This report helps readers navigate the burgeoning enterprise blockchain landscape, offering insight into enterprises’ distinct motivations, needs, and challenges. Key developments among leading projects are concisely summarized and project groupings are analyzed so to clarify notable differences in blockchain types. The report ends with additional commentary from major enterprise thought leaders.
“In modern capitalist society, technology was, is, and always will be an expression of the economic objectives that direct it into action.”
— Shoshana Zuboff, The Age of Surveillance Capitalism
New technologies have a history of being explored and adopted by businesses, governments, and other organizations that carefully aim them at trajectories serving their long term economic goals and values. Blockchain, in this respect, is no different from earlier technologies, as it is a new frontier for exploration by anyone with a motivation to do so.
From this perspective, the goals and needs of enterprise organizations are increasingly important to understand: these large and powerful companies see the value of blockchain differently than other industry actors and continue to invest in the technology on a massive scale. Based on their goals, the size of their userbases, and the types of data they collect, enterprise organizations may be uniquely positioned to disrupt certain industries and achieve sweeping impacts across industries and markets, for better or worse.
While the public cryptoasset markets experienced a heavy decline over 2018 with the beginnings of a recovery solidifying throughout Q2 2019, the enterprise sector has not slowed its blockchain investment and experimentation. Enterprise companies are increasingly researching, developing, trialing and launching initiatives leveraging blockchain technologies, as demonstrated by the projects and consortiums incubating and emerging over the course of 2018 and accelerating in 2019. Such investment is garnering results—important progress is being made in six areas where public blockchains have traditionally failed to meet enterprise needs.Figure 1. Bitcoin USD Price Movements vs. Enterprise Milestones
Data Source: CoinMarketCap
As an independent blockchain research organization studying the space since 2013, Smith + Crown has had a front row seat to the changes in blockchain culture over the years, and watched various groups attempt to adapt blockchain technology for their particular ideology, political view, or purpose. Blockchain has attracted an impressive and unlikely array of characters—from crypto-anarchists, cryptographers, idealists, business people, regulators, technologists, to do-gooders and thieves. Blockchain’s definition and purpose seems to morph under different hands as it evolves around the globe, belonging to everyone, anyone, and no-one.
The present point in blockchain’s story is fascinating: corporations are accelerating their blockchain involvement to push forward their objectives. IBM is perhaps the world’s leading example of a multinational firm investing in blockchain from nearly every possible angle—launching projects and joint ventures, participating in consortiums, developing technology, offering blockchain consulting and cloud services, strategy, and blockchain development work. Juniper Research surveyed 369 founders and executives in 2018 and found that 43% of respondents ranked IBM first for leadership credentials amongst blockchain companies. IBM’s Senior Vice President for Platforms & Blockchain, Bridget van Kralingen, appropriately captures the prevailing enterprise blockchain mindset with, “The era of blockchain tourism has ended. We’ve really seen blockchain move from being overshadowed by cryptocurrency to focus on real business problems and complex processes.”
Business problems and complex processes come packaged with real world risks and liabilities, meaning corporations engaging with new technologies like blockchain require certain controls over participants, records of interactions, network security, the design of system rules, and performance. Upholding legal regulations and responsibilities as defined by industries, jurisdictions and laws requires enterprises to engage blockchain with certain guardrails in place. These guardrails come in the form of custom implementations of blockchain between known actors—which are referred to by several different names such as, “private blockchain”, “shared ledger”, “consortium blockchain” or “permissioned blockchain”.
Smith + Crown classifies blockchains into three types, differentiating based on who has the ability to define protocol level rules, control roles and requirements for network participation, access the network to read data and/or submit transactions, and who has the ability to participate in consensus by gathering, validating and writing transactions on the network.
- Permissioned – Private:
A private blockchain is one in which a centralized party defines network rules at the protocol level and/or controls roles and requirements for participation in consensus and on the network generally, while access permissions such as reading or transacting on the network may or may not be private.
- Permissioned – Consortium:
A consortium blockchain is one in which a group of two or more organizations or individuals have some collective authority over defining network rules at the protocol level and usually control roles and requirements for participation in consensus and on the network generally, while access permissions such as reading or transacting on the network may or may not be private.
A public blockchain is one in which a group of two or more organizations or individuals have some collective authority over defining network rules at the protocol level, where anyone may participate in consensus provided they have the resources required to do so, and where access permissions such as reading or transacting on the network are open to the public.
The first blockchain network—Bitcoin—was born in 2009 as an experiment to facilitate digital cryptocurrency value transfers outside of traditional government and financial systems, built on decentralized networks of servers processing transactions, and maintaining partial anonymity for participants, even when certain transaction data is made publicly visible. Because human values underpin and drive all blockchain design and development, the values of decentralization and anonymity manifested in the design of public blockchain networks for Bitcoin and the majority of its early descendants.
For those philosophically wed to this original concept of blockchain, it is impossible to think that the more centralized governance structures and transaction processors that make up consortium and private networks, where there is no intention to further decentralize or no feasible path outlined to do so, can claim to be “blockchain” at all. Whether such a perspective remains appropriate or primary as blockchain systems expand into enterprise, and eventually perhaps government and central bank ecosystems, bears careful observation.
While some private and consortium blockchain-based initiatives are arguably un-sexy and seemingly self-contained, in the case of optimizing paper-based supply chain communications for example, other proposed enterprise projects like Facebook’s Libra cryptocurrency carry the potential to impact the financial lives of billions—or specifically in Facebook’s case—2.38 billion users, including over 90 million small businesses, representing 31% of earth’s total human population. This “global Venmo” style project, which aims for Libra to be a global medium of exchange, or its successors, could forever alter the global financial system in untold ways. Therefore, it is crucial to consider the significance of enterprise blockchain projects based on the scale of their existing user base and the types of data that they have amassed or have access to.
The reality is that the variables making up blockchain technology are being poked, prodded, reconfigured and borrowed from one another as new experiments are designed across all three of these blockchain categories. A fresh blockchain network can create rules in a number of ways—within the blockchain protocol, through consensus participation requirements, off-chain governance, by implementing intellectual property rights, at the dapp layer, etc.—making it difficult to suss out just how decentralized, secure, and fair a network truly is or could potentially become. Simultaneously, the majority of the general public are unfamiliar with the blockchain industry and not adequately aware of the history and technological nuances to be positioned to weigh in about what qualities qualify a project as blockchain, or something else entirely.
The widespread misunderstanding about blockchain technology, in combination with an abundance of speculative hype surrounding the cryptoassets that emerge from blockchain networks, and genuine interest in the disruptive potential of this technology, creates the perfect environment for blockchain to be rebranded by whomever has the means and motivations to publicize it in new ways to large audiences, hoping that their vision and story will root into the collective consciousness and not be overthrown by a competitive iteration.
The industry has arrived at a crucial juncture in its story, where blockchain technologies are on the verge of being introduced to larger global audiences after 2018’s “crypto winter” by corporate giants. In fact, this is unfolding now, as familiar corporations like Facebook, Intel, Amazon, IBM and Microsoft make significant developments and investments in blockchain.
The ramping development and adoption in enterprise blockchain is worth understanding, as these organizations have significant budgets, existing teams, audiences, and networks. The way they use and combine these resources, and how the repercussions of those actions play out in the blockchain space and across the world is yet unknown. Critically, examining the top enterprises projects matters now more than ever to building a deeper collective knowledge that can only increase the likelihood that these technologies will be used for the benefit of all.
