With whole ledgers being open for all to see, are safety concerns around public blockchains well-founded?
A popular NFT marketplace, OpenSea, recently admitted to insider trading by one of their employees.
While the company had not revealed the name of the erring employee, individuals were able to utilize the platform’s public access blockchain ledger to ascertain the identity of the culprit. In this case, the technology was utilized for the cause of justice, but the question of whether public access technology is safe against malevolent intentions still stands.
What is blockchain?
A blockchain is a digital ledger, or record, of transactions that stores information in a way that makes it extremely difficult, if not impossible, to alter the information stored in the ledger without leaving evidence of the change. Information in the blockchain can only be added and verified, not altered or deleted, thus creating unchangeable proof of the information being stored in the ledger. The technology, therefore, allows a secure way for individuals to complete transactions directly with each other without an intermediary like a government, bank or another third party to verify the authenticity or existence of the transaction. The use of blockchain technology is not just limited to cryptocurrency and can be used in different sectors, ranging from logistics to healthcare to energy.
Types of blockchain
There are two main types of blockchain systems, namely the public access and private access blockchain.
As the name suggests, a public access blockchain is decentralized and permissionless in nature, meaning that anyone can read, write and participate in the ledger.
A private access blockchain, on the other hand, is centralized and permissioned, meaning that the number of participants is pre-approved and restricted by the controlling authority. In a private blockchain, only the parties taking part in a transaction would have knowledge of it.
Let’s assess the different features of these two types.
|Public access||Private Access|
|Anyone can participate by adding and verifying data||Only authorized entities can participate in and control the network|
|Transactions per second (TPS) are low due to the massive number of participants.||TPS are high in private blockchains, as the number of participants is limited.|
|Trustless in nature, meaning participants do not have to rely on a third party to operate.||Participants must not trust each other, as the credibility of the network depends only on the authorized nodes and cannot be verified.|
|More secure due to a large number of nodes and active participation. This makes it difficult to attack and gain control of the network.||Less secure and prone to security issues as a malevolent entity can breach the central node and threaten the entire network.|
|e.g. cryptocurrencies like Bitcoin and Ethereum||e.g. Hyperledger Fabric of Linux Foundation.|
Advantages and disadvantages of the public access system
Public access networks are not maintained by any central authority, which makes it difficult for rules to be laid down. However, decentralized maintenance allows for robust user participation in the development of the network, because new changes to the network have to be voted on and vouched for by the users..
The anonymity of public access is a double-edged sword. While it helps maintain users’ safety, it also has the potential to make them vulnerable to infiltration by those who wish to change the system in order to make it vulnerable and exploit it at a later stage.
Complete transparency in the network does away with any discrepancies in the ledger, making it difficult for defaulting parties to conduct illegal transactions without being seen and reprimanded by the rest of the network. This eliminates the chance of fraudulent behavior as transactions can be traced back through every individual computer in the ledger. This makes the technology especially desirable in sectors with widespread networks vulnerable to embezzlement and corruption, like the Bunker industry.
As such, public access networks have their own sets of pros and cons like any piece of technology. It is, thus, essential to understand the requirements of one’s network before setting up a ledger.
If one’s enterprise needs a genuinely decentralized, completely transparent, immutable system to work with large communities, then a public blockchain would be a suitable option. However, if speed, security, cost-efficiency, confidential information and compliance are the main priorities of the ledger, then a private blockchain is the way to go.
Image courtesy Piqsels