When a permissioned blockchain is also a decentralised blockchain by Zurab Ashvil

person holding sticky note

Up to now, there has been a clear division in the blockchain community between those who believe decentralised blockchain is best and those who prefer permissioned blockchain.

Countless blockchain networks have already been designed along these strict lines but none of them is delivering what people really need. As a result, no-one is seeing the true power of the technology to transform people’s lives.

I have seen the benefits and pitfalls of both approaches ever since I first really dedicated my time and effort towards blockchain in 2012. Ultimately though, both approaches have too many drawbacks to scale at the global level.

What is needed is a new blockchain consensus operating system, designed from the ground up and incorporating the benefits of both decentralised and permissioned blockchain, so the whole of society can benefit from this transformational technology.

Why decentralised blockchains have failed

Having first emerged as the power behind Bitcoin’s distributed ledger, decentralised blockchain has developed into a standalone technology used in various second generation networks.

The great benefit of decentralised blockchain is it allows for huge amounts of unnecessary bureaucracy to be cut from a whole range of economies and markets as they digitalise. Smart contracts can be used in decentralised applications, or dApps, to automate processes that intermediaries would charge for or institutions would control.

It is not hard to see how this technology could reduce costs across economies. However, where the evangelists of decentralisation have gone so badly wrong is in upholding the importance of anonymity above all else. This is such a fundamental error because it doesn’t reflect human nature or the societal structures we all recognise. People want to know who they are dealing with so they can be trusted to operate fairly and honestly.

Of course, there are also many permissioned blockchains that have been built on the understanding that decentralised and anonymous networks would not be well received in certain industries and jurisdictions. The problem with the most established of these solutions is that they’ve been built by big corporations on the legacy systems they’ve relied on for years and don’t take advantage of the modern technology available today.

This is why a new blockchain consensus operating system designed for the needs of society in 2020 and built from the ground up is so desperately required.

A permissioned blockchain regulated by government

One way to see why a permissioned and decentralised blockchain is needed and how it will work is by relating it to the area of Central Bank Digital Currencies (CBDCs).

These new digital currencies are being considered by governments across the world, with the People’s Bank of China probably the most advanced in its planning. A range of leading Western nations are also interested, with the US Federal Reserve, Bank of England and Bank of France all investigating their feasibility.

To implement such a system, you would need fully regulated infrastructure based on blockchain. Such a system would not be possible on an existing decentralised blockchain because it would need to be permissioned and regulated.

The L3COS system I have built over the last six years can power CBDCs. It is a blockchain consensus operating system with a triple layer consensus mechanism that is regulated by super nodes under the control of sovereign states. There will be 195 of these super nodes – one for each of the 195 sovereign states of the UN – when it is fully operational but, even now with only three super nodes communicating, it is achieving speeds of 1.5m transactions per second.

Therefore, not only does the system enable the secure exchange of information between governments via Proof of Government consensus, it can also power a sovereign state’s CBDC that underpins its regulated digital economy.

Decentralised applications on a regulated blockchain

Within these regulated digital economies, corporations and organisations at the second layer can act as pillars of the economy, just as many do today. This would mean that government super nodes could pass on their authority to these entities via a delegated Proof of Stake consensus mechanism. In the case of a CBDC, this would involve commercial banks being delegated the authority to operate the banking system.

In a wider context though, all organisations would be able to build smart contracts into decentralized, regulated applications that provide fast and efficient services to individuals. In L3COS, this is made possible via a software development kit (SDK), with all existing ERC-20 and ERC-21 smart contracts easily transferable from other blockchain networks.

As such, everything from a corporation’s supply chain, payments, legal, accounting and HR services could be digitalised for use in a regulated economy, with KYC, AML and all other compliance processes fully automated.

Regulated digital economies designed for society

At the third layer of the blockchain consensus operating system, individuals can interact with governments, corporations and each other in a totally decentralised manner. A CBDC can be used to transact, enabling individuals to exchange value with other entities via smart contracts.

Benefits can be accessed automatically. Taxation can be paid without manual accounting. Insurance, credit and other financial products can be purchased in an instant. Travel across jurisdictions becomes quick, easy and enjoyable.

Most importantly though, people feel empowered to have their voices heard because of efficient and transparent democratic processes that make protesting, rioting and social upheaval unnecessary. Their safety and security is also increased by the Proof of Storage consensus mechanism, which means they never need to share data, and the enclosed nature of the operating system, which makes hacking impossible.

Permissioned and decentralised blockchain is the future

Blockchain technology now sits at a major crossroads. The last 11 years have been a story of great promise and potential but also underachievement. At the heart of this story has been the divide in the community that has pitted decentralisation and anonymity against the  underwhelming permissioned blockchains put forward by legacy technology corporations. 

The battlelines between decentralised blockchain and permissioned blockchain must be broken if the potential of the technology is to be realised by the entire world. Blockchain is changing forever and the future lies in a blockchain consensus operating system that is permissioned, decentralised and regulated by governments.


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