Enterprise blockchain is five years old. Happy birthday!
Happy fifth birthday, Enterprise Blockchain!
Many readers might be tempted to ask what there is to celebrate…isn’t enterprise blockchain a busted flush?
Happily, no.
Yes, yes…I know…
That’s exactly what you’d expect the CTO of an enterprise blockchain firm to say!
Yet it’s strange how an industry as hyped as ours hasn’t always trumpeted its actual successes.
Our industry’s five-year anniversary provides a pertinent moment to reflect on what has been achieved to date, what we got wrong, what we got right, what we learned along the way, and what the future holds.
Formation of consortia
The big starting point for our industry was the formation of consortia comprising businesses whose interests had been piqued by the potential of this technology.
There had, of course, been firms focusing on this concept before, but it was only when the big consortia got up and running that things really began to move.
Momentum had been growing for some time: the advent of Bitcoin and other blockchains inspired many people to think about business-level applications. Could we now imagine ‘industry-level’ systems of record? Could we be witnessing the emergence of two parallel revolutions?
But it’s easy to speculate. Far harder to catalyse and coordinate the technological upgrading of entire markets if the participants in those markets have no good way to communicate and collaborate with each other.
Collaboration with peers does not come naturally to many firms, yet it’s critical to achieving true … [+]
The first solution to this problem was the “Distributed Ledger Group” – which quickly came to known simply by the name of the firm that pulled it together: R3. It hit the headlines in September 2015 after a year of work by the founders to bring together the financial services industry to work together.
A different approach was taken by the Hyperledger project around the same time in 2015, kicking off with major code contributions from IBM and others.
The formation of R3 and Hyperledger are why I date the birth of the enterprise blockchain industry to this time: it’s when the power of collaboration really kicked into gear.
A few months later, the Enterprise Ethereum Alliance was formed and we were off to the races: three very different approaches but all based on the same insight…if this “enterprise blockchain” thing was going to achieve its potential, the firms who are going to benefit from it have to figure out how to work together!
And it meant we could now see a path to a world where we could contemplate sharing information in ways that had not previously been viable, driven by the shared goal of improving business processes at the industry – rather than individual firm – level.
Launch and maturity of the first enterprise-focused blockchain platforms
The work of the consortia soon led to the launch of the first purpose-built enterprise blockchain platforms, all of them open source.
The R3 consortium, as it still was back then, before transitioning to being a pure software firm, embarked on the journey of building a new platform from scratch, rather than trying to adapt an existing platform that had been designed to solve different problems. The result was Corda.
Hyperledger did something similar, beginning its work with an IBM-donated greenfield platform to create Fabric, before broadening its approach to enabling an ‘umbrella’ of loosely-related codebases.
The Enterprise Ethereum Alliance took a different approach, devising standards for how a diverse set of Ethereum-inspired, mostly pre-existing codebases, might be made more suitable to the business world. It was a bet, in effect that the undeniable momentum and community that drives the permissionless side of the Ethereum world can overcome the compromises that need to be accepted when applying technology to business problems for which it was never designed.
It’s fair to say that reasonable people hold firm but different views on this question!
Adoption spreads beyond finance
Much of the early activity in the enterprise blockchain space took place in the finance sector – pretty much any participant in the world’s financial markets had at least discussed blockchain in the boardroom by 2016, and many were actively involved in consortia or individual projects.
Indeed, when I was leading the work to design Corda, I assumed financial markets firms would be the primary – perhaps only – adopters of this technology. How wrong I was….in a good way!
Platforms such as Corda and Fabric had been developed to meet the intense regulatory scrutiny and privacy specifications of financial services firms. And because of this, it turned out that these same platforms were almost automatically suitable for other sectors such as healthcare, trade finance, shipping, insurance and more.
It turned out that problems outside banking, such as supply chain and trade finance, were amongst … [+]
I remember being surprised one day when I discovered people were building apps for diverse use cases such as digitising letters of credit in trade finance; improving the efficiency of marine insurance; managing patients’ healthcare records on a shared ledger; enhancing the security of personal identity data management… none of which I’d envisaged.
I don’t know what it says about my personal sales skills that it was pretty much in all the industries I never talked about – or talked to – that Corda enjoyed its earliest successes…
Real-world deployment
One of the harshest criticisms of enterprise blockchain is the perceived slowness with which the early experiments evolved into live apps, deployed in real-world business environments.
And it’s true that the early years of enterprise blockchain were marked by extensive and wide-reaching experimentation (and so many press releases…!) But we always knew widespread adoption would be a gradual process. As with any emerging technology, it takes time for industries to adapt and integrate new systems with existing infrastructure.
And as I wrote on these pages at the beginning of the year, while some of the early enterprise blockchain projects seem to have taken longer than people expected, it’s also the case that a lot of the work was a one-time foundational infrastructure build-out. Costs incurred once but from which we will benefit many-times over in the future.
Take, for example, the Spunta Banca DLT platform, driven by ABI, the Italian Banking Association and built on Corda. The system replaces the reconciliation process for interbank transactions in Italy and has been live across the Italian banking sector since April this year. There are now over 100 banks in production, it has processed over 200 million transactions and the number of manual matches needed between banks using this system have been driven down to barely 2.5%, from a far higher baseline.
Italy leads the way with the adoption of enterprise blockchain to dramatically optimise interbank … [+]
And as much as I might like to trump the virtues of my own platform, the truth is that the R3, Hyperledger and EEA approaches have all enjoyed well-earned successes.
For example, J.P. Morgan’s Ethereum-based Interbank Information Network (IIN) is now live with a group of global banks. IIN’s early adopters are using the platform to improve the exchange of data relating to compliance for payments.
The next five years
These are just a handful of the deployments of enterprise blockchain that are live today – a list which has grown and grown in 2020 amidst the pandemic-related challenges being faced by all businesses, as the technology continues on its path to maturity.
Not everything has gone to plan, and not all of the early use cases have evolved into fully fledged live applications. But each experiment has added critical value and learnings that have been applied to those apps and platforms which are now live in real business environments.
For a new technology to have progressed from the fringes of the development community to underpin regulated global markets, used by some of the biggest names in those respective markets, in just half a decade is astonishing.
Yet, I also wonder if I’ve been too narrow in my thinking at times.
The fundamental opportunity I keep returning to is the potential to transform entire markets through the judicious application of technology. Enterprise blockchain platforms are helping solve the synchronisation, reconciliation, identity, messaging and workflow problems that have hitherto made this so hard.
Lessons learned by R3, Hyperledger, EEA and others have shown the world that bringing firms together for the common good of themselves and their customers can both work and yield significant benefits. Just look at Spunta.
But it’s also undeniably true that no technology stands alone.
After all, market-level cooperation relies on accurate, timely and secure data sharing between firms. And blockchain platforms. But it’s not always the whole story. What if firms need to gain collective intelligence from data that needs to remain concealed?
It’s still a market-level problem. It still requires coordination and collaboration. But it’s an example of a situation where we don’t want data to be shared and synchronised.
This is why I and others are spending so much time on bringing adjacent technologies – such as Confidential Computing and other privacy-preserving techniques – into the mainstream. Transforming whole markets requires a whole toolbox of techniques.
The next five years look set to be just as exciting as the last!