What is Enterprise Blockchain?
The term “enterprise blockchain” has no official or formally agreed upon definition. Like many terms in the blockchain industry, “enterprise blockchain” emerged organically, often used loosely in a variety of contexts across writers, publications and organizations. When the term first emerged, it did so as a reaction to concerns that publicly available blockchains like Bitcoin and Ethereum were not suitable for corporations’ needs.
At times, “enterprise blockchain” may refer to the size (in terms of employee count and/or revenue) of the organizations that participate in the technology. For example, the US Census calls large enterprises those that have 500 or more employees, while Gartner defines midsize enterprises as those that have 100-1000 employees and/or between $50 million and $1 billion in revenue.
In other instances, “enterprise technology” is used as a catch-all phrase to describe technology that was developed to meet one or more functional criterion for large scale use cases, such as transaction capacity, privacy features, or provides certain degrees of modular customization.
In an effort to focus on organizations that may be positioned to make broad impacts with their blockchain contributions, this report defines enterprise organizations as for-profit companies operating anywhere globally, with 1,000 or more employees and over $500 million in revenue. This report focuses on the blockchain initiatives of those organizations and the surrounding ecosystem of vendors, tools, technologies, networks and projects that are contributing to their efforts. Above all, this report considers the implications for the blockchain space more broadly as a result of these enterprise efforts.
Enterprise Blockchain Traction
Enterprises are actively exploring the value that blockchain technology can bring to their organizations. This is evidenced by blockchain based spending, development and sentiment captured through interviews and surveys with enterprise leaders by consulting firms like Deloitte, PwC, Juniper Research and IDC.
Juniper Research surveyed 369 business leaders in 2017 that highlighted how even at that time many large enterprises had moved beyond internal blockchain discussions to launching proof of concepts or blockchain trials.Figure 2. Enterprise Organization Internal Blockchain Deployments
Data Source: Juniper Research
PwC surveyed 600 executives from 15 territories in 2018, where 84% said that their organizations have at least some involvement with blockchain technology.
In 2018 Deloitte surveyed more than 1,000 “blockchain-savvy” executives across the globe to understand overall attitudes and investments in the blockchain space. They found that fintech was leading in blockchain development, that 74% of respondents saw a “compelling business case” for blockchain technology, and that 34% had initiated some sort of blockchain deployment at their company. This can be compared with the results of Deloitte’s 2019 updated study, where 1,386 senior executives were surveyed at US companies with $500 million or more in ARR (and $100 million ARR or more for companies outside the United States). Results showed that the fintech sector still leads in blockchain development, but that other sectors—from technology to healthcare to life sciences—are expanding their blockchain initiatives.
In Deloitte’s 2019 update, 83% of respondents said they see a “compelling business case” for the use of blockchain technology but only 23% have initiated a blockchain deployment. Though this increase in sentiment combined with a decrease in demonstrated efforts appear contradictory, Deloitte still interprets this positively, saying, “research shows executives increasingly expressing confidence in blockchain’s importance and its disruptive potential that matches some of the most ambitious and far-reaching claims about its transformative potential.”Figure 3. Executive Attitudes towards Blockchain, 2018 vs 2019
Data Source: Deloitte
A more recent report from IDC in March 2019 anticipates that worldwide spending on blockchain solutions will grow at a compound annual growth rate (CAGR) of 76%, and forecasts that total spending will amount to $12.4 billion in 2022. The report predicts that the financial sector will lead global blockchain spending, with cross-border payments, settlements and trade finance receiving the most investment in 2019.
Blockchain-based activity confirms this sentiment, which can be found growing across consortium memberships, partnerships and projects. In May 2019, Microsoft launched ION on the Bitcoin testnet, an open-source blockchain based identity infrastructure project that aims to help enterprises manage decentralized identifiers and prove key ownership. Salesforce also made its debut into the blockchain space, announcing a CRM management project called Salesforce Blockchain, built on Hyperledger’s Sawtooth platform.
During the month of June 2019 alone, Kodak launched a “Document Management Platform” leveraging blockchain technology, for businesses to store and manage documents. Securities house Euroclear announced that it will proceed with building a blockchain-based platform pilot for issuing and settling short-term securities after successfully completing a “proof of value” study. Visa commercially launched their Visa B2B Connect network, which facilitates global cross-border payments using blockchain in 30 markets and expects to cover 90 markets by year end. Hyperledger announced 8 high profile new members including the Ethereum Foundation, Microsoft, Nornickel and Salesforce. The event that dominated news headlines, also in June, was the unveiling of Facebook’s proposed Libra project, a global cryptocurrency initiative led by a consortium of some of the worlds largest technology and financial organizations that has sparked resistance from regulators and mixed reactions from the global community.
While these developments certainly evidence greater enterprise interest in the technology, that interest is not necessarily driven by the same sets of goals had by non-profit blockchain developers. Understanding what enterprises want from blockchain casts new light on their growing interest.
What Enterprises Value in Blockchain
Blockchain in its current form can be thought of as a slower, more fault-tolerant alternative to a centralized database and, depending on the use case and its particulars, the benefits of blockchain may not outweigh the costs and complications involved in its implementation.
A private, consortium or public blockchain solution is generally worth pursuing in cases where greater trust is needed between parties that do not readily trust one another. While many blockchain projects do not require or have any compelling need to introduce a token in their ecosystem, more complex use cases may have good reason to launch one or multiple cryptoassets, which can be designed to incentivize ideal behaviors on the network. Thus far many projects launching on public blockchain networks, like Ethereum, have employed cryptoassets. For example, Numerai is a public competition for data scientists, where they are rewarded with an ERC20 token for creating and submitting predictive financial models to the network. As of July 1st, 2019, over $9.5 million was earned by participating data scientists, making it an example of a project effectively using a cryptoasset as a tool to incentivize groups of individuals who otherwise have no relationship with one another in the real world.
On the consortium and private end of the blockchain spectrum, cryptoassets have been far less necessary as a tool for incentivizing behaviors, since the identities of participating members are known, creating direct reputational risk, if not financial liability, in the event of their misbehavior. In this way, known identities replace the need for more complicated protocol level rulesets, and the challenges of creating a shared private or consortium blockchain lie primarily in the off-chain, real world environment, where corporations must define systems, strategy, ownership of intellectual property, and manage networks ongoing.
Public blockchains have traditionally not met the needs of corporations since Bitcoin’s public blockchain network first appeared in 2009. Bitcoin and the early projects that followed utilized Proof of Work consensus models and emerged from cryptography and cypherpunk communities with a libertarian political bent pursuing technology solutions that might operate around government jurisdictions and financial banking boundaries. The “openness” of the blockchain network—in terms of enabling anyone to read data, write data and transact on the network—was a crucial component to replacing or eschewing existing systems.
Bitcoin allowed individual cryptocurrency holders and investors to send and receive BTC, but this use case was expanded upon by projects like Ethereum, which introduced a decentralized environment that could be used to execute arbitrarily complex financial transactions. Following this milestone, other organizations began examining blockchain technology and how it might fulfil their needs. Relatively early on, enterprise organizations began examining blockchain technology with an eye on efficiency gains, access to new data, transparency within their own supply chains and operations, and new revenue possibilities.
