A public ledger used by numerous crypto currencies has been a trouble since the very onset of digital money. Be it blockchain or tangle (used by IOTA) – the result is the same. One needs to store transaction data somewhere. In order to store it you need to be sure that the transactions are valid. In other words we need to reach a consensus among the participants that provide and maintain the currency data.
Proof-of-Work and Proof-of-Stake are two common ways to validate transactions. The former burns electricity in vain, the later shifts the equality of participants towards the richest ones which entails a lot of security issues
Why public ledger? Why public or why ledger at all? Public is good. We are sure that there is no central point in the technology and anyone (or almost anyone) may participate. But why do you need to store and record transactions? If we do not need a ledger for the sake of ledger, then its main role is to ensure that the data is valid. And for this purpose we do not need to chain blocks and create the ledger. We only need to be able somehow to say that the data is valid.
Anyone can possess data (or money, because money is data). It is a question about how everyone could be sure that this data is not counterfeit. Some authority is needed who is believed to be entitled to verify the data.
This authority can be centralized: a bank, payment aggregator (like paypal) etc., or decentralized if it has p2p architecture, including distributed database.
So far, it is quite easy to validate someone’s data, but how do you solve a notorious double-spent problem without a public ledger? If you hold valid data it is possible to send it to multiple recipients. Bad.
One approach is to ‘own’ the data after you receive it. The original data becomes invalid after you ‘own’ it. It looks like a digital handover. You transfer the data from hand to hand, but in digital world. There is a short period of time when the sender sent the data and a the recipient did not take it. During this period the data belongs to both sender and recipient.
The example of such technology is RAIDA – Redundant Array of Independent Detection Agents. The Array helps to change data in a way that the previous owner loses control over it. The technology is used as an underlying verification mechanism in Cloud Coins. It is still centralized, so it is not that cool and pretty as it might seem. At the moment, that RAIDA implementation has 25 nodes distributed across the world. It is not P2P, though. Only trusted nodes can be part of RAIDA. However, it is the first step in getting rid of annoying public ledger. RAIDA does not record transactions because it only stores data. And there is no way to track customers transactions, because they are not recorded at all.
Hopefully, the technology will evolve into something really distributed, so that it would earn much more trust from digital community.