Understanding private blockchains

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Explains the motivation for private/permissioned blockchains and their characteristics, particularly in comparison to traditional centralized databases. Lists seven "tomatoes" that people throw at the notion of private blockchains, evaluating which represent valid criticisms and which do not.

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Understanding private blockchains

  1. 1. Understanding private blockchains Dr Gideon Greenspan, Founder and CEO
  2. 2. A brief history of blockchains 2009 Bitcoin 2011—2013 Altcoins 2015— Many private blockchains http://corporate.comcast.com/comcast-voices/comcast-sponsors-internet-measurement-hackathon
  3. 3. Public blockchains in enterprises? •  Low capacity •  Poor governance •  Unknown costs •  Anonymous miners •  Cryptocurrencies •  Writable by all •  Visible to all •  One bloated ledger
  4. 4. Blockchains for enterprises •  Private shared database •  Byzantine fault tolerance •  Control of capacity + cost •  Designated “miners” •  No cryptocurrency •  Collective admin •  Blockchain as tool not ideology
  5. 5. Tomato 1 This is just a shared database!
  6. 6. Centralized shared databases ClientServer Client Request
  7. 7. Peer-to-peer shared databases Node Node Node NodeTransaction Block
  8. 8. Peer-to-peer shared databases Node Node Node NodeTransaction Block Blockchain Consensus created by validator nodes
  9. 9. Peer-to-peer DB requirements •  Atomic transactions – Self-contained “packets” •  Peer-to-peer ⇒ origin unknown – Transactions digitally signed – All data tagged by public key/s •  Shared write ⇒ transaction constraints – Bitcoin vs Ethereum style •  Consensus mechanism
  10. 10. Signed by Bob Signed by Alice Alice £10 Bob $15 Alice $15 Bob £10 Bitcoin-style constraints Metadata: b469dc12a0746…
  11. 11. Ethereum-style constraints from = msg.sender fromvalue = contract.storage[from] to = msg.data[0] value = msg.data[1] if fromvalue >= value: contract.storage[from] -= value contract.storage[to] += value return(1) else: return(0)
  12. 12. A new type of shared database
  13. 13. Tomato 2 This is not immutable!
  14. 14. “Mining” in private chains •  All blocks signed by miner •  Only permitted miners ü  No impersonation attacks •  Mining diversity constraint ü  Proof of work not required
  15. 15. On immutability •  Public blockchains – Secured by hashing power – Mutable by 51% of hashrate – Threat: someone rich (e.g. a government) •  Private blockchains – Secured by distributed consensus – Mutable by ≥51% of validators – Threat: validator collusion
  16. 16. Tomato 3 This is not a blockchain!
  17. 17. Public vs private blockchains Different Same Permissions model Peer-to-peer architecture Transaction censorship Byzantine fault tolerance Native cryptocurrency Public key cryptography “The blockchain” Transaction constraints Proof-of-work consensus Consensus chain of blocks
  18. 18. Public vs private blockchains Different Same Permissions model Peer-to-peer architecture Transaction censorship Byzantine fault tolerance Native cryptocurrency Public key cryptography “The blockchain” Transaction constraints Proof-of-work consensus Consensus chain of blocks
  19. 19. Philosophical Investigations “the meaning of a word is its use in the language” — LW
  20. 20. Tomato 4 This has no uses!
  21. 21. What are blockchains for? •  Old problem: – Shared database (or ledger) – Multiple writers – Limited trust •  Old solution: – Centralized database at intermediary •  New possibility: – Use a (private) blockchain
  22. 22. Blockchains vs centralized DBs Advantages Disadvantages Disintermediation Confidentiality Robustness Performance
  23. 23. Post-trade settlement? •  Interbank blockchain •  Issue any asset on chain •  Rapid settlement •  Delivery versus payment •  No need for reconciliation •  Regulatory transparency
  24. 24. Post-trade settlement? •  Interbank blockchain •  Issue any asset on chain •  Rapid settlement •  Delivery versus payment •  No need for reconciliation •  Regulatory transparency Confidentiality
  25. 25. Strong blockchain use cases •  Lightweight financial systems •  Provenance tracking •  Interorganizational record keeping – Multiparty data aggregation
  26. 26. Lightweight finance •  Any asset can be tokenized on blockchain – Tokens issued by trusted entity/s – Token confers right of redemption •  Disintermediates centralized control – More secure and cheaper •  Confidentiality limits applications – Small financial trading circles – Gift cards, loyalty points
  27. 27. Provenance tracking •  Digital certificate of authenticity – Physical transfer ⇒ token transfer – Verifiable chain of custody •  Disintermediates risk of fraud – Collusion cannot corrupt •  Confidentiality via multiple addresses – Fewer transactions between competitors – Regulation can still be a concern
  28. 28. Asset movement patterns
  29. 29. Interorganizational records •  Collectively record and notarize – Communications or transactions – Digital signatures + immutability •  Infrastructure solution for large groups •  Disintermediates external party – Cheaper and simpler •  Confidentiality easily addressed – Encryption or hashing
  30. 30. Tomato 5 This is nothing new!
  31. 31. Blockchain Old-Timers
  32. 32. New? Bitcoin transaction model http://qiita.com/yanagisawa-kentaro/items/503dfce3762e3b1237c9
  33. 33. New? Compact state proofs https://blog.ethereum.org/2015/11/15/merkling-in-ethereum/
  34. 34. New: Awareness + Productization
  35. 35. Tomato 6 This is overhyped!
  36. 36. •  x http://ericsammons.com/what-is-the-blockchain/ https://ripple.com/insights/2016-will-be-the-year-you-realized-you-dont-need-the-blockchain/
  37. 37. •  x http://ericsammons.com/what-is-the-blockchain/ https://ripple.com/insights/2016-will-be-the-year-you-realized-you-dont-need-the-blockchain/
  38. 38. Tomato 7 This is all vaporware!
  39. 39. MultiChain blockchain platform •  Off-the-shelf private blockchains ü  Easy to configure and deploy •  Permission management ü  Private and tightly controlled •  Native asset support ü  Tracked at network level •  Extendable via metadata ü  Up to 8MB arbitrary data per transaction
  40. 40. MultiChain.com search acquisition Jul 2015 Aug 2015 Sep 2015 Oct 2015 Nov 2015 Dec 2015 Jan 2016 Feb 2016 Mar 2016 Apr 2016 May 2016
  41. 41. Questions? Visit www.multichain.com for: MultiChain download Getting started guide Developer docs and forum Popular private blockchain blog

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