Public blockchains historically have not met the needs of enterprise organizations for one or more of these six major reasons:ThroughputFor some enterprise use cases, the number of transactions that the network can process per second must generally be predictable and sufficiently high.The process of reaching consensus can be more efficiently executed in permissioned models, because verification between a small number of nodes with known identities is faster than verification across thousands of geographically dispersed nodes as in public networks. For example, the Bitcoin network has 10427 reachable nodes, while Ethereum has 8308 as of July 2019.InteroperabilityEnterprises recognize the need for interoperability with other chains. This is why, for example, Hyperledger Sawtooth has extended functionality to the public Ethereum chain, why Microsoft Azure is offering IBM’s Fabric within its blockchain platform, and a big part of the reason enterprises join consortia like the Enterprise Ethereum Alliance and Hyperledger.Transaction data confidentialityEnterprises often deal in sensitive or confidential data and require a blockchain that protects it. By restricting blockchain read permissions, permissioned blockchains can better control who sees what information.Protocol governance controlsThis is the ability to change the rules of the blockchain protocol, which is important from a corporate liability perspective in the event that something goes wrong. This control may manifest as a rule change, modification of balances, reverting a transaction, etc.Fast finalityFinality is the time within which one can reasonably assume a blockchain transaction is confirmed as final by the network. Enterprises often require faster finality to satisfy use cases that value instant, or near instant confirmations. For example, PBFT consensus models which are often used in private or consortium blockchains, are better equipped to offer instant or near-instant finality.Fund Source VerificationEnterprises operating in the financial sphere are subject to Anti-Money Laundering (AML) regulations, which require that they be able to verify that the funds originated from strictly legal, known sources. Public blockchains generally make it difficult to implement effective AML, which brings reputational and regulatory risks.
Blockchain Types: Permissioned- Private, Permissioned- Consortium, and Public
The industry generally thinks of blockchains as belonging to one of two binary groups—public chains such as Bitcoin and Ethereum, or permissioned chains such as Hyperledger Fabric and Facebook’s Libra. Ethereum co-founder Vitalik Buterin weighs in on blockchain types saying, “In general, the idea that there is ‘one true way’ to be blockchaining is completely wrong headed, and both [private and public blockchain] categories have their own advantages and disadvantages.”
A binary view of blockchains, however, does not sufficiently capture certain design tradeoffs that are important to consider. At a high level, blockchains can be organized into three primary classes:Permissioned – PrivateExamples: JPMCoin
- A centralized party has the ability to define network rules at the protocol level and/or control the roles and requirements for participation on the network
- Access permissions such as reading or transacting on the network may or may not be private, according to predefined rules
- A centralized party controls who may participate in consensus by gathering, validating and writing transactions to the network
Permissioned – Consortium
Examples: USC Coin by Fnality
- A group of two or more organizations or individuals have some collective authority over defining network rules at the protocol level and/or control the roles and requirements for participation on the network
- Access permissions such as reading or transacting on the network may or may not be private, according to predefined rules
- The ability to participate in consensus by gathering, validating and writing transactions to the network is limited to a known set of actors usually selected by the consortium
Examples: Bitcoin, Ethereum
- A group of two or more organizations or individuals have some collective authority over defining network rules at the protocol level and/or control the roles and requirements for participation on the network
- Access permissions such as reading or transacting on the network are open to the public
- The ability to participate in consensus by gathering, validating and writing transactions to the network is open to anyone, provided they have the resources required to participate in consensus
Blockchain type is determined primarily by three factors:
- Ability to define network rules: who has the ability to alter the rules that govern the network at a protocol level and/or control the roles and requirements for participation on the network.
- Network access-controls: who has the ability to access a blockchain network to read data from the chain and/or submit transactions for inclusion on the network.
- Ability to participate in consensus: who has the ability to participate in consensus by gathering, validating and writing transactions to the network.
Above and beyond these considerations, a blockchain may have varying degrees of confidentiality protections for data contained within transactions such as amount and sending/receiving address. Data confidentiality is being addressed by projects at various levels—be it at the core protocol layer, dapp layer, or through an accessory technology that is added to a main chain.
Private and consortium blockchains are imagined as sub-categories of permissioned blockchains, and entirely different than the public blockchains from which they are derived.
It is important to note that the differences between a centralized server and a private blockchain can be difficult to distinguish, since a central entity may make minimal adjustments to a centralized server and call this a private blockchain implementation. Vitalik Buterin highlights how thin the differences can be, noting that fully private blockchains, “…can be more accurately described as a traditional centralized system with a degree of cryptographic auditability attached.”
Similarly, the exact line between private and consortium blockchains is not widely agreed upon. Generally, blockchain projects do not aspire for a private blockchain implementation as their fully realized end-state, but may start with a private, centralized approach upfront and takes steps towards adopting a consortium approach with more distributed controls over time.
From a transaction validation perspective, consortium blockchains are simpler to operate than public blockchains, because the nodes processing and validating transactions are known. This largely eliminates the need for complex consensus mechanisms and cryptoasset incentives, instead requiring lighter touch orchestration of duties between a smaller group of known validators. Designing the blockchain to withstand a failure of duties or malicious attack is still relevant but the threat of such events happening is diminished significantly, since all participating validators are known. The complexity of launching a consortium blockchain lies in establishing the upfront strategy, ownership arrangements, and ongoing management agreements in the first place.
The simplest consortium blockchain use case that an enterprise may engage in is a shared digital view for monitoring, securing and sharing records between multiple parties that do not entirely trust one another. This shared collaborative workflow is a superior bookkeeping exercise that results in cost-saving benefits such as decreased reliance on internal accounting teams, but it does not reshape any broader paradigm of trust or collaboration as originally envisioned by proponents of public blockchains.
In the absence of identity information, successfully facilitating a public blockchain requires using code and cryptoassets to incentivize ideal behaviors and disincentivize malicious behaviors. The mechanisms preventing unethical behavior must pervade the blockchain protocol itself. Without a successful design and implementation, a public blockchain risks losing the trust of users. This presents a major challenge, where attack vectors must be identified in advance and entire systems must be designed to withstand all potential flavors of attack. Because this is so difficult to implement exclusively using code and cryptoassets, public blockchains, such as Ethereum and Bitcoin, largely facilitate governance decisions off-chain.
