Government & Blockchain Technology
Blockchain alone can’t prevent crime, but these 5 use cases can help tackle government corruption
- Blockchain offers a range of valuable qualities, particularly related to tamper-evident and permanent databases and record-keeping, that can help tackle government corruption.
- This technology must be paired with thoughtful legal frameworks and structures. Blockchain alone cannot prevent crimes.
Blockchain can serve a unique role in preventing government corruption. Its technology offers a singular combination of permanent and tamper-evident record keeping, real-time transaction transparency and auditability, and automated smart contract functionality.
To be sure, blockchain alone cannot wholly prevent crimes or thwart bad actors. While blockchain can complement and enhance existing legal frameworks and social structures, its efficacy is only as great as the system in which it is a part. In the absence of consistent law enforcement, accurate informational inputs, adequate technological know-how, cooperative political elites, and societal good will, blockchain-based governance may prove no more a corruption deterrent than status quo laws and policies.
Nonetheless, key use cases demonstrate how the technology could be deployed to address weaknesses in current systems. These use cases also highlight the importance of a comprehensive and multi-faceted approach to blockchain-based governance. In many cases, they also include critical limitations and downsides to the use of this novel technology. While these limitations may recede with technological advancements, it is essential that governments weigh both the costs and the benefits of blockchain-based governance systems.
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1. Public Procurement
Public procurement (or government contracting) is the single largest marketplace for government spending and the greatest source of official corruption worldwide. Various factors make this government process a hot bed of corruption in high-income and low-income countries alike. Vendor selection processes are complex and opaque, involving a high degree of human discretion. Not only do these vulnerabilities lead to massive financial waste, but they distort market prices, reduce healthy competition, and frequently result in substandard goods and ineffective services.
- How blockchain can help: A blockchain-based process can directly address procurement’s corruption-risk factors by facilitating third-party oversight of tamper-evident transactions and enabling greater objectivity and uniformity through automated smart contracts, thus enhancing the transparency and accountability of transactions and actors.
- Key limitations: A number of hurdles can complicate effective deployment. For example, the easier it is to access and use the blockchain platform, the more vulnerable it is to abuse. “Spamming” or “draining” attacks may cripple a system’s anti-corruption potential by flooding it with useless or malicious information or robbing it of the funds necessary to complete each transaction. Additionally, the blockchain platform may not capture the entire universe of relevant human interactions. If collusion, bribery, or even regular vendor selection continue to occur offline, the anti-corruption potential of blockchain-based procurement will be severely stunted.
2. Land Title Registries
Various governments have begun experimenting with blockchain-based land title registries. Some initiatives, like those in Sweden, are motivated by a desire to increase efficiency in a transaction-intensive industry. Others, such as those in Honduras and India, are intent on instilling and expanding property rights and enhancing transparency in a process vulnerable to corrupt practices.
- How blockchain can help: Blockchain-based land registries can potentially provide a secure, decentralized, publicly verifiable, and immutable record system through which individuals could definitively prove their land rights. These qualities reduce the opportunity for self-interested manipulation of land rights and increase the resilience of land ownership more generally.
- Key limitations: Blockchain technology itself cannot formalize property ownership or solve ineffective governance. Countries with nonexistent, incomplete, or incorrect land registries need to go through the difficult process of gathering, cleaning, and digitizing this information before a blockchain-based land title registry can function. Additionally, the degree of connectivity and tech savviness within a population may determine the feasibility of a blockchain-based land registry in the short-term.
3. Electronic Voting
Growing concern over election security, voter registration integrity, poll accessibility, and voter turnout has led governments to consider blockchain-based voting platforms as a means to increase faith and participation in essential democratic processes.
- How blockchain can help: Blockchain’s decentralized, transparent, immutable, and encrypted qualities could potentially help minimize election tampering and maximize poll accessibility.
- Key limitations: Given the high stakes of elections, electronic blockchain-based voting presents substantial risks. Any new technology systems, including those based on blockchain technologies, are vulnerable to cyber-attacks and other security vulnerabilities. These could cause vote manipulation, paper trail erasure, or electoral chaos. Furthermore, a voter verification system that uses biometric software, such as facial recognition, could lead to false positives or negatives in voter identification, thus facilitating fraud or disenfranchising citizens. Blockchain-based voting systems may also entail privacy risks and concerns. It is thus imperative that any such service be provided by an extremely vetted technology provider and system.
