Let’s switch gears quickly before we get back to talking about trust mechanisms. We’ll define what a “smart contract” is. The first blockchain that was popularized is obviously the Bitcoin blockchain. But the functionality of Bitcoin is very limited. All it can do is record transaction information. It’s only useful to keep track of the fact that Alice sent Bob 1 Bitcoin.
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A blockchain is a distributed computing architecture where every node runs in a peer-to-peer topology, where each node executes and records the same transactions. These transactions are grouped into blocks. Each block contains a one-way hash value. Each new block is verified independently by peer nodes and added to the chain when a consensus is reached. These blocks are linked to their predecessor blocks by the unique hash values, forming a chain. In this way, the blockchain’s distributed dataset (a.k.a. distributed ledger) is kept in consensus across all nodes in the network. Individual user interactions (transactions) with the ledger are append-only, immutable, and secured by strong cryptography. Nodes in the network, in particular the public network, that maintain and verify the transactions (a.k.a. mining) are incentivized by mathematically enforced economic incentives coded into the protocol. All mining nodes will eventually have the same dataset throughout.
Loom Network is a Platform as a Service built on top of Ethereum that allows developers to run large-scale decentralized applications. This lets developers build DApps with the trust and security of the world’s most secure public blockchain, along with the computing resources necessary to run commercial-scale services. Like how Filecoin tokenized disk space, Loom aims to be the tokenized application protocol of the new decentralized web.
Mastercoin and Counterparty are embedded consensus protocols (or meta-protocols) that use the blockchain to store their transactional data. Bitcoin devs, except Peter Todd who was hired by both teams to help them find a proper solution, are very unhappy, to say mildly, about storing the data on the blockchain. Heated discussions on this topic go on for hundreds of pages on bitcointalk and Mastercoin github issue. Mining pools like Eligius started censoring Mastercoin transactions (not sure if they are continuing with this practice right now, but the operators of this pool are adamant that data do not belong to the blockchain).
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”.
Perhaps blocks are created faster on that sidechain. Perhaps transaction scripts are “turing complete”. Perhaps you have to pay fees to incent those securing that sidechain. Who knows. The rules can be whatever those running that sidechain want them to be. The only rule that matters is that the sidechain agrees to follow the convention that if you can prove you put some Bitcoins out of reach on the Bitcoin network, the same number will pop into existence on the sidechain.
There is a whole other issue of identity theft that needs to be addressed. Just a short note here as this is a big subject: If the private key to identity object is stolen, the true owner of the identity needs to have a way to change the key. One approach to that would be to use the private key of the bitcoin transaction that created the first version of the identity object. Another way could be to prove the ownership of other public keys on the identity object, like the one used for encryption (PGP key management suggests a separate key for each purpose, signing, encryption, etc.). Other non-automatic ways could include a trusted third-party, social proof, etc.
The differences between these types of blockchains are based on the levels of trust existing among the members of the network and the resulting level of security. Indeed, the higher the level of trust between the members of the network, the lighter the consensus mechanism (which aims to add the blocks to the blockchain securely). As we will see, there is no trust between the members of a public blockchain since it is open to everyone and inversely the confidence is much stronger on the private blockchain since members are pre-selected. In networks based on a blockchain, the level of trust among the members therefore directly impacts the structure and mechanisms of the network.
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By contrast, the Bitcoin blockchain is not Turing complete since it has little to no ability for data manipulation. It has no ability for a user to deploy if else or goto statements. This is a bit of a simplification but anytime you hear someone say something is “Turing complete” you can do a quick check to see if there is functionality for data changes, memory changes and if/else statements. If there is, that’s usually what they mean.
Segregated Witnesses — The current Bitcoin transaction signature algorithm is complicated and flawed, leading to a problem known as transaction malleability. Segregated witnesses would eliminate that, improving the efficiency of much Bitcoin software considerably … and making much more significant innovations such as the Lightning Network (see below) possible.
Por ello, con este escenario sobre la mesa y con el objetivo de aunar esfuerzos, algunos se han preguntado: ¿Sería posible crear blockchains que sean utilizadas para casos de usos concretos, pero conectadas en todo momento a la de Bitcoin? ¿Podemos crear piezas de software que desde una blockchain se pueda saltar a otra de manera transparente, segura y descentralizada? Esto generaría, para que te hagas una imagen mental, algo así como las ruedas dentadas interconectadas de un motor, cada rueda una blockchain, todas trabajando juntas.