Though blockchains are divided into the three primary classes as outlined above, the table below offers a more granular look at the types of public blockchains that exist based on the type of resource exchanged for influence in their consensus mechanism (social wealth, compute and/or cryptoasset wealth, or combinations of rule-based behaviors). Given the quantity of public chain consensus mechanisms that continue to emerge over the past several years, and the fact that some public chains do rely on social identities and reputations more than others, these distinctions are important to unpack.Permissioned- PrivatePermissioned-Consortium
Variable access / permissioned consensusPublic
Public access / resource-based consensusPublic
(compute and/or cryptoasset wealth)
Public access / resource-based consensusPublic
(combinations of rule-based behaviors)
Public access / resource and/or behavior-based consensusAbility to define
(Protocol level rule control)A centralized party has authorityA group of two or more organizations or individuals have some collective authorityA group of two or more organizations or individuals have some collective authorityA group of two or more organizations or individuals have some collective authorityA group of two or more organizations or individuals have some collective authorityNetwork access controls
(Read, transact)May or may not be private, according to predefined rulesMay or may not be private, according to predefined rulesOpen to the publicOpen to the publicOpen to the publicAbility to participate
(process and validate
transactions, write to
the network)A centralized party controls who may participateThe ability to participate in consensus is limited to a known set of actors usually selected by the consortiumAnyone may participate in consensus, provided they have (or gain) sufficient social wealth. In a decentralized state, validating nodes have control proportional to the number of other network participants that trust themAnyone may participate in consensus, provided they have (or gain) sufficient cryptoasset and/or compute wealth. In a decentralized state, validating nodes have control proportional to their compute power, or their held/delegated cryptoasset holdingsAnyone may participate in consensus provided they have (or gain) sufficient behavior-based wealth. In a decentralized state, validating nodes have control proportional to a custom ruleset defined by the protocol that could be a combination of actions, reputation calculations, and/or cryptoasset holdingsTransaction
confidentialityData confidentiality is controlled by permission settingsData confidentiality is controlled by permission settingsTransaction data is public, unless accessory technology is added to obscure amounts and addressesTransaction data is public, unless accessory technology is added to obscure amounts and addressesTransaction data is public, unless accessory technology is added to obscure amounts and addressesValidating node
identity anonymityValidating node identity is knownValidating node identity is knownValidating node identity is known to some degreeValidating node identity is anonymousValidating node identity is anonymousNetworks and consensus
protocol examplesHyperledger Fabric and/or Sawtooth: PBFT, PoET, RAFT
Quorum: RAFT, IBFT or Clique POA
R3 Corda: “business network operator” controlling a networkFacebook Libra: LibraBFT
Hyperledger Fabric and/or Sawtooth: PBFT, PoET, RAFT
Quorum: RAFT, IBFT or Clique POAEOS: DpoS
PoA Netowork: PoA
Stellar: SCPBitcoin: PoW
Ethereum: Pow/PoSNEM: Proof of ImportanceResource exchanged by
validating nodeIdentity and associated real world reputationIdentity and associated real world reputationIdentity and/or social traction gained from campaigning for community votesResource wealth in the form of computing power and/or cryptoasset holdingsRule-based actions, as defined by the protocolRelevance for enterprise useAttractive to an organization requiring maximum control over a networkAttractive to a group of organizations requiring high control over a networkAttractive to organizations that may value a slightly more decentralized approach, while still requiring some degree of identity information attached to participationGenerally unattractive due to less control over the underlying public protocol, though certain experimental technologies can be used to alter these chains and offer increased privacy controlsGenerally unattractive due to rulesets that are too experimental and offer little control over the underlying protocol
To achieve their blockchain goals, enterprise organizations have thus far primarily experimented with private and consortium blockchain implementations, though there has been evidence from certain enterprises on public chains, for example, Walmart China’s decision in June 2019 to partner with VeChain using their VeChainThor blockchain to track food products.
Another example is Microsoft’s Identity Overlay Network (ION), produced in collaboration with the Decentralized Identity Foundation. Announced in May 2013, ION is a network that leverages a blockchain-agnostic protocol called Sidetree and the IPFS protocol on top of the Bitcoin network to support decentralized identities at scale. Interestingly, this open-source project aims to give users increased control over their own digital identities and imagines a future where users would have the option to fully control online login credentials. Microsoft said of their identity initiatives, “We aspire to a world where the billions of people living today with no reliable ID can finally realize the dreams we all share like educating our children, improving our quality of life, or starting a business. To achieve this vision, we believe it is essential for individuals to own and control all elements of their digital identity.” This serves as an important example of how enterprises, in the pursuit of applying blockchain technology to meet their own long term economic interests, can simultaneously contribute to the digital empowerment of individuals.
Additionally, there are efforts being made to make Ethereum’s public blockchain an attractive alternative to private and consortium chains. Experimental accessory tools and technologies are giving enterprise organizations the option of building on Ethereum today, though they are currently very computationally expensive. An organization wishing to build on Ethereum could add privacy shields to transactions at the Dapp layer, though these may or may not prove sufficient for its needs and use case. Consensys and the Monetary Authority of Singapore collaborated on Project Ubin to transfer digital assets on Ethereum as interbank payments without revealing balances or transaction amounts, leveraging zero-knowledge proofs. Range proofs, bullet proofs and Pederson commitments can also be coupled with Ethereum to configure privacy layers that are nott native to the protocol.
Consultancy firm Ernst & Young (EY) is also aiming to make Ethereum a viable tool for enterprise. EY released their experimental project, called “Nightfall” on GitHub in May 2019. Nightfall is a set of smart contracts and services that allows ERC-20 and ERC-721 tokens to be transacted privately on the Ethereum blockchain, leveraging zero knowledge proofs. Global innovation leader for blockchain at EY, Paul Brody says, “We’re trying to put together an entire suite of capabilities that would include audit and security [and] would allow an enterprise to say yes we are comfortable that we can do secure, private, reliable and regulatory compliant business transactions on a public blockchain network.”
Quorum, JPMorgan’s permissioned blockchain based on Ethereum, has altered the original Ethereum protocol layer code to add a data privacy layer, intended for banking and other permissioned use cases in which data privacy is a requirement. Quorum adds data privacy through cryptography applied to transaction data, and segmenting which nodes can execute certain transactions based on permissioning. The Quorum whitepaper says, “By building on Ethereum, Quorum inherits the maturity of the production hardened go-ethereum codebase as well as helps unite the public and enterprise development communities on a common protocol.”
Aztec Protocol, Oxcert, Enigma, Clearmatics, Argent’s Hopper are also exploring ways of using and combining existing technologies such as mixer smart contracts and zero knowledge proofs to make transaction amounts and/or the identities of those transacting on the Ethereum network private.
Even if these solutions prove sufficient long term to enable privacy at a reasonable computational cost, the throughput of the Ethereum network remains an issue for enterprise use cases, which traditionally have high transaction demands given the size and scale of their existing networks and audiences. It remains to be seen whether Ethereum Proof of Stake or Layer 2 approaches will sufficiently resolve this issue.
Even if both scalability and privacy are both resolved over time, enterprises may still desire tighter control over a blockchain network at a protocol level, since the rules and decisions made there are directly tied to regulatory compliance and corporate liability. Corporations must have clarity over who is responsible in the event that something in their blockchain network goes wrong. The DAO hack from 2017 that took place on the Ethereum network offers a case study: the responsibility for the stolen funds, the Ethereum network’s role in reclaiming them, and whether the funds were even stolen at all, were all heavily debated, though ultimately the funds were returned through the implementation of a hard fork. This situation highlights the inherent risk to any organization building on top of a network with such unpredictable and experimental governance and controls. Please refer to Smith + Crown’s research on distributed governance for more information on this topic.
