2019 is the Year of the Enterprise Blockchain

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  • February 22, 2019
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Blockchain technology has proven itself beneficial in numerous cases. It’s innate qualities of transparency, traceability and immutability have allowed cryptocurrencies to thrive.

Enterprise blockchain solutions have however been more difficult to put in place. Issues with scalability, transaction speeds and unwanted transparency are present when using DLT in large corporate settings.

Over the past few years the technology has matured enough to finally make enterprise blockchain solutions viable. 2019 will see the adoption of DLT in large companies and provide benefits without impacting upon operations.

Blockchain Business Value by 2030

By 2030, a minimum of $3.1 trn of Global GDP will pass through the blockchain. At Kintaro Capital research indicates the potential of up to $25 trn by 2030 (10% of global PPP.)

What exactly do we mean by an enterprise blockchain solution?

These systems are normally permissioned, distributed or centralized networks that are tailored towards corporate use. They can be payment systems, contract management systems, logistical systems and more. They must be resilient, efficient and secure to ensure smooth operability.

Functionality Issues

Enterprise blockchain has previously been set back by a number of functionality issues. Improvements in the fundamental technology now allow specialised chains to work efficiently within an enterprise. We are in a period of sustaining innovation, where the problems faced are well defined and the technology is mature enough to solve them.

The main sticking points that have previously prevented blockchain enterprise PoCs from becoming production ready include: access & security, scalability, intra/inter organisational integration, operational resilience and serviceability.

Our Blockchain Maturity Matrix

Blockchain technology has matured enough to now explicitly solve a number of different business problems. Looking towards the future, we’ve identified certain key areas of innovation and the path the technology will take.

Where the problems are complex and less defined, we see the opportunity for disruptive and evolutionary applications of blockchain in the upcoming decade. A period of sustainable innovation now allows us to introduce enterprise ready blockchains for business needs.

Key Qualities of an Enterprise Blockchain

High Throughput for Enterprise Applications

Various aspects of functionality are required for an enterprise blockchain solution to operate smoothly. The chain must have a large enough throughput to cope with the demands of an enterprise. A customer billing application may need to process tens of thousands of transactions a second. Transactions speeds have in most cases not exceeded 100 transactions per second on public chains. Due to the possibility of malicious nodes attacking the system, secure protocols are needed which lower throughput.

Konfidio’s enterprise ready KSTACK operates at 160 TPS, allowing over 13 million customer transactions every day. This is in comparison to the Bitcoin public blockchain at 7 TPS and Ethereum at 20 TPS. Visa however claims to be capable of around 50,000 TPS. Gains are still to be made, but progress has been significant since the the birth of the technology.

High Resilience

Enterprise level software requires a high degree of resilience too in order to withstand potential failures and disruptions in service. Large global corporations could not afford to use blockchain applications in the past due to their instability and unreliability.

Resilient features already present in current enterprise systems are now being introduced into blockchain applications. Redundant and/or replicated nodes can protect against disruptive challenges to the system. Regular backups of system data and monitoring by support teams all help improve overall resilience that is required for an enterprise. Cybersecurity is also tightened due to the cryptographic nature of blockchain, helping protect against external attacks.

Privacy Preserving

Internal and external security is of utmost importance for enterprises. Public blockchains have a large number of inbuilt cryptographic features, but often aren’t fully suitable for enterprises. Transactions can be traced, albeit anonymously, and the ledger is open for all to read from. The development of private, permissioned blockchains which allow only vetted validators to take part creates greater privacy.

Control over the permissions within the enterprise-grade solution are possible. All members are known legal entities governed by existing legal agreements and must be enrolled though membership services. Identity and key management improves internal security, which can be altered through changes in governance that were not possible when using a public chain.

Intra/Inter Organisational Integration

Multi party and client processes will often utilise different networks and systems. The integration of blockchain into ERP systems has reached a sufficient level of maturity to successfully run a blockchain in production. With an increasing complexity of information being recorded on blockchain, sidechain architecture has also been developed.

