Bitcoin has gifted the world a revolutionary technology, ‘Blockchain’, with enormous potential to change the way we transact and trust transactional systems, be it a banking, currency, logistics ecosystems or even voting mechanism. It is high speed, reduces the transaction time, for example settlement time in stock exchanges or logistics confirmations etc, more importantly removes the need of trusted intermediators, like Banks or third-party settlement agencies. Any third-party mediation could be biased, contemporary examples are mistrust in voting systems, forging of online contracts etc.
So, speed of execution is almost easy to understand, smart contracts are eventually real time executable commands, but how it is solving for trust, well the answer lies in open distributed ledgers and ‘proof of work’. Every confirmed transaction is signed by ‘proof of work’ and replicated across the platform network in distributed ledgers, hence temper proof.
Heart of blockchain is every transaction confirmation should generate some value to monetize miners’ against ‘proof of work’, that would encourage platform to grow and furthermore democratize the ledger.
Banking and Financial systems are attracted to this concept but they are worried about the distribution of ledger in open network, however they also don’t want to be left behind in the adoption of this technology, the fear is almost similar to the early days of internet and its adoption. Blockchain is evolving and adoption interest is almost similar and truly based on need. No technology can sustain its value unless it is fulfilling any business need.
So, they are weighing the concept of closed/permissioned block chain, which means ‘proof of work’ would be replaced by the trusted and authorized nodes or partners. Which is against the core principles of blockchain, no proof of work, no miners and scope of biased approval from these new ‘trusted nodes’.
Also, to mine and maintain blockchain transactions in permissioned environment would be very costly affair as it would not be on public network. Debate is still on, and hopefully some reliable hybrid solution will come out, which would answer the concerns of data security, complex smart contracts and ‘proof of work’ in permissioned environment.