Private Blockchains Were A Good Start: But They Are Not The Future
The first email was sent in the early 1970s. Yet it would be more than 20 years before email even started to gain widespread, daily use by the public. Why?
Certainly one of the reasons was that not everyone had access to a personal computer (let alone a smartphone in their pocket). But perhaps the biggest reason the use of email remained low is because it was used primarily within private networks—not outside of them.
Universities, governmental departments, large businesses were using email - but it wasn’t until a public network—the World Wide Web—came along in the 1990s that email became widespread.
Today, we see the same pattern repeating itself with
But for anyone familiar with history, let alone how quickly our industry moves, it’s not surprising that we are starting to hit the limits of private blockchains. First, the infrastructure is just too expensive to scale, and second, it fails to address the long term scaling requirements of global business. As Paul Brody, the Blockchain Lead at EY puts it: “Blockchains will do for networks of enterprises and business ecosystems what enterprise resource planning (ERP) did for the single company.”
If that’s true - if that’s the future - then we can’t very well get there by building the same old siloed private blockchains.
For many companies and institutions, the current use case for blockchain technology is the tracking of goods and services, dictated by contracts, which requires most businesses to interact with many different entities - businesses not just within their industry.
Say you were operating an airline. Rarely do you talk to other airlines. Rather, you are
trading information, services and goods back and forth between the airline, the TSA, vendors, financial institutions, air traffic control, suppliers, passengers and employees. The list goes on. If each airline has its own private blockchain, the daily exchange becomes too burdensome, too slow and too costly.
The only way to effectively address these issues is to build multi-party business applications on an open system, enabled by universal standards.
By definition, private blockchains are also not truly open. They provide control (and leverage) to a select number of individuals. A truly open blockchain network - a public one - will always beat a semi-decentralized one. Why? The more decentralized, the better - because less control over users is better - and because the network of various counter-parties can grow faster as industry participants change.
Finally, privacy and security. In an era when rarely a week goes by without news of a major data breach, the single best way to safeguard process integrity is on a public blockchain. Only a fully decentralized blockchain can protect against a single point of failure. Private blockchains are only as good as their weakest link.
Of course, the necessary shift from private to public blockchains doesn’t mean we can’t have private, encrypted data on a public blockchain. Already, protocols have been developed to achieve this with public blockchains. One, EY’s Nightfall, keeps transactions that occur over public blockchains secure and private. Others have been working on similar protocols to achieve the same security.
The more we continue to experience a constant stream of data breaches and government and corporate monitoring of communications, the more a requirement and desire for a permanent, scalable and sustainable solution will grow. To be able to deliver that solution, blockchain networks will have to follow the public path that email took more than three decades ago.
Just like e-mail, time is once again showing that for wide-scale blockchain adoption to take hold and to realize the technology’s full potential, an open application system built on public blockchains must be the future.
By Matt Spoke