Has Blockchain Crossed the Chasm? Public Blockchain in Enterprise
For a long time, private and permissioned blockchains have been the go-to choices for organizations and enterprise users - and it’s easy to see why, most of these enterprises have placed a high level of importance on control, of which private blockchain environments provide plenty.
Specifically, they only allow selected entry of authorized participants, which can join only through authentic and verified invitation and need to be validated by the network operator or a clearly defined protocol implemented by the network. Since private blockchains weren’t decentralized in their truest sense and operated as closed databases, not allowing all users to make transactions, validate changes, or run a full node, a new category became accepted - permissioned blockchains.
Acting as a sort of a hybrid between private and public blockchains, permissioned blockchains allow for more customization options, permit anyone to join after verifying their identity, and support the allocation of special permissions for certain activities on the network (e.g. RippleNet).
Private and permissioned blockchains have been pervasive in institutional settings also due to fear of public blockchain networks and the lack of knowledge on how they operate. However, as institutions start to discover the limitations of private and permissionless blockchains and learn more about the advantages of public blockchains, a dramatic shift towards public blockchain adoption can be predicted.
Public blockchains have observable advantages
Public blockchains like Ethereum, where anyone can see the ledger, join, and participate in the consensus process, are expected to become the dominant platforms for both the public and the enterprise sphere. At this moment, Ethereum itself has the largest number of use-cases across industries - 52% - compared to the best performing private blockchain, Hyperledger Fabric, with only 12%. This expectation becomes all the more tangible as institutions and enterprises begin to flock towards public blockchains for several compelling reasons:
- Widely available computing infrastructure
A public blockchain is built on public computing infrastructure anyone can join without needing permission and for free. You only need to deploy your decentralized application (dApp) and you’re good to go. Due to a lack of permission, public blockchains are also often called “permissionless” blockchains.
Leveraging a public blockchain also eliminates the requirement of building or commissioning special blockchain networks, which saves a considerable amount of resources. Furthermore, public blockchains are straightforward and cheaper to operate, and no membership fees are needed for accessing them.
Network security and privacy
While fears over privacy and security prevented more enterprise players from jumping on the bandwagon, they have been eased by the maturation of privacy and security solutions on public blockchains. These solutions are now at a level where institutions can utilize them confidently.
One of these solutions are zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). They solve the problem of privacy by allowing users to prove anything they want to third parties without disclosing the actual information. In other words, zk-SNARK of data is shared but not the data itself. As it happens, these solutions now allow organizations to transact with each other over public blockchains in total data privacy. This means no sensitive enterprise or private data is disclosed on the blockchain at all. The only data that is passed includes status updates and mathematical proofs, providing high transaction security.
It is the story of public cloud services all over again - organizations getting accustomed to the security and reliability of sharing infrastructure, leading to the domination of such infrastructure.
A public blockchain features true decentralization - a system in which control and decision-making are carried out by a distributed network instead of a central authority (individual, organization, or group).
In a public blockchain, everyone can join and participate in the core activities of the network. Any person can read, write, and audit the running activities on the public blockchain, which helps it maintain its self-governed nature. In other words, all nodes on the public blockchain have equal rights of access, creation of new blocks of data, and validation of data blocks.
By spreading data among multiple network nodes at various locations, a blockchain preserves the immutability and tamper-resistance of the data kept on it. This means that someone trying to modify a record at one instance of the database won’t succeed in modifying the other nodes, and the wrongdoer would fail in their goal. The other nodes would also cross-reference each other and easily narrow down the one with the altered information.
Additionally, public blockchains typically have tens of thousands of nodes, which makes them virtually impossible to shut down. In the enterprise setting, a public blockchain facilitates the instant provision of goods and services to anyone connected to the public infrastructure. On top of that, a public blockchain removes the controlling entity that extracts excess profits.
Access to Liquidity
Having access to liquidity allows organizations to more easily get in and out of assets, when exchanging assets for value is difficult or impossible. Public blockchains can be leveraged by tokenizing or splitting traditionally illiquid assets into smaller, more liquid fractions. This allows users to instantly transform their receivables into tokens that are liquid and transferable.
The tokens can also be utilized for representing a part of or an entire real-world entity such as natural goods, financial instruments, real estate, and so on. By tokenizing them, organizations have more freedom in trading the assets and decreasing illiquidity premiums.
Public blockchains can also be used in banking, where decentralized and centralized finance come together to allow the easier provision of financial services to clients and digitize national currencies. For example, Stellar’s public blockchain was chosen by Ukraine’s government to digitize its hryvnia and create a “virtual assets ecosystem and national digital currency of Ukraine.”
The concept, called a central bank digital currency (CBDC), is intended to provide banks and governments with a way to retain control of the monetary system while offering cheaper and faster transactions for clients. This way, they democratize access to finance and make money universally available to everyone everywhere.
Although most organizations are currently still leaning toward private and permissioned blockchain, their interest in public blockchain is increasing, especially as they learn more about the disadvantages of the former and the advantages of the latter. In fact, according to research carried out by the consulting company EY, 75% of institutional decision-makers said they were likely to use public blockchain in the future, with nearly one-third saying they’re very likely. This plays well into the expectation of the growing enterprise adoption of the public blockchain, which certainly has a bright future.