As investors demand more access to alternative investments, blockchain & DLT (distributed ledger technology) offers an innovative way to solve for the industry’s current operational inefficiencies. Here is a look at the differences between public/open & private/permissioned blockchain.
Private/Permissioned Blockchain
Public/Open Blockchain
Private/Permissioned Blockchain
Permissioned Blockchains are dedicated networks where only designated & trusted parties can participate. In simple terms, you need PERMISSION to access the system.
Public/Open Blockchain
Public/Open Blockchain – anyone is free to join and participate in the core activities of the blockchain network. In simple terms, you DO NOT need PERMISSION to access the system.
Permissioned Blockchains are dedicated networks where only designated & trusted parties can participate. In simple terms, you need PERMISSION to access the system.
Public/Open Blockchain – anyone is free to join and participate in the core activities of the blockchain network. In simple terms, you DO NOT need PERMISSION to access the system.
Permissioned Blockchain offers strong privacy protection & security as participants need permission to access any transaction data or other records. An outsider cannot access or enter transaction information without being veri๏ฌed or granted permission.
Less privacy & security due to the open nature. Transactions are transparent & transaction execution can be viewed by literally anyone with the software to read the ledger.
Due to limited users, the networks require less computational power hence consume less energy.
Less privacy & security due to the open nature. Transactions are transparent & transaction execution can be viewed by literally anyone with the software to read the ledger.
Traditional securities are converted to digital asset securities and recorded on the distributed ledger when applied to alternatives.
Records of all transactions are held with the issuer & shared with transfer agents, custodians, advisors, and investors who have been granted permission to transact on the Blockchain. No private key is needed as the network operates using accounts vs. wallets. Hence, if investors lose access to the account/network, the record of transaction/ownership will still remain with the asset manager & all other parties on the network.
When applied to alternatives, open blockchain networks issue tokens representing ownership of a security that functions like bearer form instruments. Investors access their wallets with the use of a private key. Loss of private key could lead to loss of the asset.