Private Blockchains Overview and Stats

My last Research at ICORating team about Private Blockchains and their Pros and Cons

Intro

While major public blockchains like Bitcoin, Litecoin or Ethereum are well-known to the public, the private ones are not so famous. Here will be reviewed the main private blockchains in the article, as well as highlight the key similarities and differences.

As its name suggests, private blockchains are the complete opposite of public blockchains. In public blockchains, anyone can participate because it is open to everyone and anyone can read, write and audit information within the blockchain, however, that is not the case with private blockchains unless one has permission to do so. In private blockchains the owner is usually a single entity, that is why it is not, in its true sense, decentralized. It is more of a distributed data ledger with embedded cryptographic protection in it. However, that is not a drawback but another concept. The private blockchain is supposed to be faster and cheaper than its public analog because the system does not need to spend high amounts of energy, time and money to reach consensus here. But from another point of view, it is relatively less secure and non-transparent as opposed to public blockchains.

Although the differences above are a good way to identify which blockchain is better suited for a specific use case, there are similarities between both types which can make it confusing to make the right choice:

• Both types of blockchains are somewhat decentralized and represent P2P distributed ledger.
• Both types contain a replica of the blockchain on each full node which gets updated with consensus.
• Both types of blockchain provide immutability, however, this may be not equal, because immutability is highly dependent on the underlying blockchain architecture.
• Both types of blockchain can be used by both enterprises and the public, however, we note that enterprises are more likely to use private ones.

Private Blockchains overview

Photo by William Iven on Unsplash

Here will be reviewed most popular private blockchains and their usage and mining statistics. Most of them are well-known for people in crypto and some of them are released an only month ago, but each of them has its advantages and technical features.

Monero

Monero is technically a Bytecoin fork which utilizes the CryptoNote protocol for one of the layers, Ring Signatures for transaction signing, Ring CT for transaction hiding and Stealth Addresses for the purpose of hiding the users’ addresses. Upon creation of an address, a user receives three keys — 1 for review incoming transaction and balance, 1 for sending and 1 public key. 3rd parties can review addresses and transaction only having the review key.

The Monero team is currently developing Kovri Project which will route and encrypt transactions using I2P Invisible Internet Project nodes. This will help to hide transactors’ IP addresses and provide further protection from external monitoring. In addition to the above, Monero is ASIC-resistant proof of work.

Here is the most interesting statistics:

• The top-3 mining pools accumulate almost 72% of the network hash rate.
• For now, there are more than 5700 connected miners.
• Monero’s block reward per any given time period (per minute or per day) is always higher than Bitcoin’s, except for the time period between 2019 and 2027/2028 (almost one decade).
• In 2040 we see the intersection point of identical coin supply for Monero and Bitcoin (both nearly 21 Million coins).
• After 2040, Monero’s coin supply will continue to grow linearly (not exponentially like fiat currencies) and exceed that of Bitcoin, exceeding the 21 Million value and continuously increasing by 157788 XMR each year [this number takes leap years into account], or 0.3 XMR/min = 0.6 XMR/2min, forever.
• You can never know the top addresses and their balances because Monero is fully private.
• Monero’s mining difficulty based on the last 720 blocks, excluding 20% of the timestamp outliers
• Block time, for now, is 2 mins and may change in the future as long as the emission curve is preserved

ZCash

The ZCash blockchain is built based on the Bitcoin blockchain, with zk-SNARK technology embedded, which allows private transactions and hides private address balances. There are two types of addresses in ZCash blockchain — private (starting with “z”) and public (starting with “t”), therefore there are four types of transactions available. “Mixed”, private-to-public transactions are hidden only from the private side. Private addresses may also send encrypted messages within private transactions. The owner of private addresses may also reveal information regarding his transactions to regulators and auditors, however, the addresses of counterparties cannot be revealed.

Here is the most interesting statistics:

• Despite the fact that private transactions on the ZCash blockchain represent 20% of transactions in terms of amount, in terms of volume they make up only 3.3%.
• Most nodes of ZCash for last month come from Germany (89 nodes), US (84 nodes), France (69 nodes) and China (27 nodes).
• 4,964 unique nodes for all time, 425 for the last month.
• Almost 40% of blocks mined relate to single mining pool — Flypool.
• The total amount of addresses is more than 3 million.
• 16.3% of transactions are private.
• 88,612 transparent transactions amounting to 45,939,248 ZEC and 14,491 private transactions amounting to 343,838 ZEC for last month.
• 4,828,605 ZEC cumulative miners reward for all time.

DASH

DASH is built based on Bitcoin blockchain and it has 2 different types of nodes (on the contrary to is “parent”) — usual nodes and masternodes, which have the ability to privately sending and quick-sending of transactions (around 1 second). DASH uses CoinJoin protocol and utilizes I2P Invisible Internet Project nodes technology for privacy purposes.

Here is the most interesting statistics:

• 26% of all master nodes are located in the US, 19% in the Netherlands, 11% in Germany, 9,2% in Lithuania and 8.2% in France.
• 5,000 active master nodes and 5 are inactive.
• The top-100 addresses contain 15.29% of all coins.
• The top-10 addresses contain 5.93% of all coins.
• On average 545 blocks every day.
• 40% of Hashrate from Genesis Mining pool
• On average 349 transactions hourly, each transaction is circa 15.1 DASH.
• As of 2018 coins were mined using a proof of work algorithm with a hash function called “X11”, with eleven rounds of hashing, and the average time to mine a coin was around two a half minutes.
• The Dash DAO uses the 10% it receives from mining to invest as the DAO chooses.
• Running a masternode requires ownership of 1000 Dash. Masternodes are also required to have a static IP address and meet minimum requirements for CPU, RAM, disk space and network bandwidth.

