What is a private blockchain? And is the "USDT" on a brand-new network real?

Every so often a project announces that it has built its own "private blockchain" or "independent network". A private blockchain is a separate network, not one running on Tron or Ethereum; whether it is actually independent depends on one thing: who runs it. This piece gives five questions to put to any new network, and explains why the "USDT" or "dollars" you see on one are not real USDT.

A blockchain, in one sentence

A blockchain is a ledger copied onto many computers (called "nodes"), which agree with each other on every new transaction. All of its value comes from one property: no one can change the ledger on their own. Not close an account, not reverse a transaction, not create money out of nothing.

"Private" can mean two very different things

A public network. Anyone can run a node, read the ledger for themselves and take part in confirming transactions. Tron, Ethereum and Bitcoin are this kind. "Independent" means something here, because the operators are many and separate.

A private (permissioned) network. Only computers the company itself has chosen confirm the ledger. It looks like a blockchain, with an explorer, addresses and transactions, but in practice it is a company database: the company can do what it likes with the ledger, because there is nobody else to object.

Building a new network is not hard today; free, ready-made software exists for running one and even for its explorer. The hard part is finding independent operators and real users.

Five questions before you trust a new network

Who runs the network?

Ask how many operators (validators) confirm transactions and who they are. If all or most of them belong to one company, the network is exactly as independent as that company.

Can you run a node yourself?

On a truly public network the node software is published, and anyone can run it and read the ledger directly, with no one in between. If the only way to see the network is the project's own website or explorer, you only see what they choose to show.

Who can create new tokens or close an account?

Ask whether there is a key that can mint tokens, freeze an account or change the rules, and who holds it. On most private networks the answer is "the company".

Where did the "dollars" on this network come from?

Tether, the issuer of USDT, only issues USDT on a specific list of networks, which it publishes itself. On any other network, something called USDT or "dollars" is one of two things:

• A receipt from a bridge or custodian: real USDT is held somewhere else and this is a receipt for it, worth only as much as that custodian's word. See wrapped tokens.
• Just a name: on any network, anyone can create a token and call it USDT.

In neither case is real USDT in your hands.

Where can it be turned into real dollars?

A token is worth what someone, somewhere, will pay for it. If its only buyers are on the project's own site, the project sets the price you see, and getting out depends on its goodwill.

What "unblockable" does and does not mean

Some projects say their network cannot be blocked or sanctioned. A network's code is hard to stop; but people, companies, exchanges and the routes by which a token becomes dollars can all be blocked. And if a network's operators are all one company, the network is exactly as vulnerable as that company.

Warning signs

• It is called a "private blockchain", but nobody says who runs it.
• The node software is not published, and the only explorer belongs to the project.
• There are "dollars" or "USDT" on the network, but nobody says what backs them or where it is held.
• The project's token trades only on its own site.
• You are asked to hand over real USDT and take the network's token or "dollars" in exchange.

At Money Harbor

• Only USDT from the official Tron contract (TR7NHqjeKQxGTCi8q8ZY4pL8otSzgjLj6t) and TRX on the Tron network are credited. Any other asset or network that reaches a deposit address cannot be recovered.
• Any USDT someone sends you, on Tron, Ethereum or BSC, can be checked with USDT Check: did it come from the official contract, or is it only called USDT?
• Deposits are matched against the blockchain every night by separate code, and the result is on the transparency page.

More on the same subject: Is this USDT real?, what a wrapped token is and TRC20, ERC20 and BEP20.

This is educational. It is not investment advice.