Public versus Permissioned Blockchain: All of the above?

Earlier this year, I attended the American Banker's conference on Blockchain.

One of the sessions that attracted me to the conference was the session, "The Debate: Permissioned vs. Permissionless Blockchains".

This is one of those good old tech "religious" debates on whether the future is open or closed - similar to open source versus proprietary software debates of old.

As for public blockchain this is referring to Bitcoin or Ethereum.

As for permissioned or closed blockchains, I had written an earlier post where I explored Goldman's take on the "permissioned blockchain" where the participants are known to each other.  I had noted in the post that the "consensus mechanism in the permissioned blockchain is quite different than it's public counterpart, which relies on the proof of work (POW)... This is not the case for permissioned system which require the consortium who set-up the blockchain to determine how they will work with each other". Some main examples of permissioned are R3, Hyperledger, and NASDAQ's Linq. The following video gives a quick breakdown of Hyperledger and the key features of a permissioned ledger:

Before seeing the debate (more of a spirited discussion), was that permissioned was going to win out.

To be honest, what I see as the main obstacle of the public blockchain is the amount of energy it needs to sustain itself.  Linked to that is how much more energy it would require to hit the level of Visa or other credit card transaction processing to become mainstream.

It's not to say there aren't other issues, such as confidentiality and regulatory opposition to the technology, but I see this as one of the key challenges. So I thought we would at least see permissioned ledgers dominate at the outset.

However, what I realized after seeing the debate was that I wasn't approaching this from the right perspective.

What Siddharth Kalla (Chief Technology Officer, Acupay) noted in the debate was that you need to think what's the equivalent of Google and the blockchain. What he was saying was to think of blockchain as the equivalent of the Internet: how could we have predicted that TCP/IP would have ushered in the technology-giant we now know as Google? 

That concept hit my mind like a bolt of lightning: think about all the things that Google has brought about, search, gmail, Android, and cloud-based office productivity. 

That's the power of open.

And that's what I realized is that I needed to think of bitcoin or Ethereum as the Internet of Value's first proof-of-concept (POC). There will be someway to overcome the limitations I noted above and make it viable. It's only matter of time before the equivalent of Sergey Brin and Larry Page will unleash the power of open on the public blockchain. 

So what about the permissioned blockchain? Will it die out?

Where I am is that this not about one or the other. Rather, each solves for different problems. The public blockchain is about exchanging value with strangers. The permissioned blockchain is about exchanging value with private parties that an entity regularly deals with. In a gross oversimplification of the latter, it is a "secured-shared-spreadsheet" that replaces the routine exchange of spreadsheets by email. I like the term distributed ledger ledger technology, as used by the World Economic Forum, to describe the latter. 

Although the two are closely linked now in terms of community and development, eventually the two communities will separate based on what societal or business challenge they address. 

DNSChanger Virus & Trust on the Internet

I came across this forum in a CNET Newsletter which I subscribe to. The immediate issue on hand is the DNSChanger trojan. As discussed in this post, it is a nasty piece of malware that has infected not just PCs and Macs, but also routers and other network hardware. As mentioned on my post on the virus attacks on Macs, the culprits are not attention seeking hackers but an Estonian criminal gang that managed to steal $14 million from its victims. Although the FBI was able to catch the criminal gang and the rogue DNS server, they were unable to shut off the rogue servers immediately because this would result in the infected computers being suddenly cut off from the Internet. So instead the FBI "chose to keep the rogue DNS servers active and convert it to a legitimate DNS system for infected computers" and conduct an awareness campaign to alert users about this potential infection before shutting off the rogue DNS server. They plan to do this on July 9 2012.


For more information on how to address this issue, see:

• The Canadian government resource page to fight this issue (thanks to SC Magazine). Once you accept the T&C at the bottom, you system will be checked to see if it has the DNSChanger Trojan.
• The DNSChanger Working Group Site, which is managed by a consortium of experts and groups. 
• The FBI's post on this.  

The other aspect of this story relates to credibility on the Internet. "Barbara" submitted a classic "Dear Editor" letter to CNET which was the subject of the feed I received in my email. She did not know whether she should download the tools from DCWG.org and thought it could be a scam (see the first post at the top). Although she more than likely Googled (or Binged) the topic, she did not trust the results. Instead, she needed to turn to CNET as a "trusted intermediary" to verify that the tool the FBI was offering to clean the system was indeed legitimate. This illustrates a challenge for the new "here comes everybody" approach to the Internet enabled media: How do we verify claims on the Internet? Clay Shirky (who is the author of the book Here Come's Everybody) has analyzed how the Internet as a broadcast medium has made it possible to get one's news on events outside of the traditional mediums of print, television or radio, which were controlled by professional journalists. The implications of his analysis is that the previous monopoly that journalists had on broadcasting will be undermined by just regular people who can supplant such traditional media organizations through blogs, wikis and the like.  However, Barbara's concern about being duped by nefarious actors on the open Internet highlights how there continues to be a need for trusted institutions or individuals, such as CNET, to add credibility to news in order to effectively act on something such as the DNSChanger trojan.

This, however, does not mean that pre-existing business model of the media, which relied on its on monopoly on broadcast technology will continue to be viable. Changes will have to be made. For example, Encyclopedia Britannica was able to successfully shift from its previous model to of selling physical books to an online subscription model. In fact, 2012 will be the last year that they will be selling its iconic set of encyclopedias. More importantly, Encyclopedia's new approach is a good example of how people are willing to pay a premium for an "authenticated encyclopedia" instead of solely relying on the "free encyclopedia" Wikipedia. That being said, Encyclopedia Britannica's model may not work for traditional news outlet. As Jeff Jarvis,  professor in journalism at CUNY and author of "What would Google do?", points out on his post on the danger of pay walls, media organizations stand to lose audiences and therefore "Googlejuice" by adopting this approach. His post highlights the conundrum that media organizations find themselves in. Do they opt for the pay walls which are akin to the old way of doing things? Or do they embrace the "Googlejuice" and rely on online ads and greater user interaction? It will be interesting to see how this all gets sorted out.