PIVX

PIVX is based on DASH technology, so the key main features of PIVX are the same, however, PIVX utilizes the PoS protocol of Zerocoin for consensus whereas DASH is PoW. The network speed of PIVX is circa 170 TPS. In addition to the above, PIVX team is globally decentralized with no central ruling company. The project is maintained by the community. The project is also claiming itself to be energy-efficient with an estimate of 1 wind turbine to fully power the network.

Here is the most interesting statistics:

• The total amount of addresses is 88681, 34945 of which were active last month.
• 30% of coins are locked.
• Top-100 addresses contain over 43% of all coins.
• Top-10 addresses contain about 21% of all coins.
• Over 29% of stakers based in the US, 18% in Germany and 9% in the UK.
• 1746 active masternodes.
• 138,062 addresses in use at all time.
• 2,651,183 confirmed transactions in the blockchain.
• 11,926 addresses hodl coins.
• ALL transaction & zPIV minting fees are burnt from coin supply.

Verge

Verge is based on the Bitcoin blockchain with multiple layers for privacy. One of the layers is Tor for hiding IP addresses and the other is I2P, similar to Dash for privacy purposes, as well. Verge has a built-in Wraith protocol which allows the choice between private and public network somewhat similar to ZCash. Verge uses a PoW protocol, however, there are 5 different mining algorithms, each of which takes 30 seconds to execute, which provides protection from 51% of attacks. The verge team also claims to support atomic swaps between blockchains that support BIP65.

Here is the most interesting statistics:

• The top-25 addresses contain 49.41% of all coins.
• The top-100 addresses contain 95.59% of all coins.
• Half a minute for mining each block.
• 660,987 transactions in all time.
• Total supply is fixed and equals to 16,500,000,000 XVG.
• Uses next mining algorithms — scrypt, x17, Lyra2rev2, myr-groestl, & blake2s.
• In average 1,412 transactions each day.
• More than 41% of all nodes in the US (46 nodes), 9.8% in the UK (11 nodes) and 8.9% in Germany (10 nodes).

Bitcoin Private

BTCp is a fork-merge of ZClassic and Bitcoin, which allows for 4 different types of transactions. BTCp utilizes ZCash’s zk-SNARK tech to hide transactions. BTCp utilizes a PoW protocol similar to the one of Bitcoin Gold, therefore, having same block time. The team is currently developing the Dandelion protocol, which will improve the security of transactions.

The total supply of BTCp should have been the sum of the total BTC supply at BTCp launch date plus the total supply of ZClassic at the same date plus 62,500 BTCp under Volutary Mining Contribution Program. However, the actual amount of BTCp upon launch was higher that it should have been. You can read more about this vulnerability and understand what could be wrong with this project.

Here is the most interesting statistics:

• The top-1 address in ZClassic possesses 48,56% of all coins, top-25 — almost 73%. Since Bitcoin Private is a fork of ZClassic and Bitcoin, they received a huge amount of coins.
• 13 sponsored mining pools, 32 mining pools were confirmed by the BTCp team and 5 pools were unconfirmed.
• There was no premine, and there is no founder’s reward. Hard Fork was at blocks 511346 for BTC and 272991 for ZCL.
• Bitcoin Private has been released in a fair manner to all. Coins were distributed on a 1:1 basis to BTC (segwit & normal) and ZCL (t & z) holders.

MimbleWimble Grin

MimbleWimble is a blockchain format and protocol which provides scalability, fungibility, and privacy. Grin is an open source project which implements MimbleWimble blockchain and provides blockchain environment. Grin has privacy by default and also allows for the partial disclosure of information if need be. The Grin blockchain scale in relation to the number of users and minimally in relation to the number of transactions, because of the check that each new transaction does not have any new coins, previous blocks can be removed without concern.

Based on that, the Grin blockchain takes much less disk space in comparison with competitors. The blockchain itself is simply designed and easy-to-audit and maintain. The Grin blockchain utilized time-proven Elliptic Curves which have been used for decades. The Grin blockchain is developed by the community, utilized ASIC-resistant algorithm (Cuckoo Cycle) while encouraging miner decentralization. It also supports sidechains and Quantum-resistant.

Here is the most interesting statistics:

• The first four years of Bitcoin emission rate are identical to the first four of Grin.
• Every year that passes makes the overall dilution smaller. After 10 years, this falls below 10%. After 20, below 5%. After 25 years Grin will have 4% supply inflation, the same as Bitcoin 10 years after its genesis (2018).
• 257,610 transactions in all time, there mined only more than 72,900 blocks.

Outro

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There is definitely a lot of banks that are interested in private blockchains. In some cases, they are happy with public blockchains as well. The opposition to just doing things on a public blockchain is definitely smaller than some of the strongest detractors think. — Vitalik Buterin

Each of the private blockchains has its own features, mainly related to the privacy of the data and has its own strong and weak sides. However, even though blockchain technology itself is still in its early stage and the whole market is tiny when compared to other markets, private blockchain share is even tinier — even on well-known blockchains focusing on privacy (like ZCash) still have relatively low volumes of transactions when compared to their public rivals. Regardless of that, private blockchains definitely have their customers and market, therefore their development is not in vain.

It is also worth noting that private blockchains implement technical solutions which have proven their relative effectiveness in privacy protection like Tor, I2P, etc. However, there is no such thing as absolute privacy and 100% anonymity, and the attacks against privacy are getting better. One should use common sense, prudence and in-depth cautiousness to keep their privacy safe.