CRYPTO

Private distribution book technology or public blockchain?

Some people think that approved distributed laser technology can work better than open blockchain because it is tweaked to solve subsequent problems. Such systems are also called “permitted blockchains”, as if blockchain is a high-level concept and a form of “permitted”. But this statement is controversial and down, you can understand why.

Decentralized “allowed”?

There are many options to choose from in DLT: Permitted, Private, Enterprise, Federated DLT, etc. And of course, sometimes, it is not easy to distinguish between them. Therefore, for this level of discussion, let us just compare DLTs versus blockchains.

An authorized DLT and its specified variations are not decentralized. There should be no mistakes around this, as it can be fatal for a project. Although some opponents of this statement may claim that there may be a degree of decentralization, and of course, unlicensed blockchains are more decentralized.

Let’s simply say. If there is one of the two opponents in a transaction and you can do nothing about it, it is centralized. In a public blockchain, if an average user does not want to rely on a mine so that their transactions are included in a block, they can draft their transaction and mine a block of them. If the block is valid, the network will accept it. Of course, mining requires a lot of computational resources nowadays, but there are no technical or formal barriers – you don’t need to get mining permission. In DLT, network users have different roles and powers and ordinary users are not able to create and verify blocks. There is nothing wrong with having a centralized system; It is a matter of understanding what you are working on.

Related: What is the difference between blockchain and DLT?

Permitted DLTs can only be decentralized from one perspective, i.e., consisting of individual members (organizations, companies, etc.) operating networks with exclusive authority to create blocks. It will not be decentralized if there are a few authorized companies controlled by a beneficiary.

And remember, any consortium structure can be decentralized with independent members but only for these members – It will always be centralized for everyone outside the consortium.

Is DLT a cartel?

A consortium (private / permitted) DLT can be considered as a cartel. Sooner or later, an unbelieving agency may question it. A safe strategy will ensure that the terms of the consortium are made in compliance with the law of no confidence.

However, it is much safer to have a fully centralized system. But a centralized system can never achieve the same level of reliability and credibility that blockchain can. It will be as weak as any other centralized system and this is why.

A central DLT is not immutable. The book can be intentionally rewritten (or multiple) by someone who controls it or because of a cyber attack. Due to its open and competitive nature (digging, stacking, etc.), any blockchain can achieve immutability and therefore its records will be credible. Thousands of independent nodes can ensure an unprecedented level of resistance against any kind of attack.

Usually, it comes after a discussion about immutability. How to correct mistakes? What if you have to change your smart contract? What if you lost your private key? You can’t do the opposite – it’s impossible to change the blockchain. What’s done is done. In this regard, DLT is usually the opposite of blockchain alternatives. You will hear that DLT can be designed so that those who control the network verify the transaction at the time of entry and therefore, non-loyal transactions are not allowed to pass. But it would be wrong to think that censorship of the network will ultimately eliminate all wrong and unwanted transactions. There will always be opportunities for mistakes. What then? A retroactive change as a last resort? But if you can change history, you will undermine the whole concept of blockchain. No other technology can ensure the degree of immutability of information. This is not one of the advantages of blockchain – it is one of its advantages.

Related: Returning to the main purpose of blockchain: timestamping

Nonetheless, immutability is seen as something that hinders its legal application. Say, your situation has changed, and you need to change smart communication. The answer is the proper design of an application that does not damage the immutability of the laser. The smart contract should be designed in such a way that the user can attach a new transaction so that the change is reflected in the previous one. The blocks are strongly chronological and only recent transactions will reflect the current situation, while all previous transactions will be a historical reference. You do not need to change the history. Blockchain is a universal repository of evidence of what happened. There are various methods of designing applications that solve all possible legal issues; For example, this and this academic paper proposed solutions for managing property rights in the blockchain registry. These issues are also discussed in a series of articles published last year.

Permission is not a blockchain

If anyone questions this about your system, they will be right. More on why this is not an approved blockchain can be found in this academic paper, but briefly: Not every chain in the block is a blockchain. Attaching the data timestamped part to the hash was invented in 1991 by Haber and Sterneta. This is how these blocks are created and verified. The blocks that are created are the result of an open, decentralized and uncensored competition. This is the definition of blockchain and this is what Satoshi Nakamoto designed. Therefore, whatever is centralized (authorized, private, etc.) is whatever but blockchain.

