Month: June 2017

Private vs. Public and Permissioned vs. Permission-less

 

 

 

 

There are two related concepts regarding the most general types of blockchains:

  1. The idea of a blockchain that is “public” vs. one that is “private” (the “open door” and “passport bearer” photos above),
  2. The notion of a blockchain that is “permissioned” vs. a “non-permissioned” (or “permission-less“) blockchain.

We have seen people conflate items 1 and 2 (e.g. saying a public blockchain is a permission-less blockchain), and we have seen people maintain a subtle distinction between 1 & 2 above.

On this latter point, for people who maintain a distinction between 1 & 2: the concept is that the public/private distinction has to do with user authentication (WHO are you) and the permissioned/permission-less distinction has to do with user authorization (WHAT can you do). Although there doesn’t seem to be (ahem) 100% consensus on exactly what these terms mean, Blocktonite offers the following explanations of these subtle distinctions:

Public vs. Private

 These terms are generally used to describe whether a blockchain is open to literally anyone with an internet connection, symbolized by the open door graphic above, or if access (read, write, or read/write) to a blockchain is controlled by one or more parties. A very real example of a private blockchain are those set/up by consortia of parties with a shared interest in a particular community or marketplace. R3, the consortium of major banking institutions, is a prime example. In the case of “consortia based” blockchains – there are rules for consensus that stray away from the “proof of work” or “proof of state” mechanisms of public blockchains like Bitcoin (e.g. 10 out of 15 consortium members must agree before a transaction is posted to the blockchain).

You could have a private blockchain under the authority & control of one organization, but, frankly – why would you do that? That situation begins to sound like a secured, high performance, database!

Permissioned vs. Non-Permissioned

Generally speaking, we believe it is useful to think of public blockchains as “non-permissioned” (the Bitcoin blockchain would be “exhibit A” in this way) and private blockchains a “permissioned”.

However, we also believe a useful way to think about whether a blockchain is “permissioned” or not – is if there is the presence of some entity/entities who control what kind of transactions a blockchain participant can perform.  Example: perhaps I’m a bank who is “permissioned” to participate in R3, but I’m not allowed to see or initiate certain interbank transfers on the R3 network.  The fact that I need to be cleared to participate in R3 makes it a private blockchain, and the fact that I’m allowed to perform only certain transactions makes R3 a permissioned blockchain.

In the end, this discussion is a matter of semantics – the more important point is to understand blockchain deployment types and design points.

“Blockchain Friendly” Britain

The United Kingdom stands out (along with Dubai, the US, India, Australia and China) as a country aggressively piloting blockchain applications. However, perhaps more than other countries, the British government itself is more engaged in blockchain uses in public sector settings.

You can Bank on the British

Since 2015, the Bank of England (similar to the US Federal Reserve in mission) has been testing blockchain applications to lower costs in inter-bank transfers internal and external to the country.  The UK Department for Work & Pensions has been piloting the use of blockchain to pay benefits to recipients who do not have bank accounts.  The UK Royal Mint is testing blockchain to issue “Royal Mint Gold” a digital representation of real gold (think of a digital token that can be redeemed for gold).

English Gardens for Innovation

In 2016, UK’s Crown Commercial Service agency (akin to the US General Services Administration) awarded a “blockchain-as-a-service” contract to  Credits (a start-up out of Isle of Wight) so that agencies and organizations within UK’s public sector can use blockchain for their own purposes and applications.  The UK government has also funded a “Digital Catapult Centre” in London to incubate start-ups in newer technologies, including blockchain.

The UK’s Financial Conduct Authority (similar to the US’ Securities & Exchange Commission) has included blockchain start-ups in its Regulatory Sandbox (kind of a ‘safe harbor’  that allows companies to test applications in a live environment).

In academe, the University of Surrey is ramping up its research efforts in “Digital Economy & Blockchain”.

British Blockchains Emerging

Activities like those above are helping to cultivate private enterprise in the UK.  London itself is a hotbed of Financial Technology (“fintech”) start-ups and other industry companies developing blockchain applications.

Postscript 7.9.17: The UK is also looking into blockchain technology for it’s judicial system.

What is Blockchain?

If you google the phrase “what is blockchain” you will get (as of 6/3/17) 17 MILLION hits. We at Blocktonite don’t pretend that we can offer you as good an answer to that question as any of those folks. In fact, we’d be lying if we said WE totally get it.  However,  we plan on building over the next few weeks a special section of our library dedicated to the best explanations we’ve found.

Having said that – here’s the way we think about blockchain in terms of “what  is it for?”: it’s a way to allow a “community” who have some kind of shared interest (exchanging money, who has what property, where did a physical, virtual, or intellectual asset come from, and on and on) to agree on the state of that specific world (energy consumption, land ownership, money, etc.).  This sounds dull – but it’s yuge. Take it from us.  The best way to “get it” is to see how industries and countries and governments are thinking of ways to use blockchain (hence our attempt to highlight what’s going on in the areas of music, energy, state regulations, document management, internet of things, etc.).

From an “information technology” perspective, blockchain is an evolving foundational technological standard (meaning ‘raw’ technological plumbing) that can run on the internet. The internet today has literally hundreds of such foundational ‘services’ – most of which you experience but don’t directly interact with.  Examples:  “SMTP” is what your e-mail provider uses, “http” powers all the websites you access, “FTP” is what you are using when you upload/download files from somewhere, etc.  You rarely deal with these services directly – but your PC, Tablet, and mobile phone is using them on your behalf.  Blockchain is rapidly evolving as one of those core “foundational” services.