4. Beneficial Corporate Ownership Registries
Recent corruption scandals have raised concerns worldwide over opaque or undisclosed beneficial corporate ownership. Secretly operated companies can easily be used to launder money, pay bribes, or self-interestedly sway governmental investment.
- How blockchain can help: Many countries are beginning to develop central registries for beneficial corporate ownership in order to better track conflicts of interest and criminal activity. Tamper-evident and broadly accessible blockchain-based registries could provide much needed transparency and disclosure.
- Key limitations: Corporate ownership registries remain the exception and those which do exist overwhelmingly lack adequate verification systems. The recent emergence of beneficial corporate ownership registries combined with the novelty of blockchain technology may pose certain challenges to effective implementation. For example, most countries still do not require companies to maintain beneficial ownership information themselves. Furthermore, the adoption of a comprehensive and verifiable blockchain-based registry would require buy-in from politicians, lawyers, banks, and big business, many of whom may feel their interests are not served by the public transparency and auditability of such a system.
5. Grant Disbursements
Many governments annually disburse millions of dollars to support education, arts, humanitarian aid, and social assistance, amongst other causes. This process is frequently convoluted, opaque, and inefficient, which causes money to be lost to banking fees and middlemen and opens the potential for corrupt financial diversions.
- How blockchain can help: Blockchain can potentially be used to build public trust in such systems. The ability to disintermediate and reduce the number of actors involved in grant awards, disbursements, and management could streamline the process, reduce costs, and minimize opportunities for illicit financial siphoning.
- Key limitations: The ability for recipients to effectively manage blockchain-based grant disbursements may prove challenging or limit the depth of transparency. Less technologically savvy or well-resourced individuals and organizations may face discrimination or exclusion from grant disbursement processes if they are unable to use the system. Moreover, a blockchain-based disbursement system does not adequately address the challenge of corrupt practices in the use of the grant itself — an issue which frequently arises in the context of humanitarian aid.
Balancing benefits and challenges
In addition to the application-specific concerns, overarching technological barriers may stymie effective blockchain-based governance. These barriers could range from implementation cost and scalability, to unknown negative externalities and underinformed policy-makers.
“Blockchain presents valuable qualities, particularly related to tamper-evident and permanent databases and record-keeping, that could enhance transparency, accountability, and citizen engagement.”
The World Economic Forum recently released a report to further assess blockchain’s ability to effectively reduce public corruption. The report, Exploring Blockchain Technology for Government Transparency: A Blockchain-Based Public Procurement System, focuses on the Forum’s ongoing project with the Inter-American Development Bank and Colombian Inspector General’s Office, which has investigated, designed, and tested the use case of blockchain-based procurement. The proof-of-concept, centered around a public permissionless Ethereum blockchain-based procurement auction, highlighted the potential applicability of this technology in a variety of additional corruption-prone areas of public governance.
More blockchain use cases will continue to emerge to tackle bad actors. As they do, the novelty and untapped anti-corruption potential of blockchain-based solutions should not distract policymakers from the downsides and trade-offs associated with employing the technology in the public sphere. Nonetheless, blockchain presents valuable qualities, particularly related to tamper-evident and permanent databases and record-keeping, that could enhance transparency, accountability, and citizen engagement in areas that materially impact democratic governance and sustainable development around the world.
How the Blockchain Can Transform Government
The blockchain is one of the most significant, fundamental advances in digital platforms since the internet and also probably the most overhyped technology in current times, according to Kevin Werbach, Wharton professor of legal studies and business ethics, at the inaugural annual Penn Wharton Budget Model Spring Policy Forum, held recently in Washington.
“In many ways, the parallels are striking,” said Werbach, who worked at the Federal Communications Commission in the late 1990s during the dot-com boom. “This is a new infrastructure baseline technology that can lead to lots of benefits — also, it has lots of problems. Blockchain is now the source of a great deal of fraud, of illegal activity and regulatory arbitrage, but it is also sparking innovation across the world in all sorts of areas.”
