Tag Archives: Ethereum

Enterprise Blockchain Consortiums – Part 2

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https://goo.gl/EewTRW

 

This is the second part of our article about Blockchain consortiums focusing on the enterprise market. Part I of this article can be found here.

In Part I, we covered Linux Foundation’s HyperLedger Project which acts as an umbrella for Fabric, Intel Sawtooth Lake, and Iroha. We also that R3’s Corda and Digital Asset Holding’s offerings.  In this part we will cover the following three players:

  1. Chain
  2. Ripple
  3. Enterprise Ethereum

Chain

Chain is a Silicon Valley startup that provides Enterprise Blockchain solutions. Chain offers an enterprise-grade platform called Chain Core that allows companies to build and launch their own permissioned blockchains. Chain Core is built based on the Chain Protocol which defines how assets are issued, transferred, and controlled on a blockchain network. It allows a single entity or a group of organizations to operate a network, supports the coexistence of multiple types of assets, and is interoperable with other independent networks.

Chain Core SDK is available in three languages (Java, Ruby, and Node.js) and provides a robust set of functionality to create enterprise applications that require a permissioned Blockchain. Chain has put a significant amount of effort in building and documenting the APIs. By abstracting the technical details that may impose a steep learning curve when it comes to learning DLT, Chain has done a great job with providing simplified libraries which will have an enterprise developer up and running in a minimal amount of time.

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Image Credit: Chain.com

Chain could have stopped at just releasing the developer documentation – but they went an extra step and open sourced their Chain protocol as well. This allows third party developers to inspect and view the protocol specifications and build additional adapters and bridges to other popular blockchain networks and solutions in the market.

Chain has managed to demonstrate their success by building a fully permissioned Blockchain-based solution for Visa called B2B Connect, that gives financial institutions a simple, fast and secure way to process business-to-business payments globally. Chain has also managed to gather investments from NASDAQ, Fiserv, Capital One, Citi, Fidelity, First Data, Orange etc. With its developer and enterprise-friendly platform, Chain provides an easy entry to DLT technologies for enterprises that are looking to experiment with Blockchains.

The foundation of Chain platform includes the Chain Virtual Machine(CVM) that executes the smart contract programs written in Java, Ruby or Node. These high-level language smart contracts/programs allow business logic to be executed on chain using the  CVM instruction set. These programs are Turing Complete; to guarantee that the contract does not get stuck in an infinite loop, the chain virtual machine terminates contract code that executes more than a run limit time. (Similar to the ‘gas’ that powers ethereum smart contracts).

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Image Credit: Construct 2017, Coindesk

Ripple/Interledger:

Ripple is one of the first successful Distributed Ledger technology companies that has managed to successfully integrate with financial institutions around the world to solve the problem of faster cross-border payments.  Sending money from one country to the other can be a frustrating experience even in today’s standards. Almost all of the banks in the world today use SWIFT technology to move money across borders.

An average SWIFT payment takes days and not hours to settle. Bank to Bank transfer is usually 1-2 days (keeping into consideration time differences, if applicable). Depending on the size of the bank and their presence in the receiver country,  a correspondent bank may be involved.

Ripple attempts to eradicate this delay by providing near real-time settlement times for cross-border money movement. By their own statement:

Ripple’s solution is built around an open, neutral protocol (Interledger Protocol or ILP) to power payments across different ledgers and networks globally. It offers a cryptographically secure end-to-end payment flow with transaction immutability and information redundancy. Architected to fit within a bank’s existing infrastructure, Ripple is designed to comply with risk, privacy and compliance requirements.

Interledger Protocol(ILP) – ILP serves as the backbone of Ripple technology. ILP strongly borrows many of the battle-tested ideas from Internet standards (RFC 1122, RFC 1123 and RFC 1009) that exist today. ILP is an open suite of protocols for connecting ledgers of different types of digital wallets to national payment systems and other blockchains. A detailed overview of the ILP protocol can be found in a white paper here.

