Virtual private ledgers: Embedding private distributed ledgers over a public blockchain by cryptography

Distributed ledgers allow us to replicate databases of records across mutually untrusted parties. The best known example of distributed ledger is perhaps the Bitcoin blockchain, which maintains a consistent history of financial transactions organized as a hashed chain of blocks. Distributed ledgers can be public, i.e., accessible by everyone, or private, i.e., accessible only by a given consortium of parties. In this paper, we explore the technological possibilities of applying Identity-Based Encryption and Attribute-Based Encryption to distributed ledgers. We introduce the novel concept of Virtual Private Ledger. A Virtual Private Ledger is a private distributed ledger embedded in a public cryptocurrency ledger by means of cryptography. A Virtual Private Ledger provides for the same confidentiality and integrity of a private distributed ledger, but without its high operational costs. In particular, nodes that maintain the ledger do not have to be always online to trust the order and the integrity of the records. We analytically show that Virtual Private Ledgers can be implemented over many existing cryptocurrency ledgers like Ethereum, EOS.IO, IOTA, XRP. Different cryptocurrencies lead to different trade-offs between the Virtual Private Ledger max record size, cost, validation time, and max consortium members.