Research Examines Compatibility of Public and Private Blockchains

While distributed ledger technology continues to gain momentum among the world's financial institutions, the potential and viability of bitcoin is still being largely dismissed by the same parties.

Avid bitcoin supporters believe that using a private blockchain would inevitably result in a centralised system – a world away from bitcoin's decentralised, trustless protocol.

However, according to bitcoin mining firm BitFury's latest white paper – written in collaboration with developer Jeff Garzik – permissioned and permissionless blockchains are compatible and can be interconnected.

Many permissioned blockchain applications, the paper says, can be layered on top of permissionless blockchains using existing technology.

For example, coloured coins – a concept designed to be layered on top of bitcoin's blockchain which aims to ease the transfer of assets – could make public ledgers useful for financial institutions.

The paper adds:

"Payment channel networks could streamline payments by creating a scalable peer-to-peer layer on top of permissionless blockchains," it continues. "Sidechain technology could be used to integrate permissionless and permissioned blockchains into a single interconnected environment."

Although the paper says that private, permissioned blockchains could hold the key for blockchain innovation in the short run, it notes that public permissionless ledgers are less vulnerable to attacks.

This, the paper notes, is due to the design of permissionless ledgers, which are based on the assumption that transaction participants do not have to trust each other.

It concludes:

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