Ripple Connect – Ripple Connect acts as the glue to connect various Interledgers operated by FI clients around the world. By linking the ledgers of FI’s through ILP for real-time settlement of cross-border payments, it preserves the ledger and transaction privacy of the financial institution. It also provides a way for banks to exchange originator and beneficiary information, fees and the estimated delivery time of the payment before it is initiated thus providing transactional visibility.

Screen Shot 2017-03-16 at 5.40.49 AMImage Credit: ripple.com

Ripple has also built a sample ILP client for developers along with supporting documentation that shows how to use ILP. A good overview of Interledger development documentation can be found here. Complete documentation about developing for Ripple platform can be found here.

Ripple has managed to successfully prove that DLT can be used to solve a real-world problem of cross-border payments. They are one of the few companies who has managed to acquire BitLicense – a virtual currency license from the New York State Department of Financial Services.

Here is a list of Ripple’s Financial Institutions clients who are either using it in production or testing the technology for cross-border money movement:

Ripple clients.png

Image Credit: Ripple.com

Enterprise Ethereum:

Enterprise Ethereum is technically the new kid on the Enterprise Blockchain Consortium Block; however, Ethereum as a platform has a robust base of credentials to bring a fight to the ring. Enterprises have shown significant interest in Ethereum as a platform and many innovation labs have been testing a private deployment of Ethereum to understand the technology as well as the use cases it can solve.

Jeremey Millar from ConsenSys elegantly presents the merits of using Ethereum in an Enterprise setting:

Ethereum is arguably, the most commonly used blockchain technology for enterprise development today. With more than 20,000 developers globally, the benefits of a public chain holding roughly $1bn of value, and an emerging open source ecosystem of development tools, it is little wonder that Accenture observed ‘every self-respecting innovation lab is running and experimenting with Ethereum’. Cloud vendors are also supporting Ethereum as a first class citizen: Alibaba Cloud, Microsoft Azure, RedHat OpenShift, Pivotal CloudFoundry all feature Ethereum as one of their, if not the primary blockchain offering.

Enterprise Ethereum (EE) brings forth a very crucial difference between the technology used by players in this space – Blockchain vs.  Distributed Ledger. While these two technologies have been interchangeably used by many in the field, there is a subtle difference that catches folks off-guard. Antony Lewis of R3 says:

All blockchains are distributed ledgers, but not all distributed ledgers are blockchains!

Enterprise Ethereum attempts to bring the technology behind Ethereum into enterprises while the other players have redesigned the idea behind Blockchains to fit the enterprise needs. It is still early in the game to see how Enterprise Ethereum will evolve as not much details have been published except the launch day webcast (7 hours). Around the first hour, Vitalik Buterin talks about the Ethereum roadmap.

We also see the various alliance partners in various panels talking about what Ethereum in Enterprise means to them and the reason why they are part of it. EE has launched with a significant number of important players in the space – most notably JP Morgan, who also have announced the launch of their Ethereum based blockchain called Quorum.

Enterprise Ethereum Alliance members

Image Credit: http://entethalliance.org/

Conclusion:

The Enterprise Blockchain/Distributed Ledger space is starting to become competitive with a good number of offerings. There are are other players like Multichain and Monax, which we have not covered here which deserve a close watch. Like relational databases that changed the way how enterprise applications are built, Blockchains and Distributed ledgers will shape the future of how enterprise applications are designed and built for the next generation of applications.

 

 

 

 

 

 

 

Blockchain – What is Permissioned vs Permissionless?

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If you have been following distributed ledger technologies (Blockchain), you would see the term permissioned blockchain being thrown around. What is the core difference between a permissioned vs. a permissionless blockchain?

A permissioned blockchain restricts the actors who can contribute to the consensus of the system state. In a permissioned blockchain, only a restricted set of users have the rights to validate the block transactions. A permissioned blockchain may also restrict access to approved actors who can create smart contracts.

Permissionless blockchain is contrary to what you read above – Here anyone can join the network, participate in the process of block verification to create consensus and also create smart contracts. A good example of permissionless blockchain is the Bitcoin and Ethereum blockchains, where any user can join the network and start mining.