While most people use the terms Bitcoin and blockchain interchangeably, they are very different things. “At bottom, blockchain is not about money, even though this is the technology underlying Bitcoin and other cryptocurrencies — and it’s not fundamentally about destroying governments and replacing them with purely private, decentralized systems, even though it is a system that creates a new kind of decentralized infrastructure,” Werbach said. “Fundamentally, blockchain is about something deeper than all of that. It’s about trust.”
Equifax and the Role of Intermediaries
Last fall, a company most Americans don’t know much about was hacked and the private data of 145.5 million people — including their Social Security numbers — was exposed. With its rich repository of private data, credit bureau Equifax became a target of hackers. And the reason why the company and other credit bureaus exist in the first place is due to a lack of trust. Equifax provides credit scores so a bank, car dealer or other lender will have a sense of whether a borrower will pay back a loan.
“The point of Equifax and credit bureaus is not to have credit bureaus,” Werbach said. “It’s to have a mechanism so that a distributed world of actors, companies and individuals can engage in loan transactions with some sense of what people’s creditworthiness is.” But imagine if those same transactions can be done without central, trusted intermediaries, “it would be much more secure and be much more efficient,” he said. Firms like Equifax charge fees for being an intermediary and going through them also adds delays to a transaction.
The basic idea behind blockchain is that one can trust the system as a whole without necessarily trusting any of the participants, Werbach said. The blockchain is a ledger — record of transactions in a database — distributed to people in a network. Everyone on that network has their own copy of the ledger and be “actually confident, based on mathematical structures of cryptography, that every copy is the same.” So even though there is no central intermediary — like Equifax, a bank or the Federal Reserve — all the players in the blockchain network can trust the information.
There is only one ledger in any given blockchain network and everyone works off that record. Each participant gets a copy of the ledger and additions to the record cannot be changed. With all eyes on it, there is no need for a trusted institution to be in the middle to charge fees or delay transactions. “Everyone can maintain their own copy even across different organizations and across different countries,” Werbach said. “This seemingly basic abstract idea is what has led to all the excitement and adoption around blockchain and cryptocurrencies.”
The excitement around this innovation has pushed the value of Bitcoin to $100 billion around the world while cryptocurrencies in circulation are worth around $300 billion, though down from a high of $750 billion in December 2017, Werbach said. More than $15 billion has been raised in crypto-token offerings in 2017 to 2018. He also cited figures from Gartner projecting that the blockchain is expected to add $176 billion in business value by 2025 and $3.1 trillion by 2030.
“Fundamentally, blockchain is about something deeper than all of that. It’s about trust.”
But there are issues to overcome. “It’s incredibly early. This is not a mature technology. There’s great uncertainty, there are all sorts of problems, even basic technical programs that need to be worked out, and there are all sorts of non-valuable applications,” Werbach said. There are “people using this, for example, to commit fraud, or using this capability to engage in money laundering and illegal transactions — and all sorts of regulatory uncertainties.” However, he believes that these challenges are “not indications that this technology is fundamentally flawed or is fundamentally fraudulent or a Ponzi scheme at the heart.”
Why Blockchain Shows Promise
To be sure, one doesn’t need the blockchain to keep a record of transactions. Any centralized database can do the job. “However, there are large swaths of activity where no database will actually get deployed, or actually be successful, because of basic trust problems,” Werbach said. Sometimes the level of trust is too limited. For example, two companies that enter into a transaction typically will not trust each other. So, they each maintain a record of the transaction. If it’s a more complex deal, they have more copies and have to reconcile them back and forth, he said. That leads to delays, duplication, additional costs and errors.
One example of how the blockchain can improve operations is in supply chains — where goods and services flow among many different organizations around the world. Delays come when the companies in the supply chain are not willing to share their data with each other so there’s a lot of back and forth involved. But the blockchain can solve this problem. Werbach pointed to Walmart’s use of blockchain to track its produce. Before, if someone got sick from the produce, it would take the retailer 6.5 days to find out which farm it came from. After using the blockchain, “Walmart got it down to 2.2 seconds,” he said.
The other potential value of the blockchain is that once a network is set up, it can be a platform for ‘smart contracts’ to run on top of it, Werbach said. These are software applications that automatically execute the rules programmed into it. For example, a smart contract on a car loan gives the driver ownership rights while he continues to make payments. If he misses payments, the contract would trigger a process to repossess the car and the ownership would revert to the lender — all done without an intermediary such as a repo agent or collection agency.