Consortium Types and Example Overviews
Successfully implementing a blockchain-based solution requires collaborating with partner and competitor organizations, making blockchain a “team sport.” Because the word “consortium” is used frequently and loosely in the space, it is helpful to distinguish between the three types of consortiums that are emerging in the enterprise blockchain space:
- Technology development: Collaborations that emerge to develop and fund the development of open source blockchain tools and technologies that likely interoperate.Examples include the Hyperledger technical working groups, Hyperledger frameworks and tools, The Initiative for cryptocurrencies and contracts (IC3), Web3 Foundation, R3, Ethereum Enterprise Alliance
- Standards-defining: Collaborations that attempt to define industry standards and specifications for the purpose of enabling long term interoperability.Examples: Ethereum token taxonomy group, Digital Identity Foundation (DIF)
- Project-based: Collaborations that emerge to learn, share, co-govern or co-contribute to a blockchain-based project, usually within a single industry vertical. Though formal agreements and expectations around membership may vary, it’s a deeper partnership than a blockchain project directly hiring a service provider to deliver goods or services.Examples include Hyperledger special interest working groups, TradeLens, Food Trust
Often, these types go hand-in-hand. A single consortium may embody multiple types at once or a single organization may contribute to multiple consortia of different types simultaneously. All require collaborating and often with organizations that are either existing partners, customers, or competitors. The fact that so many organizations are voluntarily doing so is a sign that walled gardens housing trade secrets and proprietary information are starting to be replaced by more permeable structures made possible by a shared trust in the underlying cryptography and code of blockchain systems. Data sharing across what have historically been tightly sealed corporate boundaries is conditional in consortiums, offered to specific parties and in circumstances where there is a clear benefit for all involved. Negotiating these relationships, including what data may cross boundaries and under what conditions will take center stage as consortiums unfold.
Below is an overview of two leading consortiums working towards defining standards and developing technology in the enterprise blockchain space:
The Hyperledger Project, the open source initiative hosted by the Linux Foundation, brings together 13 projects and over 250 member organizations across finance, manufacturing, IoT, technology, and other industries, many with deep histories of rivalry, such as Microsoft and IBM. Hyperledger is an example of an organization that brings together standards-defining groups as well as project-based groups. Hyperledger offers working groups, training resources, an ambassador program and more.
IBM contributed its Fabric framework to Hyperledger, and Intel contributed its Sawtooth framework, which can be used for supply chain traceability, asset settlement, or for issuing and exchanging digital assets.
Salesforce and Microsoft joined the consortium in June 2019, though Microsoft has long been involved with blockchain, the World Wide Web Consortium (W3C) and the Decentralized Identity Foundation (DIF). For a detailed overview of Hyperledger, please see Smith + Crown’s Blockchain Tech Series piece.
The Enterprise Ethereum Alliance
The Enterprise Ethereum Alliance (EEA) is a global membership group open to individuals or organizations involved in supporting the development of enterprise blockchain use cases leveraging Ethereum. Members may participate in a variety of working groups, which are divided into special interest groups centered around industry verticals, technical working groups which define standards-based specifications for deploying Ethereum solutions globally, and a Legal Advisory working group which enables the sharing of information between lawyers in the space.
Some enterprises plan to utilize tokens in their blockchain-based projects, and many are spending time contributing to shared standards and frameworks for tokens. The Enterprise Ethereum Alliance launched their Token Taxonomy Initiative in April 2019 to develop a standard taxonomy for tokens and facilitate conversations that lead to swifter interoperability between solutions. The Token Taxonomy Initiative says of their mission, “The purpose of this initiative is to clearly define a token in non-technical and cross-industry terms using real-world, everyday analogies so that anyone can understand them.”
While consortiums devoted to the development of underlying standards and technology specifications are crucial to a future where technologies interoperate, the consortiums launching blockchain-based projects are worth understanding for the notable impacts they are starting to accumulate. These impacts are better understood in the context of the following project profiles where Libra, if launched, could impact the global financial industry, where Tradelens membership adoption now represents 61% of global containership capacity, and where a Food Trust member company is seeing blockchain supply chain tracking affect customer purchasing behaviors.
Libra is a permissioned payments network proposed by Facebook, utilizing some aspects of blockchain technology, including BFT consensus amongst authority nodes. Libra offers a quasi-stablecoin pegged to a basket of fiat currencies and is run by a consortium of technology and finance companies and nonprofits, including Facebook, Uber, Visa, and Kiva.
Facebook developed the Libra software, which is fully open-source and includes a variety of SDKs for external developers. The codebase is written in Rust and introduces the novel programming language Move, which supports full smart contract functionality and a virtual machine. While this design suggests that metatokens and other uses of smart contracts will be supported, as is common in like networks such as Ethereum, early versions of the network will only support smart contracts approved by the Libra association; Libra is open-source, but not permissionless. Transactions are managed in an account model, similar to Ethereum and in contrast to Bitcoin’s UTXO model. Accounts are not directly linked to a real-world identity if accessed through a third-party service, though Facebook’s Calibra custodial wallet will link addresses to social media accounts. Per the whitepaper, Libra transactions are pseudonymous, not shielded, and can be viewed with a block explorer; this may permit de-anonymization of transaction flows, as Chainalysis does with the Bitcoin and Ethereum blockchains.
The Libra network uses LibraBFT consensus, based on the HotStuff protocol, versions of which are used in Celo and Thunder Protocol. This model requires ⅓ of validators to be honest for the network security; Libra Association members act as validators in this permissioned network. The whitepaper leaves open the possibility that the network could transition to Proof of Stake in the future.
Libra is not a blockchain, in the traditional sense. Instead, it is a single Merkle tree that records checkpoints of the network state, updated as transactions are confirmed. These checkpoints are taken to be canonical after being verified through the LibraBFT consensus because each of the validators are known/trusted. Libra tokens are used to pay for smart contract execution, using a similar pricing model to Ethereum gas. The Libra network aims to launch with roughly 100 validators, 10 second confirmation times, and 1000 transactions per second.
There are two tokens associated with the Libra Network. The Libra token is designed for use as a payment mechanism and is fully backed by the Libra Reserve with a basket of major fiat currencies and short-term, low-risk securities. Since Libra are backed by a basket of fiat which have floating exchange rates, the value of one Libra can fluctuate relative to any individual fiat currency. Thus, Libra is not a stablecoin per se, and bears closer resemblance to currency boards, such as Hong Kong’s or the IMF’s Special Drawing Rights. Authorized resellers can purchase Libra through the Association with the reserve basket and all such transactions will be subject to KYC monitoring.
Second, the Libra Investment Token (LIT) is a self-avowed security token that conveys rights to the accrued interest on the Libra Reserve, which may function similarly to a money market fund. This interest could be significant were the Libra to gain a large market capitalization and would not accrue to Libra token holders. LIT were allocated to the founding members of the Libra consortia, each of whom invested at least $10 million to provide initial capital for the Reserve. Broadly, the Libra Investment Token can be understood as a form of preferred bank equity or an example of ‘securities plus’, as described further inS+C’s overview of security tokens.
In addition to developing the core software and being a member of the Libra Association, Facebook also operates Calibra, a subsidiary that will manage a custodial Libra wallet and develop auxiliary payment services. Calibra aims to be integrated into products such as Facebook Messenger, WhatsApp, and/or Instagram. Facebook claims that Calibra will not share customer financial data with other Facebook divisions, except in cases of fraudulent activity. Libra tokens held on Calibra will have full password and private key recovery features. Calibra is not the exclusive wallet for Libra—it is anticipated that third-party, non-custodial wallets will also be developed, though it is unclear if Calibra would receive any favorable treatment within the network. Once integrated within Facebook’s product suite, the Calibra ecosystem may resemble WeChat Pay, which has more than a billion MAUs and $15 trillion in yearly transaction volume.