Now you may wonder what the benefits and disadvantages of each approach are? In a permissionless world, you do not have to prove your identity to the ledger. As long as you are willing to commit processing power to be part of the network and extending the blockchain, you are allowed to play. Any miner who is playing the game by the rule may be able to solve the hash puzzle and verify the block of transactions to win the mining reward (Higher the mining power, better the chances of winning the mining reward).

In the permissioned blockchain world, you need to be an approved actor in the system to participate in growing the chain as well as building consensus. Many of the blockchain consortiums that build private blockchains for financial institutions and other enterprises follow this model.

One other critical difference between these two is the underlying mining model – permissionless blockchains use Proof of Work(PoW) mining where hashing power is offered to build trust. As long as 51% of the nodes are honest players, network consensus is reached. (Read about 51% attack here).  While Bitcoin uses PoW mining, Ethereum is proposing to use a Proof of Stake model (PoS) for reaching consensus.  Proof of stake mining asks users to prove ownership of a certain amount of currency (their “stake” in the currency). Instead of buying computers and electricity for mining in a PoW system, a PoS systems uses the capital to acquire the coins/tokens that allow you to validate transactions.

Permissioned blockchains do not have to use the computing power based mining to reach a consensus since all of the actors are known; They end up using consensus algorithms like RAFT or Paxos. There are also other PBFT algorithms that can be used to reach consensus without PoW mining.

Let us look at the topic of enterprise blockchains. Almost all of these piloted blockchains these days are permissioned. There are many reasons why this is the case:

  1. Privacy – using a permissioned blockchain allows only actors who have rights to view the transactions. A permissionless blockchain is ideal as a shared database where everyone can read everything, but no single user controls who can write. Imagine you are a large bank who uses a shared ledger with a list of other banking partners within a consortium – you do not want the volume of your transactions to be visible to your competitors.
  2. Scalability – A Permissioned blockchain can build a simplified Proof of Stake model to establish consensus; this prevents the proof of work by burning computational cycles. The ultimate result is scalability compared to a public blockchain network like Bitcoin. (See BigChainDB).
  3. Fine Grained Access Control – A Permissioned blockchain allows restricted access to the data within the ledger (See the design model underlying R3CEV’s Corda)

I want to highlight one of the most famous interviews by Bitcoin guru Andreas Antonopoulos – Sewer Rat and the Bubble Boy. When asked about “How are enterprise/private blockchains different from bitcoin’s blockchain?”, Andreas responded:

“The banks and the corporations say, “Oh, bitcoin’s awesome. We want that. Only without the open, decentralized, peer-to-peer, borderless, permissionless part. Could we instead have a closed, controlled, tame, identity-laden permission version of that please?”

It is an interesting argument where Andreas compares Bitcoin network to the Internet and the private blockchains as the secure intranet within enterprises. He compares them to the Sewer Rat and the Bubble Boy:

Bitcoin is a hardened platform because its security is tested on an everyday basis.

“Bitcoin is a sewer rat. It’s missing a leg. Its snout was badly mangled in an accident in last year. It’s not allergic to anything. In fact, it’s probably got a couple of strains of bubonic plague on it which it treats like a common cold. You have a system that is antifragile and dynamic and robust.”

Does this mean that the enterprise blockchains are the bubble boy?

 “let’s take bitcoin, cut off its beard, take away its piercings, put it in a suit, call it blockchain, and present it to the board.” It’s safe. It’s got borders. We can apply the same regulations. We can put barriers to entry and create an anti-competitive environment to control who has access. It will be more efficient than our existing banking system.

Eventually, successful, vibrant, innovative companies are the ones that turn their IT infrastructure inside out. In the future of finance, successful, vibrant, and innovative banks are the ones that turn their infrastructure inside out and make it part of an open, borderless financial system that serves the other 6 billion, that serves all the people who have been excluded from finance.”

I for one cannot wait to see how this whole debate will shape up the future of finance. The advent of bitcoin and blockchain and DLT technologies is a pivotal moment in the history of computing and technology. It will change the way of how we build systems of the future.

You can watch the full-text interview with Andreas here and the video of his talk here.