The New Kid on The Block(chain)
• 7 min
• 7 min
Hello BS’ers, and welcome to this week's sesh!
This week’s topic is one that is close to our hearts...hybrid blockchains!
You better strap in for this adventure.
First, let’s explain our excitement - Prometheum is powered by a hybrid blockchain model, and you’ll see, as we get further into this adventure, that there is really no other way to combine all the features required for blockchain securities into a single, public or private chain.
What is a hybrid blockchain (model)?
A hybrid model involves two blockchains, each serving a very important purpose. In the case of Prometheum, there is:
- A private (permissioned) blockchain that can process transactions very efficiently but is centralized (to some degree); and
- A public chain (not permissioned) that has cost efficiency and open access.
The blockchains are connected by a token that can function on either chain (that’s called interoperability) by employing smart contracts to move tokens between chains.
If your recollection of public and private blockchains is a bit fuzzy, now is an excellent time to go back and review our weekly BS on the subject as it will help you understand the next section.
Until recently, most blockchains consisted of a single network of nodes that, through a consensus process, write data to a single distributed ledger (a “blockchain”). The first blockchains were public, permissionless, and decentralized. As distributed ledger technology (DLT) became more “mainstream” and adapted for business (enterprise blockchains), private, permissioned, and/or centralized blockchains were created. We’ve come a long way, but to scale these solutions to meet higher transactional activity (throughput) and accommodate specific business requirements, modern designs often use a hybrid blockchain. This can help with throughput (allowing more transactions to be written more quickly), regulated industry business requirements, or simply a company's desire to keep information private.
Prometheum’s ecosystem must comply with Federal Securities Laws (which means having some form of participant and activity controls and protecting the privacy of market participants, like you) and provide functionality for tokens and smart contracts. A hybrid blockchain model accomplishes both. One chain (the “Core” chain) is based on a permissioned model. This is better for the issuance and trading of blockchain securities as a result of its faster and less complicated consensus model (when node operators are vetted they are less likely to be malicious). The core chain was specifically created to meet regulatory requirements as well as activity generally associated with active electronic markets. The other chain (the “Utility” chain) is a public blockchain like Ethereum or Bitcoin. It can be used to build decentralized applications (Dapps) that work with the blockchain securities issued and traded on the Core chain. The Utility chain is where blockchain securities are “just” digital tokens being used within a specific blockchain network for their specific purpose. These two chains are linked together with a combination of special smart contracts that can track and control interchain movement and processes at the clearing firm.
Ok, take a breath - that’s all for today! There’s a lot more info on this topic, and if you want to dig deeper we encourage you to check out Prometheum’s architecture paper.