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Bulge bracket financial institutions are all over "blockchain tech" making multiple bets in the space. Some are more vocal than others about the need for these blockchains to be private. But hang on a minute.. isn't a “private blockchain” just a confusing name for a shared database? Read Arvind Narayanan blog post on the topic here.
But here’s the thing — “private blockchain” is just a confusing name for a shared database. The key to Bitcoin’s security (and success) is its decentralization which comes from its innovative use of proof-of-work mining. However, if you have a blockchain where only a few companies are allowed to participate, proof-of-work doesn’t make sense any more. You’re left with a system where a set of identified (rather than pseudonymous) parties maintain a shared ledger, keeping tabs on each other so that no single party controls the database. What is it about a blockchain that makes this any better than using a regular replicated database? Supporters argue that the blockchain’s crypto, including signatures and hash pointers, is what distinguishes a private blockchain from a vanilla shared database. The crypto makes the system harder to tamper with and easier to audit.
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