Public, Permissioned, and Private Blockchains

This week I am going to post a series of articles from my friend and colleague Jack Saba. Jack is the founder of Day One VC. Day One is a venture fund focused on Blockchain technology and its application in emerging markets.

Applications for cohort #2 are open here!

Public, Permissioned and Private chains:

The term “Blockchain” would suggest that there is only one ever-growing ledger of transactions, records, information, and votes. The truth is that there are many, and they can be grouped into three categories: public, permissioned, and private.

The terms public, permissioned, and private refer to who has the ability to be a user of, or run a node on, the Blockchain (a node is a computer that host the blockchain and validates transactions). Each type of Blockchain places a different level of importance on anonymity, immutability, efficiency, and transparency.

On a public Blockchain anyone can be a user or run a node. Generally speaking public Blockchains such as Bitcoin value anonymity, immutability, and transparency over efficiency. This means your identity can be safe as you purchase goods online (discussed below).

Permissioned Blockchains are operated by known entities such as stakeholders of a given industry. They value immutability and efficiency over anonymity and transparency. The Financial industry would use such a Blockchain to reduce the time of international payments from days to seconds.

Private Blockchains are operated by one entity. These Blockchains value efficiency over anonymity, immutability and transparency. I wouldn’t say that they are useless, but their use cases are limited.

Supply Chain Management

The Blockchain will enable goods to be tracked from raw material to completion.

This means that consumers can understand the business practices of all actors in the supply chain. Ultimately we will be able to make informed decisions to not support slave labor, blood diamonds, child labor or unsustainable resource utilization.

Solar Energy and The Blockchain

For decades power grids have used a centralized system for the creation and distribution of energy. The decrease cost in alternative energies such as wind and solar is providing the opportunity to reimagine the infrastructure and business models that have been used.

A team in Brooklyn, NY is piloting a distributed micro-grid that uses solar panels and the Blockchain to enable people to sell their excess energy to their neighbors.

The Blockchain is used to record the quantity of energy created, and to facilitate the transaction in real time.

This means that prosumers of solar energy can reduce their carbon footprint, and earn money.