Unfortunately, anyone is free to associate the term “blockchain” with any of their technologies, as the term has no legal copyright or legal protection. DLT proponents worked hard to erase the boundaries between these ideas. But some high-profile knockdown hacks of private DLT show the real difference between DLT and blockchain, and it’s only a matter of time before the situation changes dramatically. There is a big difference between how many nodes ensure network security, i.e. a handful of known nodes in a DLT network, or thousands and thousands of anonymous nodes worldwide in a blockchain network.

We can argue about this at the theoretical level, but when it comes to losing money due to system weaknesses, no one will listen to enthusiastic talk about DLT. People will start asking questions. If you use “Private / Permitted”, you need to be prepared for this.

Related: Blockchain technology can change the world, not just through crypto

If you still want permission

A safer strategy would be to use the word “DLT” in all communications. It doesn’t address potential vulnerabilities, but you can then say: “We never said it was a blockchain.” However, ENISA (European Cyber ​​Security Agency) always uses “distributed ledger” instead of blockchain in their reports. In contrast, their colleagues at the U.S. National Institute of Standards and Technology used “blockchain” in their previous report.

Do you want to create your own public blockchain network? This is not a good idea unless you have reliable technology and a strong plan. First, [permissionless] Blockchain does not mean secure by default. To achieve a stable level of immutability and attack resistance (hence, credibility and high capitalization of your currency), you need thousands of independent nodes around the world. If you have enough resources to build your community on this difficult path, your network will survive and you will be rewarded. But what is the difference?

DLT Economy

If you are still thinking about building your personal or licensed network, think about how this infrastructure will be maintained. If it’s entirely your network, you can get a solution to it because its maintenance can be covered by the commercial applications you develop. But you have to understand – network maintenance is entirely on your shoulders.

If your members have a consortium, how do they save on infrastructure costs? In a blockchain, it has a native mechanism – cryptocurrency. Independent nodes compete with mine coins. This is how the whole infrastructure is built and maintained. Those who create applications on blockchain need to think about fees, not infrastructure.

But how about your DLT? Is your DLT for personal use only among network members? In this case, the latter must justify the means, so the reason independent players in the market build their own DLT network is because they will bear the cost of creating and supporting it.

Consider another story about DLT for members developing a network for external users. Inevitably, you need to design an effective economic model for network members. No one will spend their resources without spending or the resources will be misused – you will end up with a simple tragedy. One possible solution is to create a local token on the network – say hello to the cryptocurrency.

Private DLT blockchain?

Is an authorized / private DLT better than a blockchain? This is not an appropriate question. They are different and their use depends on what you are trying to achieve. But it would be a mistake to associate blockchain features with an authorized DLT.

Existing blockchains can provide you with a reliable infrastructure for an application. The notion that immutability hinders the application of blockchain is a misconception. Conversely, this is a major advantage because no other technology can provide such a level of credibility for the record. There are various methods available for creating mature applications without jumping on the bandwagon.

A fully regulated DLT is centralized and therefore requires as much attention for cyber security as any other centralized technology. A consortium DLT is decentralized for its members, but will always be centralized for external users (unless of course the DLT is designed for public use). At the same time, the use of such a DLT can be fruitful in a personal application among independent members, but be careful with motives as it can be considered a cartel and questioned by unreliable organizations.

The opinions, thoughts and opinions expressed herein are the sole property of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Oleksiy Konashevich The author of Cross-Blockchain Protocols for Government Databases: Technology for Public Registry and Smart Laws. Olexi is a PhD. Associate with a joint international doctoral degree in law, science and technology programs funded by the European Union government. Olexi RMIT University is collaborating with Blockchain Innovation Hub, researching the use of blockchain technology for e-governance and e-democracy. He also works with real estate titles, digital IDs, public registries and tokenization of e-voting. Oleksi is a co-author of an e-petition law in Ukraine, cooperating with the country’s presidential administration and serving as the manager of a private e-democracy group from 2014 to 2016. And tax issues for crypto assets in Ukraine.