. It is also capable of handling attachment files, needed in the healthcare and financial industries.
Recordemos, como hemos mencionado anteriormente, que actualmente son cientos los proyectos y monedas alternativas que trabajan con su propia cadena de bloques, totalmente desconectadas de la de Bitcoin. Todas con su cotización volatil. El problema de estas monedas es que ninguna de ellas dispone del efecto red ni de la seguridad que sí tiene Bitcoin. De hecho muchas, pese a haber implementado propuestas interesantes, se quedan en nada, con miles de horas y esfuerzo “tirado a la basura”. Incluso algunas de ellas han replicado el codigo de Bitcoin, pero también los fallos que en ese momento pudiera tener y mientras que en Bitcoin si se han solucionado, en esa Altcoin no.
A partir de este momento, se podrán intercambiar y mover estas monedas para hacer uso del potencial de esa sidechain siguiendo las directrices y protocolo que ésta tenga estipulado. Por ejemplo, quizá la velocidad de creación de los bloques es más rápida en esta o quizá los scripts de transacción en esa cadena son turing completos (disponen de un poder de cómputo equivalente a la máquina universal de Turing).
If you want a deeper look at Proof of Stake check out our detailed POS post. In short, while Proof of Work is an effective mechanism to secure the blockchain and provides a trustless consensus paradigm, it’s extremely energy intensive because of all the computing power required to solve hash problems. Also, while it was meant to be decentralized, it’s actually becoming more centralized as miners consolidate and massive mining setups eat up larger shares of winning blocks.
Always there is a balance in nature, even in blockchains. If you want to have extra features, you need to make a sacrifice from your current features. For example to have high speed and volume; you need to give some from your security & immutability by doing consensus with smaller groups or you need to use different methods in consensus like POS / PBFT. (Proof of Stake / Practical Byzantine Fault Tolerance)
Security issues. Like the blockchain, the sidechain needs the work of miners to stay safe from attacks. Without sufficient power, the sidechain is vulnerable for assault. If hacked, only the sidechain will be damaged, while the main chain remains untouched and ready to continue work. If the main chain comes under the attack, the sidechain still operates, but without the value of the peg.
“Private blockchains are valuable to solve efficiency, security and fraud problems within traditional financial institutions, but only incrementally. Private blockchains will not revolutionize the financial system. Public blockchains, however, hold the potential to replace most functions of traditional financial institutions with software, fundamentally reshaping the way the financial system works.”