For the government, smart contracts can have implications on how it can regulate more efficiently. For instance, auditing functions can be embedded in the smart contract itself. “So, audit doesn’t have to come in by a third party forensically,” Werbach said. “The transactional data can be readily available on the blockchain itself, including to regulators.” The government does not have to rely on records a company provides to audit transactions because it can see the record on the blockchain.
One example of how the blockchain can improve operations is in supply chains — where goods and services flow among many different organizations around the world.
Werbach said two broad approaches comprise the blockchain innovation. One is the crypto-economic system, such as Bitcoin and other cryptocurrency tokens. In this system, the goal and incentives are the cryptocurrency itself. For example, Bitcoin ‘miners’ expend plenty of electricity and computing power to secure and validate blocks of transactions in a blockchain network. Their reward is Bitcoins. “Bitcoin depends on Bitcoin to incentivize miners who are investing their resources,” he said. “Their tokens become an incentive for behavior.”
The other approach is what’s called “permissioned systems,” Werbach said. In this set up, the participants all know each other so there is no need for all the “overhead” of the mining and validation process, he added. “You can create a shared environment. No one’s in control [and everyone has the same copy of the ledger]. It’s still decentralized but [participants can] much more efficiently use that shared ledger.”
Applications for Government
Werbach said at a time when trust in the government is “at an all-time low,” systems that don’t rely on trust have “tremendous potential.” Also, government resources are constrained and so blockchain-based solutions that wring costs out of the system are helpful. Moreover, blockchains tend to be “incredibly secure systems because they decentralize out this process of security and create an alignment of incentives to secure the network,” he added. “They’re designed around an information security and cryptography paradigm that puts security at the core, and … they allow for this integral accountability in the system itself.”
Critics might question the security of Bitcoins after high-profile thefts at several cryptocurrency exchanges. But Werbach said the blockchain of Bitcoins is quite secure. “Bitcoin is a public $100 billion bank vault. It’s out there. Anyone could hack the Bitcoin network. Nobody has been able to do that in nine years of trying,” he said. Where Bitcoin has been stolen is “at the edges.” For example, when Bitcoin leaves the blockchain vault and goes to an exchange and the exchange gets hacked.
Werbach said using blockchain makes sense for the government because much of what it does is actually record-keeping. “These can be put on a blockchain to make them more secure and more accessible.” For example, Cook County in Illinois put its title registration on a blockchain. Once it is recorded, no one can change it. This can be the foundation for smart contracts to handle liens on properties or the need for additional information.
“Bitcoin depends on Bitcoin to incentivize miners who are investing their resources. Their tokens become an incentive for behavior.”
In Delaware, the blockchain is used for corporate share issuance. When an investor buys a stock, it is technically owned by the Depository Trust and Clearing Corp. “If you owned that stock, the system would grind to a halt because you’d have to trade the physical stock certificates back and forth each time,” Werbach said. That’s why Delaware used the blockchain. And the company has the added benefit of seeing all its investors in real time.
West Virginia just did a pilot test to use the blockchain for voting in its recent primary. The target was military service members deployed overseas. “If someone’s on an aircraft carrier, it’s hard to get them an absentee ballot to vote in a primary,” Werbach said. The state hired a vendor to create a system that lets overseas military securely vote using a mobile device and it’s all recorded on a blockchain. “This potentially uses the immutability of the blockchain as well as native digital accessibility,” he said.
But Werbach acknowledged that security experts have concerns about using it for voting. “The question is, where is the real challenge? Is the problem of information security in elections the core record, or all the things around the edges?” The blockchain might be secure, but if there’s malware on a voter’s mobile phone that is used to cast a ballot, maybe it could change the vote. “Blockchain at the core doesn’t necessarily solve that problem.”
Another use of the blockchain by government is for distribution of benefits. Here, Werbach cites the example of the United Nations World Food Programme that provided cash transfers to Syrian refugees in Jordan. Not only did the blockchain system save money by avoiding bank fees, it enabled the refugees to buy food from local merchants through a biometric scan of their eye. They didn’t need any physical cash, vouchers or electronic cards.
