Past challenges led to slow traction of blockchain technology in the enterprise. But is enterprise adoption of blockchain finally making gains?
While most technologies aim to improve enterprise and societal problems, blockchain technology could stand out given its transparency and security while remaining decentralized and inclusive.
Blockchain technology helps to ensure secure digital transactions among dispersed parties—even without a centralized entity brokering those transactions. Contracts and money can be exchanged without involving a bank or other official intermediary. That decentralization frees entities to transact without requiring the overhead of centralized parties. With blockchain, Plastic Bank has enabled the poor and previously disenfranchised to use credits from recycled plastic to pay for items like cell phones, education and healthcare through digital payments.
A blockchain works this way: When a new transaction takes place, every computer in the blockchain network records the information into a database, or digital ledger, of sorts. That time-stamped transaction is combined with others to form a block. As a block is added to the larger chain, it is attached with a “hash”— a unique string of characters—to make the chain virtually immutable and unbreakable. Any node can be the host of the block where this new transaction will reside, and it competes for the privilege by solving a tough math puzzle. The correct answer to that puzzle becomes part of a hash’s encrypted digital fingerprint, and even then it must meet additional specified conditions.
This process makes blockchain data unique and secure, but also distributed and accessible.
Much has been written about blockchain’s potential as well as its unfulfilled promises. While blockchain is distributed and secure, verifying transactions through the network can be slow. As observers have indicated, blockchain could change industries, from finance to healthcare. From its origins as an airtight validation mechanism for bitcoin, a digital currency, enterprise blockchain technology has made its way into a range of industries, as it secures any valued digital asset: health records, financial records, even votes in an election.
"Borderless, close-to-free payments; financial anonymity; impossible-to-rig elections; universal authentication of goods; un-hackable data storage; verifiable crowd predictions; accurate public health records; ensuring charity fund distribution," writes Niklas Göke in a piece for the Crypto Times on blockchain technology’s potential.
It does so by recording digital asset transactions—payments, medical records, votes, and potentially many other things. Blockchain is seen as immutable and secure because the permanent, append-only ledger is distributed among blocks across many physical storage nodes. Code can be embedded in the blockchain to customize its security and behavior even further. The result is a network of nodes that can locate relevant data – but that is protected from malicious hackers, because the hack would have to solve every hash solution in the chain–and the hash solutions are all spontaneous.
Properly deployed, it performs as advertised, making those assets unhackable. But uptake of the technology has been slow, and a number of barriers to implementation exist.
It's easy to see how the complexity of the security rules outlined above, computationally intensive as they are, would make a blockchain as slow as molasses–and most are. Early blockchains could manage only one or two transactions per second, and even today, five to seven transactions per second is considered blindingly fast. That's a deal breaker in many scenarios.
And even if it weren’t slow, the complexity of implementing such a network is daunting. "There is still a lot of confusion about the nature of this technology," said Dr. Gideon Greenspan, CEO and architect at MultiChain, an open source blockchain platform.
Another barrier is blockchain's over-association with the elusive and somewhat dubious bitcoin, a digital currency that has been subject to speculation and malicious hacking. While blockchain has uses that extend beyond unproven systems like bitcoin, it’s still strongly connected with speculative digital currency, said Paul Busch, founder of Bitswift, a community devoted to evangelizing a digital lifestyle.
"Putting trust into a system with no name or face for many people is 'unreal,' especially when they don't understand the technology” Busch emphasized. “Also, the amount of bad press and attention bitcoin gets will hinder and delay adoption."
But the greatest barrier is that out-of-the-box enterprise blockchain technology doesn't scale.
Conceptually, a blockchain is a decentralized, distributed network. In practice, however, since every node in the network is aware of every transaction, a consensus protocol is required–and that forces a tradeoff between decentralization and low transaction throughput. In other words, to scale well, the consensus protocol requires a mechanism that limits the number of participating nodes needed to validate a transaction without compromising trust in transaction validity. When this compromise plays out in real-world network designs, it usually results in recentralization–largely defeating the purpose of deploying blockchain in the first place.
Finally—and perhaps most problematically—there is no universal use case for blockchain. Every potential application of the technology, no matter how general, skews from its ideal path, requiring some tweak or concession that results in a custom implementation.
"Eventually, we'll all use something that relies on blockchain,” Göke said. “But that something won't be a web browser or cell phone for everyone.”
Several strategies do exist for reconciling computational overhead, network complexity and validity requirements; there just isn't a one-size-fits-all solution. The path forward, then, is to map each blockchain application to the implementation methodology that best serves the real-world need.
Here are some approaches that improve blockchain speed and the blockchain scalability problem:
Off-chain state channels shift blockchain state off the blockchain, increasing speed and transaction capacity; electronic health record databases and high-transaction financial apps greatly benefit from this technique.
Sharding is a type of database partitioning that separates larger databases into smaller, faster, more easily managed parts called data shards. Sharding is a good method for handling logistics and high-security database apps.
With the plasma approach, transactions are mined on an entirely independent blockchain with a much higher throughput, which splits the blockchain into a hierarchical tree, with each branch having its own computational log, relieving the root node of computational overhead. The plasma approach is ideal for electronic health record storage as well as high-volume, high-security voting systems.
The methodologies emerging for scenario-specific blockchain implementation inevitably add a layer of complexity to an already complex undertaking. This complexity is the cost of doing business for a technology that swings for the fences quite assertively in an Internet-driven world, rife with security threats and infrastructural compromise.
But any enterprise capable of wrestling with the intricate elegance of blockchain in the first place should be up to that task, and should reap game-changing rewards.
The last word goes to Robert Mao, founder of ArcBlock, an ecosystem for building decentralized applications based on blockchain technology.
"It won't be long before you'll be seeing blockchain technologies behind a host of applications that will be revolutionized by it."
Scott Robinson is director of business intelligence at Lucina Health in Louisville, Ky.