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:
“Similar protocols could enable timestamping documents, assisting in development of decentralised timestamped registries.”
“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.”
Permission vs permissionless
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.
“Permissionless chains minimise human factor and emphasise the algorithmic approach to security and data consistency, which are core aspects of blockchain technology. Therefore, permissionless chains could reasonably become a base layer of blockchain infrastructure, while permissioned applications could be built on top of it.”
Jigsaw image via Shutterstock.
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