The Libra Association is the Swiss foundation that will manage the network, and includes as members Facebook, Uber, Visa, and Kiva. Libra aims to launch with 100 Association members, who span technology, finance, academia, and NGO. Members must meet two of the following criteria: more than $1 billion market value or $500 million in customer balances, reach more than 20 million people per year multinationally, or be recognized as an established industry leader by a third party organization such as Fortune or S&P. Notably, none of the founding members are traditional banks. Each member is required to run their own node on the Libra network, with operating costs covered through interest accrued on the Reserve. The Association will perform a broad set of governance functions, such as changing fiat constituents of the Libra Reserve or censoring transactions with a supermajority vote. While individual members can earn any amount of interest rewards based on their Libra Investment Token holdings, their voting weight in Association governance decisions is capped at 1%. This mechanism is designed to limit the amount of formal influence that any one member can have; though Facebook lead development of Libra, its governance weight is fixed at 1%.
Facebook’s involvement with Libra through Calibra is led by David Marcus, the former head of Facebook Messenger, president of PayPal, and member of the Coinbase board of directors.
TradeLens is a digital shipping platform leveraging a permissioned blockchain built using in a joint venture between IBM and the largest container shipping company in the world, Maersk. Hyperledger Fabric’s permissioned blockchain technology was used for improved tracking, transparency and collaborative data and document sharing across all parties involved in the global shipping supply chain.
Gartner estimates that 80% of the $4 trillion in goods that are shipped globally each year are carried by ocean shipping companies. Today shipping supply chains are primarily using email or other internet-based communications to send and receive data in a variety of unstructured formats such as PDFs and document scans. Collecting and processing this data is inefficient, and delivery methods between parties are less secure than they could be.
TradeLens launched on August 9 2018 to address these issues. Maersk CEO, Michael White, and IBM’s Marvin Erdly Co-lead Tradelens, and each organization has contributed employees to facilitate sales, onboarding and operational support. Though TradeLens platform intellectual property is jointly owned by IBM and Maersk, the platform is also comprised of participating members who contribute and exchange supply chain data. TradeLens gathers and consolidates shipping data contributed by members into a single view that can be accessed in real time by groups involved in the global shipping supply chain. These include customer cargo owners, freight forwarders, ocean carriers, inland transportation providers (including rail and trucking), port and terminal operators, customs agents, government regulators, commerce logistics companies and insurance providers.
The value of collaboration between these groups comes into view when shipment plans are derailed due to weather, mistakes, or some other unforeseen circumstance. In these cases, situations and resulting needs benefit from being broadcast in real time, allowing parties to work closely on adjusting routes or plans far more efficiently than in a system with limited visibility.
The sharing of information between competitive shipping organizations was initially met with resistance, since the TradeLens platform’s IP Rights are retained by IBM and Maersk rather than divided between the broader member base. In initial conversations, this IP reality proved less than compelling to other shippers, and was insufficient to gain their buy in. French shipping company CMA CGM, and Germany’s Hapag-Lloyd rejected TradeLens publicly in May 2018, citing unfair unfair platform governance. Jansen and Peter Wolf, general manager of CMA CGM said, “Without a joint solution, we’re going to waste a lot of money, and that would benefit no one.”
Marvin Erdly, the IBM lead for TradeLens, told the blockchain-focused publication CoinDesk in October, “I won’t mince words here—we do need to get the other carriers on the platform. Without that network, we don’t have a product. That is the reality of the situation.”
May 2019 marked perhaps a tipping point for TradeLens adoption, when CMA CGM and the Mediterranean Shipping Company (MSC), which is the second largest shipping company in the world, joined the platform. Both will operate nodes on the shared ledger, validate network transactions, host data and participate in the TradeLens Advisory Board. In July 2019, German company Hapag-Lloyd, and Japan’s Ocean Network Express (ONE) also joined Tradelens, meaning that 61% of global containership capacity is now controlled by TradeLens members, according to maritime analyst Alphaliner. A full list of TradeLens members are listed here.
Onboarding these organizations suggests that TradeLens restructured ownership of the venture to include these partners, but, in fact, they arrived at an unknown arrangement that is did not involve an equal split. An IBM spokeswoman told Coindesk: “IBM and Maersk continue to be the sole owners of the TradeLens platform. The nature of an effective blockchain is to create an environment where multiple parties, often competitors, want to co-exist. Both CMA CGM and MSC are participating on the advisory board as part of the shared commitment to open governance.”
As of June 2019, the platform now has over 100 participants, is processing over 10 million discrete shipping events and 100,000 documents every week. Ports and terminals contributing data to the TradeLens network can be explored in the projects’ interactive map. Proctor & Gamble has been testing TradeLens and their Director of Global Logistics Purchases has stated that they “see potential as the solution scales.”
Data is encrypted and sharing is permissioned. Participants access the network through non-proprietary REST API’s or through a Shipment Manager web app UI.
TradeLens is comprised of the following components:EcosystemThe member organizations and business networks that make up the global shipping supply chain.Platform
- The platform is a set of standards created by IBM and Maersk, built on Hyperledger Fabric and the IBM Cloud. The append-only permissioned ledger is processed by a network members operating nodes called “Trust Anchors”. Smart contracts exist that control what transactions may be written to the ledger.
- Product inventory contained within a specific shipment can be searched for on the platform’s web interface by search queries such as “equipment number”, “booking number”, of “bill of lading number”. A result produces data on the origin port, destination port and important tracking milestones as the container makes its way between those points.
- Tradelens supports 120+ standardized events, organized into ‘actual’, ‘estimated’ and ‘planned’ event types.
- Documents (containing either structured or unstructured data) can also be uploaded to the network, which stores an encrypted hash of the file on-chain. Viewing, uploading, downloading, editing documents, and subscribing to shipment-specific data is controllable through a permissioning system. TradeLens creates a copy of a document each time one is uploaded or edited, and that copy is added to a ‘secure Blockchain Document Store’. This allows TradeLens to perform ‘Consistency checks’, where the copied document is retrieved, and hashed to compare the new hash with the original. If the two hashes match exactly, that serves as proof that the document is identical and has not been tampered with.
- Typically the industry uses unstructured documents such as pdf’s or scans, but TradeLens is actively developing standardized document templates for participants to use which translates to easier sharing.
Services MarketplaceThe longer term vision of TradeLens is to enable third party developers to launch their own services on top of the platform.
IBM’s Food Trust initiative launched on October 8th, 2018 as a blockchain-based solution for more efficient tracking of food products along supply chains as they pass between suppliers, wholesalers and retailers. The Food Trust is built on IBM’s Hyperledger Fabric permissioned blockchain, where governance and rules are set by an Advisory Council. Some of the industry’s largest food corporations are participating, such as Walmart, Nestle, Unilever, Kroger, Tyson Foods and Carrefour. Importantly, this project marked the first deployment of an enterprise blockchain network at scale.
The Food Trust brings together a variety of participants who work together to on food supply chains such as farmers, processors, wholesalers, distributors, manufacturers and retailers. In total there are 125 Food Trust participants as of June 2019, and the network is being monetized by IBM, with pricing tiers from $100 for companies making less than $50 million in revenue, to $1,000 per month for those with $50 million to $1 billion in revenue, or custom pricing for needs outside that scope.
Supply chain data can give customers purchasing food products in retail stores more visibility into the lifecycle of the product on the shelf. A QR code can be scanned by a customer’s mobile phone that provides information about where the food was grown, how long ago it was harvested, which manufacturers interacted with it, and more. Carrefour, the French retail giant has seen positive impacts on sales after adding blockchain tracking to 20 food items.
