Blockchain Technology: More than the dark web’s ‘central bank’

When block- chain is men- tioned, the first thing that comes to mind is Bit- coin, the crypto currency reported to have about 16 million units in circulation, and of course, the illegal activity on the dark web as- sociated with it (and crypto currency generally).

That blockchain is an ingenious invention is an understatement. It is de- scribed as the brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto who had presented the original idea in 2008. It has since evolved into a technology with enor- mous applications, beyond the stereotype P2P payment platform.

Like everything else, the dark side of the technology is discussed more than the good side. While blockchain technology has both good and well, “not so good uses”, it is important to highlight adoption of the good com- ponents  in blockchain and controlling the bad.

Definition & Classifications

A blockchain facilitates secure online transactions. It is a decentralized digital led- ger that records transactions across many computers in such a way that the regis- tered transactions cannot be altered retroactively. It is also referred to as the best known type of Distributed Ledger Technology (DLT), so most people tend to use them interchangeably. A DLT or blockchain is a ledger that is shared amongst all the net- work participants and that records their transactions. The ledger is code protected, distributed and decentral- ized; and is updated by a consensus mechanism.

Vitalik Buterin, in a post on types of blockchain, identified three types; private, public or consortium.

• Public blockchains

Public blockchains are open- source and anyone can be part of them. Public blockchains are open peer-to-peer platforms where all transactions are decentralized and distributed amongst all par- ticipants, i.e. anyone in the world can explore the blockchain, send transactions or contracts, consult them and participate in the con- sensus process.

A public blockchain is most ap- propriate when a network needs to be decentralized (i.e. no need for a central authority), distributed (no central point of failure), highly secured and the participants have low trust amongst themselves.

Examples: Bitcoin, Ethereum, Stellar etc.

• Private blockchains

Unlike public blockchains that have no central authority, private blockchains are privately owned and managed and accessible to a closed group of users. In a private blockchain, permissions to update the blockchain are kept centralized to one organization. Read permis- sions may be public or restricted to an arbitrary extent.

In contrast to public block- chains, pure private blockchains are blockchains which are operated by an organisation which are only accessible to individuals or organ- isations which have been granted permission to use the blockchain by its operator. Private blockchains are essentially private databases which are structured as a distrib- uted ledger.

For some companies, the pri- vate nature of a private blockchain is a key advantage, as it maintains the confidentiality of information concerning transactions made on the blockchain and prevents commercially sensitive informa- tion from being viewed by any- one with access to the internet. However, many supporters of the public blockchain argue that the confidential nature of private blockchains actually diminishes security, as blockchains might be manipulated without any of the us- ers of the blockchains being aware of the manipulation due to the con- fidential nature of the transactions.

Examples: Monax, Multichain, Bankchain

• Consortium blockchains

Consortium blockchains are a hybrid of public and private blockchains that are formed by a number of institutions and give control to a “group” of users rather than a single controlling authority. In consortium blockchains, the consensus process is controlled by a pre-selected set of nodes; for example, one might imagine a con- sortium of 20 financial institutions, each of which operates a node and of which 15 must sign every block

 

CALEB OJALEYE