People believe that permissioned means that only a select group of people can access the data and that’s the security feature. But it’s not. Since there is no real user data on the blockchain, (you) as a member of the public, can’t verify the actual content of it. This means that data resides in a location where corruption can stay undetected and data can be easily modified. So why does it even exist? Mainly because of the phenomena known as “hype surfing”; essentially reusing old technology and strapping a blockchain sticker on it gets IBM salesmen a foot in the door to institutions who can’t evaluate the technology accurately in the first place. Unfortunately, even some teams doing public token offerings started to sell this deeply flawed approach to the public.
Implemented by The initial design was published by Blockstream in 2014, but the implementation is blocked by the lack of native support for SPV proofs in Bitcoin (which may not be added at all). Rootstock workaround this by sacrificing decentralization (still work in progress). The Ardor platform created by Jelurida is the first to propose and implement the concept of Child Chains. Already running on testnet, the production Ardor launch is scheduled for Q4 2017.
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.
The great thing about Bitcoin, for a tech columnist like me, is that it’s simultaneously over-the-top cinematic and technically dense. Richard Branson recently hosted a “Blockchain Summit” at his private Caribbean island. There’s a Bitcoin Jet. At the same time, 2015 has seen the release of a whole slew of technically gnarly–and technically fascinating–proposals built atop the Bitcoin blockchain.
In this article, I will intent to do a public vs private (permissioned) blockchain comparison. This will include an examination of what exactly the roles of these two types of blockchain really are and why big businesses should quickly move to adopt them. This analysis will look at why private blockchains are better suited to big business use when compared to public ones.
“What is private blockchain?” is a logical question to ask after you found out that there is no such thing as one transcendental blockchain. What makes private networks different from the public is that only a selected group of people can access them. Hence, a random person has no chance to join a private ledger all of a sudden. To do so, a new participant needs an invitation or permission that can be issued by:
That is however not all. Sidechains also have some specific use cases, unique to a certain blockchain. One example is the usage of sidechains in EOS. EOS is currently facing a RAM problem. RAM is too expensive and developers are complaining. Sidechains could compete with the EOS mainchain by having lower RAM prices, this would lead to competition, incentivizing both the EOS mainchain block producers and sidechain block producers (mainchain and sidechains of EOS are maintained by the same group of block producers) to keep the RAM price as low as possible. This also means there is more RAM available, so the RAM price will go down as a result.
The sidechains vision of the future is of a vast globe-spanning decentralized network of many blockchains, an intertwined cable rather than a single strand, each with its own protocol, rules, and features — but all of them backed by Bitcoin, and protected by the Bitcoin mining network, as the US dollar was once backed by gold. Sidechains can also be used to prototype changes to the fundamental Bitcoin blockchain. One catch, though: this will require a small tweak to the existing Bitcoin protocol.
Sidechain transactions using a two-way peg effectively only allow for intra-chain transactions. A transfer from Bitcoin (parent chain) to Ethereum (sidechain) would allow a user to use the functionality of Ethereum (i.e., fully expressive smart contracts), but the underlying original asset would remain precisely that, Bitcoin. So, a Bitcoin on an Ethereum sidechain technically remains a Bitcoin.
Sidechains as an idea have existed and had been floating around for quite some time now, the bases is to extend the decentralization of trust into other sectors and to other digital assets. However, while this all sounds great it's a perfect example of good in theory but not so much in practice. Nevertheless, this hasn't stopped people from trying with groups such as Blockstream exploring the idea and our friends over at Rootstock co-creating a Sidechain which is allowing Litecoin and Bitcoin to execute smart contracts and all without changing the core software of the original currency.
Hey there! I am Sudhir Khatwani, an IT bank professional turned into a cryptocurrency and blockchain proponent from Pune, India. Cryptocurrencies and blockchain will change human life in inconceivable ways and I am here to empower people to understand this new ecosystem so that they can use it for their benefit. You will find me reading about cryptonomics and eating if I am not doing anything else.