Complex enterprise processes that require multiple chains are now possible. Enterprise blockchains also require hard code corporate governance legal requirements into the blockchain architecture and value settlement.

Usability & Supportability

New business models for operating in relation to blockchain are needed. Software as a service, support teams and other maintenance routines need to be put in place. The technology overall needs to be combined with sound business methodology. This was not required for sandbox public chains or corporate innovation. Physical infrastructure may also be required when utilising a blockchain application with IoT devices. This adds another level of complexity to support systems.

Public vs Private Chains

A public chain provides open access to the ledger for all involved in the system. Wallet amounts, transaction details and participation in the network is open to all who want to participate. This also includes the validation process. These qualities do not lend themselves to an enterprise setting.

A degree of flexibility is also required for governance and updates. Utilising a public chain does not allow for either of these to be modified easily. The ability to change rules when needed is crucial for an enterprise.

Consensus mechanisms needed to deter bad actors from public chains slow down the system and limit transactions per second. This isn’t suitable for a multinational company processing thousands of transactions a second. Therefore the creation of a private chain where consensus mechanisms aren’t needed is much more suitable for an enterprise application.

Private Chains

Ledger is private and cannot be read by the public.
Reading rights are governed by governance smart contracts
Permissions are given to trusted actors in the blockchain based on governance and legal agreements.
PoW Consensus mechanism not needed or is less CPU intensive
Block sizes can be tailored towards the specific needs of an enterprise
There is no blockchain Trilemma. Scalability is not an issue

Public Chains

Open access to the ledger for all involved in the system
Reading rights are opened to all members of the public
Consensus mechanism and validation is open to all to participate
Consensus mechanisms slow down traffic in the network
Block sizes in bitcoin and ethereum are too small. Bitcoin is a little over 1mb per block, not enough for enterprises use cases
In 2019-2020, the Blockchain Trilemma is ever present

Profitable and Sustainable Innovation in 2019

The next step for blockchain innovation seems inevitably to be in creating stable enterprise applications. The problems are already well described and the technology is now reaching maturity, meaning that we have reached the stage of sustaining innovation.

A leading pharmaceutical company and Konfidio’s KSTACK

Trust environments have been created which allow for specific enterprise problems to be solved with blockchain, that could not necessarily have been done in permission-less chains. KCS’s contract management application for a leading pharmaceutical has created such environments, that allow for both supplier and client to negotiate terms and contracts without the need for any mediator. This is done through a series of permissioned actors creating new contracts, which are subsequently agreed upon and put into place. The execution and follow up process are all governed through this created trust environment.

Parity Technologies & World Food Programme

WFP trialed a blockchain-based system to make cash-based transfers to refugees. As of October 2018, more than 100,000 beneficiaries redeemed humanitarian help from the blockchain-based.

As a result of utilising blockchain, WFP reduced the number of transactions from 10,000 upfront payments to the banks to 200 settlement transactions to local retailers. Alongside cutting upfront costs, 1.5% to 3.0% per transaction was saved.
With Parity Technologies partnership with the WFP in the last year, the Building Blocks project has had the following impact:

More than 100,000 refugees have been served on a monthly basis.
The UN saved more than 40,000 USD per month in bank transfer costs.
Tens of millions of aid has been delivered through the blockchain.

So far, the system has been up and running with more than 99% uptime and availability, ensuring that refugees receive their aid in time.

Philip Luksok, Parity

Enovos and DEEP

DEEP, a Konfidio venture, is working with Enovos to help streamline and decentralize their invoicing process. In the near future, when the technology is mature enough, they plan to further integrate IoT and peer to peer energy transferal into the solution.

One of the key qualities of the DEEP tech stack is its ability to process a large number of transactions. Creating invoices and taking smart readings multiple times a day requires a large  throughput when working at an enterprise level.

