Understanding private blockchains

Dr Gideon Greenspan, Founder and CEO

A brief history of blockchains

2009 Bitcoin

2011—2013 Altcoins

2015— Many private blockchains

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Public blockchains in enterprises?

•  Low capacity •  Poor governance •  Unknown costs •  Anonymous miners •  Cryptocurrencies •  Writable by all •  Visible to all •  One bloated ledger

Blockchains for enterprises

•  Private shared database •  Byzantine fault tolerance •  Control of capacity + cost •  Designated “miners” •  No cryptocurrency •  Collective admin •  Blockchain as

tool not ideology

Tomato 1

This is just a shared

database!

Centralized shared databases

Client Server

Client

Request

Peer-to-peer shared databases

Node

Node

Node

Node Transaction

Block

Peer-to-peer shared databases

Node

Node

Node

Node Transaction

Block

Blockchain

Consensus created by validator nodes

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

Signed by Bob

Signed by Alice

Alice £10

Bob $15

Alice $15

Bob £10

Bitcoin-style constraints

Metadata: b469dc12a0746…

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)

A new type of shared database

Tomato 2

This is not immutable!

“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

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

Tomato 3

This is not a blockchain!

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

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

Philosophical Investigations

“the meaning of a word is its use in the language”

— LW

Tomato 4

This has no uses!

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

Blockchains vs centralized DBs

Advantages Disadvantages

Disintermediation Confidentiality

Robustness Performance

Post-trade settlement?

•  Interbank blockchain •  Issue any asset on chain •  Rapid settlement •  Delivery versus payment •  No need for reconciliation •  Regulatory transparency

Post-trade settlement?

•  Interbank blockchain •  Issue any asset on chain •  Rapid settlement •  Delivery versus payment •  No need for reconciliation •  Regulatory transparency

Confidentiality

Strong blockchain use cases

•  Lightweight financial systems •  Provenance tracking •  Interorganizational record keeping – Multiparty data aggregation

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

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

Asset movement patterns

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

Tomato 5

This is nothing new!

Blockchain Old-Timers

New? Bitcoin transaction model

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New? Compact state proofs

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New: Awareness + Productization

Tomato 6

This is overhyped!

•  x

http://ericsammons.com/what-is-the-blockchain/

https://ripple.com/insights/2016-will-be-the-year-you-realized-you-dont-need-the-blockchain/

•  x

http://ericsammons.com/what-is-the-blockchain/

https://ripple.com/insights/2016-will-be-the-year-you-realized-you-dont-need-the-blockchain/

Tomato 7

This is all vaporware!

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

MultiChain.com search acquisition

Jul 2015

Aug 2015

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Oct 2015

Nov 2015

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Jan 2016

Feb 2016

Mar 2016

Apr 2016

May 2016

Questions?

Visit www.multichain.com for:

MultiChain download Getting started guide

Developer docs and forum Popular private blockchain blog