In a business network, the blockchain is used to record transactions among the network participants. Those transactions most commonly involve transfer of assets from one participant to another — like a piece of real estate, or a shipment of apples. The participants own the assets, of course, and ownership is recorded in the blockchain.
But who owns the blockchain?
In this post, I’ll define what it means to own something, and how the aspects of ownership apply to blockchain technology. Along the way we’ll look at the different types of blockchains, examine anonymity versus privacy, centralized versus decentralized governance, public versus permissioned blockchains, and the nature of shared ownership.
The nature of ownership
The question of ownership is as at least as old as human civilization. If I own a flat screen TV, I can pretty much do what I want with it: turn it on, turn it off, or smash it with a hammer (don’t worry; I love my TV way too much to ever do that).
Fundamentally, when one owns something, one has the power to control (or even destroy) that thing, and the amount of power one may exert varies by the type of asset that is owned. For example, I have the power to smash my flat screen TV to bits, but in my city I do not have the power to dig a giant crater in my backyard (not without a permit anyway).
The nature of ownership is fundamentally about control.
Anonymity vs. privacy
An anonymous act is one where the action is known, but the actor is not. The classic example is the superhero who catches the bad guys. The actions the superhero performs (catching the bad guys) is perfectly visible, but the superhero herself has complete anonymity (that is, we have no idea who she is).
A private act is one where the actor is known, but the action is not. If you walk into a room and close the door, I well know who you are, but once inside the room, I have no idea what you are doing, and you have complete privacy.
Boundaries of trust are lines that separate “us” from “them.” We can still do business with them, of course, but to do so means we have to keep our boundaries up. Our lawyers draw up contracts, our accountants count all the beans, and everyone is happy.
In this minimal-trust environment, MegaRetail and MomAndPopRetail can still do business with each other, and both can do business with MegaBank. Everyone keeps their own (private) records, and everyone has lawyers on speed dial (you know, just in case).
One strong use case for blockchain technology is to disintermediate the need for trust (cut out the middleman). Once trust has been disintermediated, two or more parties can do business without having to trust one another. This is possible because the trust is baked into the technology. Trusting the technology is sufficient, making it less important for us to trust each other.
Types of blockchains
So what does that have to do with blockchains? Let’s first look at the types of blockchains, and then see how ownership affects them.
A public blockchain has a fully transparent, distributed ledger, with complete transaction history. Anyone can submit transactions for addition to the blockchain, and can examine all of the transactions, in a public blockchain.
A permissioned blockchain (sometimes called a private blockchain), as the name suggests, requires permission to append and view transactions, to participate in consensus, to issue cryptographic materials, and so on. One group of entities controls access to the blockchain, while others append transaction blocks to the blockchain, yet others grant access to the network itself.
So who controls a public blockchain? Anyone (can manipulate), and no one (can destroy).
So who controls a permissioned blockchain? Any participant (can manipulate), and no single participant (can destroy).
Centralized vs. decentralized governance
A decentralized governance model is essentially no governance at all, similar to the wide-open nature of a public blockchain. In fact, the barrier to participation in a public blockchain like Bitcoin is virtually non-existent (create a Bitcoin wallet, and you can receive Bitcoins just by providing your wallet address). Decentralized governance ensures that anyone can participate in the blockchain network.
A centralized governance model, on the other hand, is one where a central authority is responsible for granting permission to use the network. Of course, this responsibility could be shared across trust boundaries according to the particular business needs of the consortium. Centralized governance ensures that (1) access to the blockchain network is restricted, and (2) the power to grant (and revoke) that access is tightly controlled.
Shared ownership: Pubic blockchain
In theory no single entity owns a public blockchain, all parties involved have their own copy of the ledger, and absolutely no trust (between transacting parties) is required to do business. All participants own the blockchain.
This is good for the group because in this model it is nearly impossible for a single entity, or even a group, to act in bad faith and steal from the group. Any records they manage to tamper with are but a small number of the whole, and the attempted deception is immediately discovered by the consensus mechanism (the mining process with Bitcoin, for example), and consensus cannot be achieved.
Shared ownership: Permissioned blockchain
A permissioned blockchain requires a central authority to grant permission to access the network, and participants only see the blockchain transaction history to which they have access. All participants own the blockchain.
This is good for the group because access to the blockchain is tightly controlled. While it is possible that one or more authorized participants could tamper with the ledger, the nature of blockchain technology — even in a network with just a few participants — makes it difficult (if not impossible) for the bogus transactions to be accepted, since the deception would result in ledger discrepancies, voiding the bogus transactions.
Ownership boils down to control. Whether the blockchain is anonymous (public blockchain) or private (permissioned blockchain), the nature of ownership is fundamentally the same: shared. The difference between public and permissioned blockchains is the number of owners: in a public blockchain, anyone can participate, and in a permissioned blockchain, the number of owners is limited.
Because the notion of shared ownership and disintermediation is inherent in blockchain technology, this results in a reduced level of trust required to do business, and makes this type of shared ownership possible.
Learn more about Blockchain at IBM
- IBM Blockchain 101: Quick-start guide for developers
- Pattern: Build a Blockchain network
- Pattern: Build your first Blockchain application
- Debunking the myths of enterprise blockchain
- Who has the power in enterprise blockchains?
- Blockchain Developer Center – Tools & tutorials, code & community for blockchain application developers