Len Seitter, DEEP

Utilising the KSTACK, DEEP is able to operate at 160 transactions per second. This in turn gives the possibility of serving 5.5 million customers daily, assuming that meter readings are taken twice a day.

Their goal of having hourly data readings, hourly P2P trading settlements and efficient data management with 24 data points per day requires a throughput of 556 Tx/sec. This looks to be achievable by the year 2025

Beyond 2019

Revolutionary and Disruptive Technology in 3-5 Years

The Revolutionary approach covers new methods of applying blockchain technology or reaching a mature stage in current blockchain developments:

– Skunkworks projects

– AI Blockchain projects

– Complex multiparty DAOs

However, it’s still in the development stage.

The Disruptive builds the foundation for Revolutionary inventions. Here we meet:

– Venture Innovation Labs

– VC model: STOs and Banking licenses

– Protocol Layers

– Scalable DApps with new business models

Algorand Protocol Layer

One protocol that has been designed and developed specifically to support Enterprise applications is Algorand. Having raised $62M in October with the promise of tackling the blockchain “Trilemma” decentralization, security, and scalability.

“Algorand provides a foundation for existing businesses and new projects to operate globally in the emerging decentralized economy. Algorand’s first-of-its-kind, permissionless, pure proof-of-stake protocol supports the scale, open participation, and transaction finality required to build systems for billions of users.”

The founders convincingly argue that with blockchain technology’s deep roots in academia there is still some way for the space to go before protocol layers themselves are business ready.

The roadmap of the project is hashed on the blockchain, so we are unsure exactly when they will come to market, but our prediction is that a truly disruptive protocol layer like Algorand will really start to have an impact in three to five years time.

Venture Innovation Lab – Konfidio Accelerator

Konfidio’s position as a Venture Innovation Lab has led to the creation and implementation of the KSTACK. This enterprise grade blockchain is currently in use within a leading pharmaceutical company, and also in the energy sector. The technology was developed to specifically address the needs of large companies operating at national and international levels. It has modularity and is also adaptable for use in smaller, younger ventures.

Through the Konfidio Accelerator Program, companies have access to the tech stack and can tailor its design to their needs.

Evolutionary in 5-10 Years

Will it be the revolution in technology or the evolution of previous platforms? We don’t know and no one knows. We estimate that the following 5-10 years will bring us such projects as:

– Multi-Sided Platforms

– Autonomous Marketplaces

– DAO – AI/IoT/Blockchain platforms

Automated Marketplaces

We believe that with enough time there will be mass adoption of decentralised and automated marketplaces. This will include an evolution of the current centralised marketplaces such as eBay, Amazon and AirBnB into platforms that demand less rent seeking fees, and share more of their profits with the community and service providers themselves.

It will also include new marketplaces for commodities that will have ever increasing value in the decades to come. Data marketplaces like Berlin’s MADANA will have their first B2B pilot projects in Q3 of 2019.

Slock.it IoT Platform

A long-term application of blockchain, AI and IoT that Konfidio have been glad to support from the start is Slock.it.

Slock.it has developed a mechanism for connecting IoT devices using blockchain. The company provides easier access to blockchain technology and helps to connect devices to the blockchain network, thus, creating a blockchain IoT network with minimal resource requirement for each participant encouraging M2M interactions.

The Evolution of the Blockchain

From its inception in 2008, blockchain has grown from simply connecting users and enthusiasts into a more mature technology. 2019 will see a rush of enterprise blockchain solutions, providing the biggest period of sustaining innovation since the introduction of smart contract frameworks.

As we enter Blockchain 3.0, the opportunities and solutions available become larger and increasingly profitable. Utilising the technology on an enterprise scale with fully operating legal clauses and business architecture is now possible. The maturity of the blockchain ecosystem is no longer just reliant on the technology, but also support systems and business strategy. The opportunities for innovation in the blockchain space look significantly promising as we head to blockchain 4.0 and beyond.