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Hybrid Blockchain 101
7 minutes read

Hybrid Blockchain 101

What a public-private hybrid blockchain makes possible.

Blockchain terminology evolves as fast as the technology, which can get confusing for people learning about the subject. At Kadena, we aim to clearly describe our technology, which evolved from our team’s enterprise blockchain experience at JPMorgan. Kadena’s blockchain captures what we believe represents the future of how people will share, transfer and unlock value. A term we’ve found useful to describe our blockchain platform is “hybrid.”

What does it mean to have a hybrid blockchain?

Think of a street with many stores. Like these stores, a public blockchain is accessible to everyone to browse and explore. Like the back offices of these stores, a permissioned blockchain is restricted to owners and authorized people and holds private internal records. You need both to have a functioning marketplace.

For Kadena, a hybrid blockchain means a public and permissioned blockchain that can interact seamlessly to make a more secure digital marketplace — and pave the way for a different type of shared economy. Our public and permissioned blockchains interoperate by utilizing the same, easy-to-use smart contract language, Pact.

Public and Permissioned Blockchain: Tradeoffs Without Hybrid

To further understand what hybrid blockchain offers, let’s first consider the benefits and drawbacks of public and permissioned blockchains when they work alone:

A public blockchain, like Bitcoin or Ethereum, is a “permissionless,” globally distributed and cryptographically secure ledger, to which anyone with a personal computer can read, write and contribute. Public blockchains have created significant value in the form of cryptocurrencies, tokens and smart contracts.

Benefits of public blockchain include:

  • Decentralization — the more honest people participate, the more secure the network becomes (proven by Bitcoin’s Proof of Work system).

  • Resistance to censorship — anyone can participate because no central authority (i.e. bank, company, or government) acts as a gatekeeper.

  • Cryptocurrency and tokens — the first secure and permissionless digital representations of value.

But there are drawbacks to current public blockchains for certain use cases, including:

  • Permanence by design — the secure, immutable nature of public blockchain can run contrary to privacy principles such as the “right to be forgotten” in the EU’s General Data Protection Regulation (GDPR).

  • Slow speeds — the average public blockchain runs 8–10 transactions per second, a fraction of what we need for large scale financial transactions.

  • Complex & unsafe apps on smart contract platforms like Ethereum — see the Parity multi-sig bug and the DAO hack.

On the other hand, a permissioned blockchain, also known as “enterprise” or “private” blockchain, is similar to a series of replicated databases. However, this class of blockchain can have owners selectively share information with trusted participants. Permissioned blockchains have some benefits over public blockchains including:

  • Faster settlement mechanisms with different consensus protocols.

  • More controlled membership — participants get to choose who engages with the network.

  • Privacy — with proper governance, you can control how sensitive data gets shared.

Permissioned blockchains also have their own problems, namely:

  • Closed-source code — many permissioned blockchains can be more complicated and less secure than their public blockchain counterparts.

  • They lack cryptographically secure, public tokenized assets.

Hybrid Blockchain: Why Both Is Better

A hybrid blockchain takes the best of public and permissioned blockchain and allows participants to seamlessly leverage decentralization while also gaining management of sensitive personal data and improved performance. With hybrid blockchain, the benefits include the liquidity and market access of public blockchain alongside the privacy and security benefits of permissioned blockchain. Below, we’ll cover a wide range of examples of what hybrid can empower, from the end consumer experience to the enterprise providing new services.

Hybrid Example 1: I want to share my medical data easily with my doctor and health insurance company, but also want to ensure personal privacy and security.

Laws such as HIPAA in the United States recognize the importance of privacy when it comes to personal data like medical records. Hybrid blockchain allows for siloing Protected Health Information in a secure, HIPAA-compliant database and passing along an encrypted identifier to a private blockchain that is run between healthcare insurers, doctors and hospitals*. *Then, public blockchain accounts can get linked to the private network. Other medical companies can interact with the data through a public smart contract, giving greater visibility and control over who accesses sensitive information.

Hybrid Example 2: I want to use private payment systems on public networks.

Companies like JP Morgan are already creating their own private tokens. However, the value of JPMCoin can only be redeemed/settled within the company, like a Starbucks point or an airline mile. For digital currencies to have greater value, they need to connect to a public blockchain. Hybrid blockchain makes the interoperability possible. Using hybrid blockchain, consumers can unlock greater liquidity so their money doesn’t have to stay trapped, like on a corporate gift card.

Hybrid Example 3: I run a company that wants to monetize our excess capacity and share our services with others.

We’ve called this concept the smart contract sharing economy. It allows individuals and small businesses to gain access to services that are normally too costly for them to perform on their own. One example involves fashion startup Rent the Runway (RTR), which has the largest dry cleaning facility in North America in order to service all their rentable formalwear. RTR already has an economy of scale when it comes to dry cleaning. With a hybrid tokenized contract API on the blockchain, RTR could offer up their excess dry cleaning capacity to a small or medium-sized business at an affordable rate through selling a token that represents a full door-to-door dry cleaning lifecycle. Hybrid smart contract APIs have the potential to be much more specialized, accessible and affordable than current APIs and database services.

Introducing: Kadena’s Hybrid Blockchain Stack

Kadena’s goal with hybrid blockchain is to empower entrepreneurs and enterprises to build better blockchain apps, ones that can scale with growing success and that people can trust for keeping their money & data safe.

  1. Kadena Scalable Permissioned Blockchain Enterprise-ready permissioned blockchain. Community Edition available on AWS and Azure for free.

  2. Kadena Public Blockchain Scalable Proof of Work public blockchain. Currently in testnet for a planned launch in Winter 2019.

  3. Pact — Simple and safe smart contract language (open source). Easy to learn with industry-leading security features like user code Formal Verification. Pact facilitates interoperability between Kadena’s permissioned and public blockchain.

What can you do with Kadena today?