Public Blockchains – The Other Option – CoinGeek

This post was first published on Medium.

The case for private blockchains

A contributor recently posted an article here on Medium illustrating the positive impacts of multiple private blockchain implementations. He also challenged proponents of public blockchains to present implementation options to clients based on facts and not hyperbole. This article attempts to do so by examining several intrinsics limitations of private blockchains, while maintaining that clients always consider private as well as public blockchains for their specific business uses.

Public Blockchains: The Scaling Problem

First of all, let’s get straight to the scaling issue. It’s a problem that has bedeviled popular public blockchains since their inception. Given their extremely low transaction throughput (average 7 TPS), it is not possible for businesses to run mission-critical applications directly on top of the two most well-known blockchains: BTC and ETH. They simply do not scale on the chain.

Instead of addressing on-chain scaling issues, the core development teams of both blockchains have chosen instead to transfer an increasing number of transactions to Layer 2 (L2) or off-chain solutions. Bitcoin Core (BTC) uses the Lightning Network to scale micropayments. Ethereum (NASDAQ: ETH ) transactions are redirected to the Polygon chain (NASDAQ: MATIC-USD ) in addition to other L2 chains that require lower gas fees. Several of these L2 blockchains leverage creative Web3 infrastructure platforms like Alchemy to further scale.

With respect to BTC and the Lightning Network, this approach only addresses a single use case – micropayments. And even then it doesn’t work.

While BTC is a non-viable blockchain for virtually all business use cases, Ethereum at least supports the issuance of ERC-20 tokens and NFTs (ERC-721/ERC-1155). Like BTC, however, ETH is a poor choice for business use cases that need to process thousands or millions of daily transactions. It then seems to beg the essential question: If there is no scalable on-chain tool with respect to either BTC or ETH, should companies even consider them for mission-critical use cases?

If the scaling limitations quantified above aren’t enough to dissuade companies from looking elsewhere, the L2 networks that BTC and ETH are leveraging should. These networks add unnecessary complexity, security and governance risk to any implementation. Governments and highly regulated industries, such as finance, healthcare, food and drugs, etc., are unlikely to ever consider running mission-critical applications on these chains, given the associated risks mentioned above. If such participants are unwilling or unable to run their mission-critical applications on the two most popular public blockchains and associated L2 networks, what public blockchain alternatives remain?

Enter Solana (NASDAQ: SOL-USD) and Bitcoin SV (BSV). Both Solana and BSV claim to be able to process up to or in excess of 50,000 TPS, with theoretical limits far beyond that. In addition, actual TPS on both chains now surpass that of the Visa (NASDAQ: V ) network, which processes around 6,000 TPS daily. However, Solana has been plagued throughout its short history by several network-wide outages lasting up to a few days. Some critics have argued that this is due to flaws in the basic design. Additionally, the association with FTX and questionable governance practices (coin issuance) should give governments and businesses pause when considering whether to deploy enterprise use cases on top of it.

BSV, on the other hand, is currently the only viable and most energy-efficient PoW blockchain, achieving among the highest TPS throughput and lowest transaction costs of any blockchain in existence. With the introduction of Teranode in 2023, actual throughput could exceed 1 million TPS, further reducing energy use and fees per transaction. Once Teranode is released, no other blockchain will likely be able to match its capabilities. Finally, there have never been reported network outages, even during major upgrades, since the base protocol is stable or “locked in stone” (ie no future protocol upgrades expected – or required).

Restrictions on private blockchains

Limitation 1: The network effect

In the article referenced above, the author lists three criteria for successful private blockchain implementations, the first being a network effect. In the example given, a dominant firm uses its influence to influence other participants to join the private network as opposed to “incentivizing” them as miners as suggested in Section 6 of the Bitcoin White Paper. This is a key distinction between the two types of blockchain implementations and affects the long-term ability of a network to scale.

It is it is conceivable that the dominant firm could persuade other firms to join the network by offering incentives, but such incentives are likely to be tailored to each participant and inconsistent from one to the next. Over time, this becomes unsustainable even for the dominant company (as may have been the case with the abandonment of the Maersk TradeLens offer), thereby negating the long-term benefits of the private network effect.

Another obvious limitation in private blockchain implementations is that each participant must invest in and maintain redundant infrastructure. By leveraging highly scalable public blockchains instead, such investments are greatly minimized or eliminated entirely. Participants simply pay minimal fees per transaction as network usage increases. Over time, it is more likely that highly scalable public blockchains, not private blockchains, will increase participation due to Lower overall technology costs and complexity and increased efficiency gains.