Compliance is another area where governments using the blockchain can boost efficiency by eliminating some of the intermediaries, Werbach said. For example, tax collection goes through several intermediaries and steps. “Putting it all on one ledger potentially eliminates those and creates thisenvironment where regulators can get direct access to the transactional data,” he said. It has “great potential for a whole variety of regulatory contacts where traditionally the process of keeping track of activity was something that had to happen after the fact.”
Government borrowing also can be transformed by the blockchain, Werbach said, citing the example of Berkeley, Calif. In May, city officials voted to issue ‘micro-bonds’ in denominations of $10 to $25 to raise money for community projects. The typical muni bond size is $5,000 at the minimum. Typically, finance fees for issuing muni bonds is such that it would not be feasible for small amounts. But the blockchain cuts those costs because it lets the government deal directly with the buyer. Vice Mayor Ben Barlett reportedly said combining ‘micro-bonds’ with blockchain is “meant to get around Wall Street.”
“If you could go back 25 years ago, to the early 1990s, and you knew what the internet was going to become … what kind of bets would you make? It took 20 years for all this to unfold.”
The Berkeley pilot doesn’t “require centralized intermediaries, the value transfer happens directly and potentially allows for much more efficient transactions and allows for much smaller value transactions with direct maintenance and tracking of the information,” Werbach said. “Smart contracts … can be used to manage, track and implement the interest rate process, the repayment process and securitization process of these bonds.” Indeed, government using the blockchain platform for all types of functionalities could yield “new kinds of innovation,” he said.
To be sure, blockchain is still in its early stages. “Many of these will fail. But if you could go back 25 years ago, to the early 1990s, and you knew what the internet was going to become … what kind of bets would you make? It took 20 years for all this to unfold,” Werbach said. “Something similar will happen with blockchain. We’re at that point now where we can start to see the potential, and so therefore this is the time for public sector agencies as well as enterprises in the private sector to start to experiment and figure out where the real opportunities are, where this technology can actually solve problems in new kinds of ways. So that’s where we are today and it’s a very exciting time.”
A blockchain, originally block chain, is a growing list of records, called blocks, which are linked using cryptography. Blockchains which are readable by the public are widely used by cryptocurrencies. Private blockchains have been proposed for business use. Some marketing of blockchains has been called “snake oil.”
Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a merkle tree root hash). By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority.
Though blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain.
Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin. The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications.
Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree. Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain. This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.
Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher value can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks. Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and re-transmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Because blockchains are typically built to add the score of new blocks onto old blocks and because there are incentives to work only on extending with new blocks rather than overwriting old blocks, the probability of an entry becoming superseded goes down exponentially as more blocks are built on top of it, eventually becoming very low. For example, in a blockchain using the proof-of-work system, the chain with the most cumulative proof-of-work is always considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.
The block time is the average time it takes for the network to generate one extra block in the blockchain. Some blockchains create a new block as frequently as every five seconds. By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is 10 minutes.
By storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally. The decentralized blockchain may use ad-hoc message passing and distributed networking.
Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography. A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.
Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by massive database replication and computational trust. No centralized “official” copy exists and no user is “trusted” more than any other. Transactions are broadcast to the network using software. Messages are delivered on a best-effort basis. Mining nodes validate transactions, add them to the block they are building, and then broadcast the completed block to other nodes. Blockchains use various time-stamping schemes, such as Proof-of-Work, to serialize changes. Alternate consensus methods include Proof-of-Communism, Proof-of-Replication,Proof-of-Stake.
Growth of a decentralized blockchain is accompanied by the risk of node centralization because the computer resources required to process larger amounts of data become more expensive.
Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin. There are a few operational products maturing from proof of concept by late 2016.[
As of 2016, some observers remain skeptical. Steve Wilson, of Constellation Research, believes the technology has been hyped with unrealistic claims. To mitigate risk, businesses are reluctant to place blockchain at the core of the business structure.
Blockchain-based smart contracts are proposed contracts that could be partially or fully executed or enforced without human interaction. One of the main objectives of a smart contract is automated escrow. An IMF staff discussion reported that smart contracts based on blockchain technology might reduce moral hazards and optimize the use of contracts in general. But “no viable smart contract systems have yet emerged.” Due to the lack of widespread use their legal status is unclear.
