In these last few years, we have seen a lot of tokenization operations being announced. Something positive for the whole industry, you might think. Except when it comes to the technical aspects of some of these operations, you realize these were carried out on a private blockchain.
The last example was the EIB Digital Bond Issuance, the European Investment Bank (EIB) priced its first ever £50 million digital bond using a “combination of private and public blockchain”.
This operation made headlines in a lot of newspapers. When we read about it the first thought is: this is a good sign that shows the industry is continuing to grow!
But then the reality is we are skeptical when the words “private” and “blockchain” are used together. In fact “private blockchain” sounds like an oxymoron.
The question is: is this really an improvement that drives real innovation for the industry or is it more of a marketing strategy?
Why “private blockchain” is an oxymoron
The most obvious difference is that public blockchains have public nodes, while private ones are permissioned. This means that not just anyone can join the network. Not everyone can validate transactions, but just a few authorized parties. But most importantly, the owner has the right to override, edit, or delete entries on the “blockchain”.
The public blockchain is different. Everyone can access, participate, and validate transactions. This is the purpose of creating a system where the data there can be trusted because it’s made practically impossible to override entries or to manipulate them.
To create all that innovation, and then add human control back inside, yes, it’s possible. But it’s quite inefficient. And also an Oxymoron.
Blockchain should be by definition only public. If you bring back all the human control, you’re changing the nature of the blockchain, which is originally built to be immutable and not modifiable. What you get is essentially a database or a shared database. Not a blockchain.
Private Blockchains or shared databases?
It’s easy to compare a database and a private blockchain since the features you get are very similar. But If a “private blockchain” is essentially a blockchain with its advantages of transparency removed, maybe the original database works better, is cheaper, and is more efficient.
Technologies like shared databases already exist. All sorts of signature schemes that allow multiple people – even hostile competitors – to jointly validate data have been around for decades already. And they are faster, cheaper, and more effective than “private blockchains”.
The purpose of a blockchain is to create a decentralized immutable verifiable ledger. Increased security and transparency for your investors. If you don’t need that, then probably the blockchain is not the right solution for you.
So why should you choose a “private blockchain” instead of a shared database?
In multiple cases, private Blockchain could be seen just as a trendy way to label an old technology. Companies who want to appear more innovative may choose to operate on a private blockchain since they know that blockchain is generally seen as innovative and disruptive.
This would turn a weak and inefficient technological strategy, into a marketing strategy that gathers a lot of positive headlines from the media.
The reality is that the general public doesn’t really know these differences and might be easily influenced by big companies using the word “blockchain” together with “private”.
A lot of the public will mistake “private blockchain” for innovation. While real innovation is in fact even confused with these operations.
BlockInvest Take on the matter
This could be perfectly summarized with an old quote: “Everything must change for everything to remain the same”.
It’s a completely different road than the one BlockInvest is pursuing, as our technology was built leveraging the power of public blockchains. The biggest advantage of public blockchains is how secure they are. A transaction recorded in a chain is immutable because it cannot be altered or removed, only added.
This way, there can be an immediate on-chain verification of all information for Investors, in a secure environment with an unparalleled level of transparency.
What we believe is that education and learning are crucial to driving this industry. This is the only way that you can develop your own idea: without it, innovation will always be incomplete.
