credit: ethereum.org

As scalability and connectivity solutions begin to take shape in the decentralized space, the eventual reach of blockchain or distributed ledger technology (DLT) has come a bit more into focus, and a breakthrough that originally seemed to have potential implications for financial transfers appears to be on the cusp of transforming the next generation of many of the world’s largest industries.

The realization of these advancements will likely depend on the extent of interconnectivity, as organizations and thought leaders are now debating the risks and benefits of private permissioned chains versus the use of connections via larger public networks. This debate between public and private isn’t new. Brian Forde, the Director of Digital Currency at the MIT Media Lab, noted in a recent PC Magazine piece that “a private blockchain is an intranet, and a public blockchain is the Internet.” He states that, “the world was changed by the Internet, not a bunch of intranets. Where companies will be disrupted the most is not by private blockchains but public ones.”

Still, with recent scalability breakthroughs from private ledgers like Microsoft’s Coco or @quorum, and with differentiated public chains for specializing in monetary transfer, anonymity, and distributed computing, many in the industry realize that there may not one clear ‘winner.’ Bitcoin, for example, will likely continue to exist even if Ethereum’s development achieves scalability via proof of stake, privacy through zero-knowledge proofs (zkSnarks) and sharding for a light-weight and more distributed platform. These multiple public chains that could become siloed intranets serving different communities and industries just as private permission chains would. Thus there is already a race underway to implement a settlement layer to facilitate interchain communication.

Projects like Cosmos and Tendermint, the Polkadot Network, and the recently unveiled Plasma Network hold the potential keys to linking both private and public ledgers, thereby allowing secure data transfer and inter-chain contract execution between networks without unnecessarily exposing private data, thus connecting these intranets into a new internet.

In past decades, security concerns and the fear of associating with bad actors on a larger internet kept many companies to localized networks, but the demand for non-localized user access and intra-party communication led to the widespread internet adoption that we all enjoy today.

Ethereum’s co-creator Vitalik Buterin weighed in on the likely direction of the industry this week via TheNextWeb’s open Q&A session, in which he stated that “public chains do indeed have more long-term potential.” He expanded on the idea stating, “I expect in the long term we’ll see every possible combination of public and private emerge, including pure consortium chains, consortium chains connected to public chains via relays, consortium chains with fraud proofs enforced on public chains (ie. Plasma and similar systems), purely public chains, and so forth.”

The basic tenets of providing information only to trusted parties with the right access layers, all while being able to confirm transactions with otherwise zero proof is already underway via projects like ZCash and Ethereum’s coming implementation zkSnarks as part of the Metropolis hard-forks.

Buterin noted this move as well, citing that “the challenge right now is to get the scalability of public chains higher, and come up with better answers for privacy challenges. Many people talk about consortium chains where data is encrypted so that only people who need to see a piece of data can see the data.”

The idea of need-to-know access has crossover interest between industries. The health information industry is a primary example. While digitization of health records would see wide-ranging benefits, concerns around the safekeeping of private patient medical information has led to legal and other barriers. The fear that a large medical or healthcare conglomerate may have information exposed or hacked due to a single point of failure could be alleviated by advancements in decentralization. Other benefits, such as the easing of record transfers between medical professionals across locations, could be made achievable as well. Specifically, private offices and companies with permissioned chains connected to larger public ledgers could protect private data while allowing for layered need-to-know access with the right matching of user/provider credentials. For example, a general practitioner with a medical ID code from an accredited institution, when matched with the ID code from a patient’s insurance card could grant access to certain top level information like major allergic reactions in case of emergencies when health records are not immediately available. With given patient consent, the need to manually request data transfers between offices could be removed as well. Case in point, a consenting patient’s dental insurance ID could be accessed by a new accredited dentist, and the matching of the two IDs would grant read/write access to dental-only records.

Of course, banking implications are also wide-ranging. A John Doe’s transfer from Santander to his mother Jane’s account at JPMorgan Chase could today take days to settle. Intra-bank projects based on permissioned versions of Ethereum are being explored and developed for their potential to decrease security risks and increase transaction speeds for individual banks, but the ability to connect and sync with others in banking industry while protecting private data has major user experience implications like instant transaction settlement and the availability of fiat funds via DLT.

Larger and more widely-used public networks are inherently more heavily tested and come with a lower the risk of breach over time. Bitcoin is, in a sense, an eight-year-old 70-billion dollar bug bounty. Critical issues and points of failure in code are more likely to exist when networks receive limited testing or are less stressed by good and bad actors, as each line of code adds potential attack vectors as we’ve learned from recent parity bugs, and through single fatal error that resulted in the 2016 DAO debacle.

Permissioned chains signal the beginnings of industry adoption and will remain private in the short term in the name of safety and privacy, but over time they would become self-limiting. Open-sourced and long-tested decentralized networks will always correlate with true interconnectivity, and isn’t that the goal of distribution after all?