Limitation 2: Data security/sensitivity

The author claims that the business “comfort with making data visible across the network” is a critical success factor for private networks. Furthermore, the data should be of low sensitivity.

While the foregoing may be true on private networks, there are no such restrictions on many public networks. A popular method for improving privacy is smart contracts. These are ideal for hiding sensitive business or consumer data, but can pose a bit of a challenge for law enforcement tracking and investigation.

zk-SNARKs are another method of improving transaction privacy and have a long history of being integrated into smart contracts or even blockchains (eg Monero, Zcash).

One of the easiest methods to improve privacy is to use a other address for each transaction. BSV wallets do this by default. This feature can be combined with other discussed methods to further improve privacy.

Finally, the integration of IPv6 into blockchains like Bitcoin SV will usher in a new era of privacy and security by establishing P2P, secure payment channels using Simple Payment Verification (SPV) mentioned in Section 8 of the Bitcoin White Paper. It will also enable secure machine-to-machine or IoT payment channels.

Limitation 3: Efficient payment processing

This is an interesting claim to make with respect to private blockchains. The author does not provide specific details of successful implementations, nor am I asking for any at this time. It’s common knowledge that cheap or free P2P payment processing options have proliferated in the fiat realm (eg Venmo, PayPal, Zelle, etc.), but I wasn’t aware of any cheap or free B2B options running on private blockchains . SoI went looking for someone.

A traditional payment network, Mastercard (NASDAQ: MA ), openly boasts on its website that its solution, the Mastercard Blockchain, “facilitates new trading opportunities for the digital transfer of value by allowing businesses and financial institutions to transact on a distributed ledger. Our technology can drive multiple use cases and can help take time, cost and risk out of financial flows.“

This is an impressive claim, especially on cost. It comes from one of the two largest established payment networks. The lowest category of fees shown on their website is for grocers (1.65%). Consumers and businesses alike should ask themselves one fundamental question: How on earth could Mastercard, or VISA for that matter, offer merchants or consumers transaction fees that even approach the minimal transaction fees now imposed on a public blockchain like BSV? — currently around 1/1000th of a krone. Such low fees would simply break the business models of traditional payment networks such as Visa, Mastercard or even Stripe and Square (Block).

But can Mastercard really transform into a blockchain payment network? Unlikely. Transforming a private payment network into a blockchain network is simply a clever marketing gimmick (eg Block). Business models of private payment networks like Mastercard, Visa, SWIFT and others have come under existential threats due to public blockchains like BSV and their rebranding efforts as blockchain networks look more and more like final acts of desperation. They may all need to completely transform their business models – effectively become miners – to survive, or they may simply disappear altogether.

Ends

While the goal of this article has not been to offer specific implementation guidance, I have can propose technology platforms and tools as viable options for businesses willing to investigate public blockchain alternatives such as BSV. I am following the development more closely on this specific blockchain, but there may also be comparable solutions available on other public chains. Fully implemented enterprise use cases at BSV include Track and Trace, Tokenization, Smart Contracts and Blockchain as a Service (BaaS).

Many Web3 consultants like myself are starting to see a big increase in customer interest around Track and Trace. UNISOT offers a complete vertical supply chain solution, including a Track and Trace module and a range of other logistics functions. As far as I know, nothing like it exists on any other public blockchain.

Tokenized offers an award-winning all-in-one tokenization solution for institutions, government agencies, businesses and individuals.

Relysia offers a robust BaaS platform that entities can leverage to quickly find proof of concept applications.

And finally, sCrypt offers a state-of-the-art smart contract platform that now allows developers to use TypeScript, as well as a smart contract transpiler that will even allow Solidity developers to port their scripts to run on BSV. These are just some of the many solutions available at BSV to help customers quickly and easily explore and leverage public blockchain capabilities.

In conclusion, Web3 consultants should encourage clients to consider both private and public blockchain options before making a decision that could affect their company’s performance for years. Unfortunately, most customers are not aware of the solutions now available on public blockchains and can all too often be guided towards private blockchains by consultants and advisors who themselves are not current – ​​or comfortable – with the rapidly evolving capabilities of the public realm. However, the essential role of any good consultant is to present solution options that they can actually deliver for the client and then let the clients make the final decision.

See: BSV Blockchain A World of Good

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