I've been seeing a lot of stories lately about companies wanting to use blockchain, I've got two questions regarding companies using blockchain networks to store transaction ledgers.

  1. With Bitcoin, users are encouraged to adhere to the correct protocol and to continuously verify the transaction log because they are rewarded through Bitcoin mining. If a blockchain network is used to store a ledger of contract transactions, for instance, what incentive is there for users to continuously verify the transaction chain, since there's no reward for creating a block and adding it to the chain? If users aren't continuously verifying the blockchain, won't that make it more likely than a malicious entity can create their own block?

  2. If a company creates their own blockchain network, their computing power is minuscule compared to the total computing power in the world. If another entity can enlist more computing power (by being a larger company/government or by using a zombie network), won't that larger entity be able to control the transaction ledger? That not a problem for Bitcoin since the total computing power on that network is huge, but what stops this from occurring on other networks?

1 Answer 1

  1. Ethereum is one example of the blockchain used to store the contract transactions. Nodes on the blockchain validate the transactions and add it to blockchain. Ethereum also has it's currency and miners are rewarded for doing work. What you think is absolutely right, if you don't have any incentive mechanism in place then only few people will mine and network can easily be attacked.
  2. When companies talk about using blockchain for only themselves, they are referring to private blockchains and not public. Node needs permission before they can join this private blockchain thus not prone to attack. Otherwise in public blockchain anyone with 51% majority can easily alter the transactions. Some attacks are possible even at 33% majority.
  • Thanks for the response. It's very helpful. Regarding point #2 - wouldn't a private blockchain just be an overly complicated distributed database? Am I missing something that makes a private blockchain more attractive than just using a database? I guess it would be harder to change historical transactions, but couldn't the administrator of the blockchain organize things such that he keeps enough power to alter the blockchain to himself and keeps it a secret, or write the client software such that there is a backdoor to change history?
    – Ben Rubin
    Jan 11, 2018 at 14:07
  • Yeah, you are right, if you are planning on keeping your data to yourself then blockchain is not the best fit. But suppose a firm wants to share some of it's data with another firm and wants to have trustless collaboration, then private blockchain as the distributed database is useful. Basically, two or more organizations can share and communicate with each other without any trusted third party and nodes of these organizations are allowed to join private blockchain network.
    – Preet
    Jan 11, 2018 at 14:22

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