Emmanuel Delerm, Carrefour’s blockchain project manager, told Reuters, “We had a positive impact on the chicken versus the non-blockchain chicken”, and that their food tracking initiatives have proven most popular in China, followed by Italy and France. Quantifiable successes like these experienced by enterprise using blockchain will help move the industry forward.
IBM offers an interactive walk through, where potential customers can demo the product, which is broken into three modules:
- The Trace Module allows viewers to search for a product using an “IBM Food Trust ID”, product label or purchase order number to find out where a product originated and where and when raw ingredients were sourced, manufactured, distributed before they reached a point of sale.
- The Certification Module organizes a food production facilities certificates. Users first search for a facility, then depending on their access permissions, can view all available certifications including when they expire, supporting documentation and audit information. Upon archive, a record of the certificate is encoded on the blockchain.
- The Fresh Insights Module delivers food product information for inventory management. Users can search for a food product and see inventories held by various facilities, along with at-risk inventory, dwell time, time since harvest, time since production, and time to expiration. These data points can be analyzed to optimize for food freshness and identify inefficiencies in existing supply chains.
Data submitted to the shared ledger are verified by full nodes called “Trust Anchors” on the network, using Z Secure Service Containers that ensure encryption of data. They receive a full copy of the ledger with encrypted data which reveals the submitter’s identity and data hash. Trust anchors are responsible for verifying events and can further endorse certain transactions. Data owners control what data others in the network can see, and can grant certain Trust Anchors or other users permissions to fully access it. Food Trust members do have an “encryption key” to extract the original data from a Trust Anchor, which ensures regulatory compliance in case this is ever needed during a government investigation.
Enterprise organizations value blockchain differently
When it comes to the future of blockchain, predictions failing to acknowledge the economic interests that are the ‘shifting plates’ beneath the industry’s surface are likely too myopic to be useful. Because economic and corporate interests are at the heart of the capitalist system that the vast majority of the globe subscribes to, it is impossible to develop a full perspective on blockchain without considering the role of enterprise in the space.
Public blockchains originally emerged to facilitate the direct exchange of value between individuals or groups without a central party in control. This manifested as digital payments outside of existing government and financial systems. Themes included cutting out unnecessary middlemen to make value exchange cheaper and faster, individual control over personally identifying information, and transparency of transacted data to facilitate trust. What made blockchain so intriguing across the general public—regardless of someone’s technical literacy—was the message that (mature) blockchain could change paradigms and restructure power hierarchies within society.
This potential for paradigm shift was both seductive and powerful, responsible for sending many interested people from various backgrounds ‘down the rabbithole’, contributing to its experimental evolution. The fact is that it is easy to support a movement promising both logistical efficiencies and personal liberties, and which holds a promise for increasingly just ways of group collaboration, value sharing, and decision making. At least in the short term, the potential of blockchain that has been hyped culturally far outstripped its real world implementations and adoption, demonstrating that often conversations reach clear agreement about the societal ills facing humanity, but disagree about how to address them. In the media, the reputations of blockchain and cryptocurrencies were often yoked together and undifferentiated, painted as anything from a code-enabled utopia to a Silk road-esque black market nightmare.
A sobering number of technical and governance challenges emerged for public blockchains since bitcoin’s first experiment began in 2009. Messy off-chain governance processes between developers played out in reddit forums, phone calls and chats in major projects like bitcoin and ethereum, reminding us that code is a tool, not a turnkey solution for fast and efficient democracy. The industry learned that “anonymity” on a blockchain network really only means “pseudonymity”, since patterns of behavior and digital clues can lead to off-chain identity matching, and that processing transactions through a large network of distributed servers is time-consuming, imperfect, and has had trouble scaling thus far. Beyond that, public blockchains have so far presented serious user experience difficulties for general, non-technical users, and small flaws in code can lead to huge financial losses as seen in the DAO hack or the ~$300 million ETH locked by accident. Public chains have also demonstrated how risky it is for average users to custody their own cryptoassets, as evidenced by the significant estimations of ETH lost forever due to user typos during transactions.
Enterprises required more controls, identity transparency and data privacy for their blockchain implementations. Most also pursued a different set of value propositions than groups participating in early public blockchains, such as coordinating information sharing which effectively turns blockchain into an accounting solution rather than an attempt to redesign power structures in society. Still other enterprises have set their sights on implementations that would give users more control over data and identity, such as Microsoft’s ION identity solution, a decentralized identity system built on the bitcoin blockchain network. While all enterprises have economic objectives, they may opt to pursue entirely different implementations and value propositions to achieve them, which bears further attention as the space unfolds.Enterprise blockchain is already impacting the world
Enterprises may interplay with blockchain technology differently, so they should be considered by their sector, resources, and implementations, as they are not created equal in terms of their potential for disruption and often they are not trying to realize the same goals.
Sectors that rely on gathering data on users have unique potential abilities to mobilize and surveil audiences that sectors without the same data dependencies, such as oil and gas or automotive, do not. Even though Facebook’s revenues make up a fraction of those of Royal Dutch Shell, or Volkswagen for example. Therefore, while it may appear as a more benign power in the world, Facebook is in fact resource-rich in user data. The depth and breadth of data that they have amassed on their 2.38 Billion users puts them in another category—one that is shared by few others. Reaching this many people with a message about what blockchain is and how to use it has never been done before. If and when launched, some in the industry argue that Libra may be an important onramp for new users into blockchain. Augur creator Joey Krug says, “Libra has stated the underlying network will have pseudonymous addresses just like any other crypto network, which means exchanges can list Libra, effectively making it an on-ramp to all of crypto”, while Preston Byrne says, “As long as it requires people who are hooking into the ecosystem to use things that are otherwise good for cryptocurrency, then it’s good for cryptocurrency.” Libra has simultaneously been met with regulator scrutiny, and concerns over Libra’s potential to negatively impact global finance have been echoed by investor Mark Cuban and the Finance Minister of France, which holds the rotating presidency of the G7 top world economies. The latter commented, “We cannot accept private companies issuing their own currencies without democratic control”.
Historically, the majority of revenue for corporations rich in user data, such as Facebook and Google,have come from selling user data to advertisers. Empowering users to control their personal data in the short term undermines their ultimate goal as a for-profit corporation, which is growth as measured by revenues. Libra could simply be an attempt at future-proofing profits by giving away some data control in exchange for transaction fee revenues. Regardless of Facebook’s motivation for pursuing Libra, the effects of its public announcement are already having ripple effects across global finance.
Reuters reports that banks in the EU are feeling pressure to compete on real-time payments with financial services provided by technology companies, especially now that Libra has arrived on scene. Real time payments, which are processed in seconds versus 1 day or more in traditional transactions, have been possible since 2017 across the European Union currency’s 19 member countries, but only 60% of the payment service providers in these areas have adopted the technology that enables this. Full coverage is needed to ensure successful transfers. Etienne Goosse, director general of the European Payments Council (EPC), which brings together large European banks including Spain’s Santander, Deutsche Bank and France’s Societe Generale, says about Facebook’s Libra project, “The clock is ticking… [Facebook comes] with a global solution, under a global brand offering many things that the consumers seem to find wonderful, so we have no time.”
