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Many people think that private chains are useless because they are “centralized” and managed by companies. Some even think that private chains are not blockchains at all, but just a distributed ledger. However, some people believe that private chains can solve problems for financial companies that Bitcoin cannot solve. After being set up, private chains will comply with laws and regulations, including the Health Insurance Portability and Accountability Act (HIPAA), Anti-Money Laundering (AML) and Know Your Customer (KYC) systems. The Linux Foundation’s Hyperledger project, blockchain banking consortium R3CEV’s Corda (which records, manages and synchronizes financial agreements between regulated financial institutions), and Gem’s health network project are all private blockchain projects under development. Regarding the application of private chains, Bitcoin Magazine interviewed several blockchain industry giants about their ideas. Jeff Garzik, co-founder of Bloq: Bloq believes that it is very important to develop a software platform that can use both public and private chains. It can allow users on the private chain to have more access to innovative ideas, developers and new apps on the public chain.
Brian Hoffman, founder of OpenBazaar: First of all, I want to make it clear that OpenBazaar is a project based on the Bitcoin blockchain, so I don't know much about private chains. I personally think that private chains are no different from special databases and do not provide any value, and I have not seen any great use cases for private chains.
Dan Wasyluk, Syscoin manager: Private chains provide an open and transparent internal platform for enterprises to promote common development among enterprises. With the emergence of smart contract technology, it will eventually replace the operating model of most centralized enterprises.
Lisk CEO Max Kordek: I know some use cases of private chains, and they do have merits. Traditional enterprises cannot achieve the transformation from centralized to public chains overnight. Therefore, private chains are a transit station on their road to decentralization. Compared with centralized databases, the biggest advantage of private chains is that they have encrypted review functions and participants know each other's identities. No one can modify data arbitrarily, and any mistakes can be traced; compared with public chains, private chains are faster, cheaper, and can guarantee the privacy of participants. In short, using private chains is much better than using centralized databases. The advantage of private chains is to bring the concept of blockchain into enterprises and pave the way for the future development of public chains.
Omni board member Patrick Dugan: I like to call private chains 'shared databases', which improve the efficiency of post-trade settlement for financial institutions. I don't think it's necessary to discuss the pros and cons of private chains. If one day the AML or KYC system can be controlled by public chain metadata, then perhaps public and private chains will have more interoperability. At present, due to state monopoly, most of the liquidity is still in banks. However, we believe that in the future, public chains will become an important part of informal economic activities and promote global economic growth.
Eugene Lopin, CEO of CHEX: A private chain is very similar to a traditional database, just a glorified database. But if you add public nodes to it, it will be different. A public chain is a trusted ledger. The wider the scope of decentralization, the better. The Bitcoin blockchain has all of the above advantages at the same time.
The goal of CHEX is to achieve scalability, enabling the public chain to have public interactive verification capabilities when transaction volume or demand increases.
I have also learned about private blockchain alliances like R3. They are actually still centrally controlled. There are reports that their development is not going well. I believe that the more intense the external competition, the faster and better the development of the Bitcoin blockchain will be.
Ryan Charles, Founder of Yours.Network: For traditional financial institutions, private chains can solve problems of inefficiency, security, and fraud. But in essence, private chains cannot completely reform the financial system. Public chains can completely replace the functions of traditional financial institutions from a technical perspective and completely reshape the operating model of the financial system.
Ledger CEO Eric Larchevêque: Ledger ensures the security of blockchain apps through trusted hardware. Whether it is a public chain, a private chain or a consortium chain, the development of blockchain technology is inseparable from secure key management. We are working hard for this.
We believe that the public blockchain’s censorship-free system can subvert the social structure, while the private blockchain is just a tool for banks to save costs after transaction settlement. The potential value of the private blockchain is not as great as that of the public blockchain. But in essence, they have something in common and can coexist, so there is no need to always put the two in opposition.
Anthony Di Iorio, CEO and founder of Decentral and Jaxx Wallet , co-founder of Ethereum, and Chief Digital Officer (CDO) of the Toronto Stock Exchange (TMX Group): The role of private chains is to control their participants. Banks and financial institutions cannot use public chains because they are open and anyone can participate, which goes against their principle of abiding by laws and regulations.
Private chains use the advantages of blockchain technology to audit internal transactions within a company. This will put you in a security loophole similar to that of a centralized system.
Of course, private chains have their uses. They are faster, can handle more transactions, and don’t have to worry about block capacity issues. In general, they have security advantages and security vulnerabilities.
Andreas M. Antonopoulos, author of Mastering Bitcoin: Banks have no choice but to use private blockchains. At first, they refused because they asserted that blockchain would fail, but it did not. Then they began to promote virtual currencies as worthless, but now the popularity is increasing. It took a long time for banks to change their attitude towards blockchain from complete denial to trying to accept it.
Blockchain technology means decentralization, public protocols, open source, cooperative development, and coexistence with Bitcoin. Banks using private chains can say that in addition to decentralized P2P open source technology, they can still receive blockchain. However, this move just proves that they have lost the core part of blockchain technology.
Vitalik Buterin, founder of Ethereum: Companies using private chains can easily change the rules of the blockchain, revert transactions, modify balances, etc. However, in some cases, such as land registration, this modification function is necessary. In order to prevent illegal and criminal incidents, it is reasonable for the government to control the land registration system.
Therefore, private chains seem to be designed for enterprises. However, public chains can also bring many benefits to enterprises. Public chains are free, neutral and open.
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