Major portions of the financial industry are implementing distributed ledgers for use in banking, and according to a September 2016 IBM study, this is occurring faster than expected.
Banks are interested in this technology because it has potential to speed up back office settlement systems.
Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.
Berenberg, a German bank, believes that blockchain is an “overhyped technology” that has had a large number of “proofs of concept”, but still has major challenges, and very few success stories.
Types of blockchains
Currently, there are three types of blockchain networks — public blockchains, private blockchains and consortium blockchains + Driipa new proposed Hybrid Blockchain
A public blockchain has absolutely no access restrictions. Anyone with an internet connection can send transactions to it as well as become a validator (i.e., participate in the execution of a consensus protocol). Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm.
Some of the largest, most known public blockchains are Bitcoin and Ethereum.
A private blockchain is permissioned. One cannot join it unless invited by the network administrators. Participant and validator access is restricted.
This type of blockchains can be considered a middle-ground for companies that are interested in the blockchain technology in general but are not comfortable with a level of control offered by public networks. Typically, they seek to incorporate blockchain into their accounting and record-keeping procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public internet(Wikipedia).
A consortium blockchain is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network. The administrators of a consortium chain restrict users’ reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol.
A Hybrid blockchain is double-featured blockchain with both permission-ed and also has some access restrictions. Every user of Driipa serves as a node on DriipChain and can easily restrict their public showed data themselves . Unlike Private Blockchain where Participants and validators access is restricted & Public blockchains where anyone with an internet connection can send transactions to it as well as become a validator (i.e., participate in the execution of a consensus protocol). Our hybrid blockchain is meant to do both and enhancing extra open-source access to all users of the network restricting access to become giving way to any participant to join the validating network, but through the consensus network scan selection to execute a consensus protocol.
“Public vs. Private Blockchains
People within the industry talk a lot about public versus private blockchains. On a basic level, public blockchains are cryptocurrencies such as Bitcoin, enabling peer-to-peer transactions and, therefore, a revolution in seamless global payments. Interacting with public blockchains fundamentally requires tokens, and comes with its own rules of engagement, agreed upon by the P2P network. Private blockchains (those being built by distributed ledger consortium R3, for example) use blockchain-based application development platforms such as Ethereum or blockchain-as-a-service (BaaS) platforms such as those offered by Microsoft and IBM, running on private cloud infrastructure.
Brian Forde, Director of Digital Currency at the MIT Media Lab, likens public versus private blockchains to the relationship between an open-source technology, such as Linux, and companies like Red Hat that build on that tech for enterprise use. Public blockchains like Bitcoin were the open-source movement that started it all, and private blockchains such as R3 are taking that technology and commercializing it for businesses.
“A private blockchain is an intranet, and a public blockchain is the Internet. The world was changed by the Internet, not a bunch of intranets. Where companies will be disrupted the most is not by private blockchains but public ones,” said Forde.
Bloq’s Garzik echoed a similar thought when explaining the difference between public and private blockchains, but he uses the open-source analogy a bit differently. Bloq bills itself as a “Red Hat for blockchain” of sorts, but its platform is built atop the Bitcoin blockchain rather than a private or “permission-ed” one. (Permission-ed blockchains include an access control layer governing who can participate in the network.) Garzik’s biggest question when looking at cloud providers and others building private blockchains and BaaS offerings is: Who’s running that network?
“On the private and permission-ed side, it’s very much a question of who the referees are. I use that term specifically because what blockchains really provide is a neutral, level playing field for the execution of rules,” said Garzik. “Those rules are applied to transactions that the actors create from that network. For Bitcoin, it’s rules like the monetary supply; the number of transactions that can fit into a block. All of that forms the economic incentives and ultimately consensus rules that everyone in the network complies with and cross-checks to create this system of checks and balances.
“Some of the other blockchain networks, whether it’s [open-source project] Hyperledger, Ethereum, or a bank chain [such as R3] are opening the question of trust and trust shifting,” Garzik went on. “It’s less about the technology, and much more about a rapid, near real-time adjudication of rules between actors on a network. That’s what blockchains do.”( Blockchain: The Invisible Technology That’s Changing the World , ROB MARVIN, AUG. 30, 2017,PC)
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