Attitudes are changing in global central banks as well. The Bank for International Settlements (BIS) which is known as ‘the central bankers’ bank’, went from being dismissive towards cryptocurrencies to actively supporting central banks issuing digital currencies. Head of BIS Agustín Carstens told the Financial Times in July 2019 that, “Many central banks are working on [creating their own digital currencies]; we are working on it, supporting them, and it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”
BIS published a study in June 2019 that clearly calls out the role of big tech in finance. It acknowledges that:”…big techs’ entry into finance has the potential to spark rapid change in the industry…In some settings, such as the payment system, big techs have the potential to loom large very quickly as systemically relevant financial institutions. Given the importance of the financial system as an essential public infrastructure, the activities of big techs are a matter of broader public interest that goes beyond the immediate circle of their users and stakeholders…The aim should be to respond to big techs’ entry into financial services so as to benefit from the gains while limiting the risks. As the operations of big techs straddle regulatory perimeters and geographical borders, coordination among authorities – national and international – is crucial.”
The People’s Bank of China (PBOC) was the first central bank to research digital currencies in 2014 and is now stepping up the research and development of their own cryptocurrency after learning of Libra. Wang Xin, director of the People’s Bank of China (PBOC)’s research bureau said in a July 2019 academic conference, “We had an early start … but lots of work is needed to consolidate our lead.” He added that the PBOC are paying “high attention” to the Libra project.
There have been several banking consortiums that have formed to provide faster financial settlement systems, but because these are usually made up of around a dozen banking partners, interoperability between these consortiums and technologies is the key to enabling real time transactions across the broader financial ecosystem. Piet Mallekoote, the CEO of the Dutch Payment Association says, “The challenge now is to make these mechanisms interoperable.”
With so many different payment processing solutions launching by different groups across traditional finance, technology companies and traditional remittances companies, there is a competition brewing around which groups will provide the infrastructure enabling the future of finance.Enterprises are actively using blockchain today
Much like previous major disruptive technologies—telephone, computers, the Internet—it would be constraining to think it is destined for only one use case. Anyone can adopt and alter such technologies for their own ends, and it is in that contest that often unforeseen and highly impactful uses emerge. Enterprise adoption will likely make everyone see the core technology innovations in new ways, regardless of whether they are ultimately adopted or come to predominate
Given a new technology where a surplus of hype, ignorance and misinformation abounds, those with the ability to disseminate messages to large audiences have an advantage, putting enterprises in a unique position. They can take the seed of public perception that exists from previous crypto narratives, and alter the seed so that it sprouts into the plant of their liking.
Though it is impossible to speculate on what might happen in the medium and long term as these stories and corresponding implementations play out, enterprises are certainly rolling up their sleeves and investing in the space. With plans, tests and live implementations underway, many are providing some of the first real evidence of adoption and economic impact, as seen with French food giant Carrefour reporting that blockchain tracking on their chicken had a positive impact on sales to retail customers.
In recent years research and development, project launches, testing and collaborations have accelerated in enterprise. Corporations are predictable in their pursuit of global trends and technologies that either threaten their relevance and revenues or contain the potential to increase them. Blockchain could do either or both. It is important to remember that as quickly as blockchain technology is developing, it is still nascent and solutions are fragmented, making the lifespan of each individual platform or solution impossible to predict. Gartner has issued a prediction that by 2021, 90% of current enterprise blockchain platform implementations will require replacement within 18 months to remain competitive, secure and avoid obsolescence. Gartner Senior Research Director Adrian Lee says, “Many CIOs overestimate the capabilities and short-term benefits of blockchain as a technology to help them achieve their business goals, thus creating unrealistic expectations when assessing offerings from blockchain platform vendors and service providers.”
Despite the fact that the industry is so early, there are important projects, milestones and efforts emerging. We look forward to keeping a close eye on how enterprise blockchain values and pursuits impact the industry and the world at large.
Thought Leader Commentary
We’re at the dawn of another defining technology, with the familiar tension and debate that comes with a sprawling gap between future promise and current state. An understanding that blockchains hold disruptive potential has taken shape in the minds of leaders across industries and sectors. And yet, the technology is still raw, and our knowledge of how to apply and govern is still experimental. There is no clear path to ROI, no accepted best practice. In this moment especially, enterprise executives face a difficult decision—let others serve as a “canary in a coal mine,” testing use cases and the market—or plunge in through the fog of unknown outcomes to make investments of uncertain return in the hopes of being on the winning side of a new wave of digital disruption.
More and more organizations are taking the plunge of investing in blockchains, propelled by a blend of fear (of ending up on the losing side) and the tantalizing potential for both new efficiencies and market opportunities. These organizations are rapidly learning where the technology holds promise—and where it fails, and they will use this applied learning to assert power in the new collaborative ecosystems of a blockchain future. Especially for today’s leaders, the next year holds serious and potentially defining strategic decisions about where and when to invest. Despite the newness of the technology, the future could arrive fast, especially in some industries and functions.
Initial successes often center on the mundane yet important objective of increasing ecosystem auditability—an area that could bring far-reaching operational benefit to the enterprise. However, the sheer volume of global experimentation and the open nature of much of the resulting innovation suggests that use cases that break new ground (such as the co-creation of new markets or co-opting certain functions of one industry by another, as Facebook’s Libra suggests) could arise as fast followers. As successful formulas are discovered, it is only a matter of time before trusted brands with large networks and user bases will effectively “flip the switch”, leveraging blockchain technology to create a new possible that touches the lives of millions in a discernable way. At this point (and it’s hard to predict exactly when that point will be), laggards who have held off investment and applied learning will find themselves at a potentially irreparable competitive disadvantage. While investing in the space, especially at this moment, is expensive and bold, it is also the bold who will be best positioned to jockey for power when the technology (and our understanding of how to use it) matures.
Director of Blockchain Program Office, Intel
Enterprise blockchain technology is an emerging data center workload that could fundamentally change the way businesses transact. Intel is working with the blockchain community to help ensure that enterprise blockchains run well in the cloud and on-premise data centers that are powered by Intel processors. Silicon technologies such as Xeon Scalable processors and Intel® Software Guard Extensions can help improve blockchain privacy, security, and scalability. Intel works with leading enterprise software developers such as R3 and IBM and leading developer communities such as Hyperledger and Enterprise Ethereum Alliance to help them utilize Intel technologies and accelerate blockchain adoption.
Senior Fellow, Blockchain Trust Accelerator
While a lot of the hype around blockchain has been driven by dramatic fluctuations in the value of cryptocurrencies and big pronouncements about the technology’s potential or shortcomings, much of the most interesting and innovative work has been quietly happening behind closed doors through research and pilot projects. Blockchain continues to evolve from its origins as the underpinning of cryptocurrencies to meet increasingly diverse global challenges. While the bitcoin blockchain – and other public blockchains – have created opportunity in several types of transactions, shortcomings remain for enterprise applications. Our work at New America, which is focused on harnessing blockchain for social impact and good governance, suggests that organizations interested in leveraging the technology should consider a collaborative approach from the outset of design – from users and stakeholders to technical partners and compliance experts. In many cases, building a coalition can help with the allocation of resources and result in a stronger solution. This report from Smith + Crown helps break down where public blockchains have fallen short for enterprise uses, and examines some of the promising consortium and coalition approaches to building enterprise blockchains. It’s an insightful and valuable read for anyone thinking about pursuing enterprise blockchain projects.