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InfoQ Homepage Articles The Current State of Blockchain - Panel Discussion (Part 1)

The Current State of Blockchain - Panel Discussion (Part 1)

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Key Takeaways

  • Blockchains do not have to be distributed to be a blockchain, they can also be centralised or decentralized.
  • Examples of real production projects making use of distributed ledgers includes certain payments systems
  • Most blockchain projects that move beyond the proof of concept phase into production are not yet supporting business-critical processes
  • The key challenges that occur in working with public ledgers currently are performance, permissioning, privacy and secure key management
  • Actual use cases for distributed ledgers are still emerging but include asset tokenisation

John Davies, CTO and co-founder of Velo Payments, and Conor Svensson, author of the web3j library for interacting with the Ethereum blockchain give their view of the current state of blockchain.

InfoQ: Please introduce yourself, and explain your connection to the space.

Davies: Hi, I'm John Davies, CTO and co-founder of Velo Payments. We're a startup but a little different in that we have a lot of experience, i.e. we're veterans. We do B2B and B2C cross-border payouts (not salary) for fortune 100 companies, mostly in the gig-economy. The likes of app programmers, car and truck drivers, supply chain in hotels etc. One of my co-founders was the president of Visa where I used to be the chief architect and where I started looking at BitCoin in 2009.

In the summer of that year I was personally 0.25% of the entire world's transactions on one day - there were only 400 that day and I was one of them. I owned over $0.5M of them at their peak value but sold a lot in 2013 and the rest just before the peak in Dec 2017. I have done many talks on blockchain over the years and put 2 into production.

I am definitely a blockchain skeptic, I love the idea of BitCoin but it will never work, I think crypto currencies are a total waste of time (and energy) and a Ponzi scheme at best. Yes you can make money but so did Madoff. The cleverest crypto companies exited quickly and invested in fiat money.

A blockchain is a database folks, it has all the same problems and issues as a distributed database (e.g. CAP theorem) but apparently, for some reason, now people think it's the solution to every problem. Like any tool, used in the right place it solves real problems, there are problems out there where a blockchain fits and it fits well.

Svensson: I'm Conor Svensson, author of web3j the Java library for integrating with Ethereum, founder of blk.io an enterprise blockchain technology company, and the technical standards chair at the Enterprise Ethereum Alliance.

InfoQ: How would you characterize the current state of the distributed ledger ecosystem? Is it, as some have suggested, "the end of the beginning", or is it something else?

Davies: Two points here... Firstly, a blockchain does not have to be distributed to be a blockchain, they can also be centralised or decentralised. A lot of people understand this but there are still die-hards that think it's not a blockchain unless it's unpermissioned and distributed, that's just wrong.

Second point is that blockchains are not all ledgers, I don't like this assumption that the word blockchain can be substituted by the word ledger. If you're storing legal documents in a blockchain, land registry for example then there's no ledger, if you actually want a ledger then relational databases have worked well as ledgers for decades.

So "end of the beginning"? No, "is it something else"?  Yes, it's another tool like a graph databases or NoSQL.

Svensson: I think that's about right. The initial hype around blockchain has settled, and we're seeing certain platforms emerging which have significant developer mindshare, with a number of businesses both established and new building on top of them.

InfoQ: What are the actual use cases for distributed ledgers? Are there specific markets and sectors that can make especially good use of them? How widely applicable are the use cases?

Davies: I struggle to find a justifiable use-case for pure DLT outside of BitCoin and the other 6,000 odd CryptoCurrencies, this use-case has been thrashed to death, DLTs are a "solution" looking for problems. Any organisation with existing infrastructure is going to have to rip-and-replace their entire system to replace an existing system of record or golden source with a DLT. If your bank says you have £100 left in your account and your DLT tells you that you have £120, you might believe your DLT but good luck trying to spend the last £20.

Svensson: ICOs aside, asset tokenisation and utility tokens have certainly got a lot of traction in the public blockchain networks. These are certainly good use cases for the technology, however, right now there are too many different projects providing their own flavour of these technologies, and a lack of large scale adoption to say which will be truly successful.

In the permissioned, private ledger space, the asset tokenisation is very popular too, along with identity initiatives due to the decentralised nature of blockchains allowing individuals to have greater control of the identity - i.e. not relying on big-tech to harness data about them.

In terms of general use cases, any business process that has data spanning multiple organisation boundaries, resulting in duplication of data and hence ongoing reconciliations can potentially benefit from DLT. 

InfoQ: What sense do you have of real projects making use of distributed ledgers and the ideas behind them? How many actual production systems are there out there based upon distributed ledgers?

Davies: We are using a blockchain on live payments today and have been for some time, we do not use the blockchain as a ledger, we use it as an audit trail and secure data store. We initially solved this with a database and to be honest we can implement almost everything we have in an RDBMS but investors and customers like technology with blockchains in them so we have one too and everyone is happy.

The immutability in a blockchain (at least the older blocks) makes the replication/change history more transparent than a traditional RDBMS (where one would have to perform additional work to ensure no-one had sneakily changed a historic transaction). We designed our "VeloChain" from scratch, built in C for small foot-print and performance (six figures per second). Security takes top priority as we work in international banking, geo-fenced (which you can't do with a DLT) and options for post-quantum security.

Everything on our system from AML to KYC, sanctions and SWIFT messages are recorded and logged on our blockchain. Our clients (payor, banks and payees or sellers, banks and buyers if you prefer) can add metadata, e.g. invoices, statements, on boarding documents to our blockchain and prove that the processes, payments, regulatory and compliance requirements were met.

We can secure any metadata (at field level) with precise and audited access control which is also defined in the same blockchain. Encrypted data can only be unlocked (decrypted) by the user's private key, even we can't see some of the content. We have an encrypted vault for record storage so we are also GDPR compliant.

That's not a sales pitch because we don't sell it, we're not a blockchain company, it's part of our platform. We will however open source it just to disrupt the disruptors.

Svensson: There are projects in production using distributed ledgers, however, I think its important to differentiate those that are running in a production environment replicating data from existing systems, and those that are directly responsible for supporting core revenue generating activities of businesses.

In the enterprise, there's certainly a lack of the latter - most blockchain projects that move beyond the proof of concept phase into production are not yet supporting business-critical processes.

This is not surprising when you think about the challenges of coordinating infrastructure changes that span multiple organisations, each of which has their own technical and security diligence processes that have to be adhered to. 

There's also the question of overall liability in the case of errors or bugs. If you have a consortium or group of organisations participating on the same DLT at scale, who is liable? I believe you'll need to have the regulatory or industry body support in place with many of these projects, otherwise, the stakes could be too high in the event of significant failures for one organisation to take on.

InfoQ: Thinking specifically about the distinction between public systems (such as Ethereum or Bitcoin) vs private, permissioned systems what do you think the balance is between them? Are projects preferring to use public or private ledgers? What is driving that distinction, if it exists?

Davies: I think I answered that in the last answer, I think the public blockchains are a waste of time. If you have something you want to broadcast put it on Twitter or Facebook, if it's a secret the last thing you want to do is distribute it publically, encrypted or not. However if you want another cryptocurrency, then a public blockchain is the technology for you!

Svensson: Established enterprises working with DLT tend to use private permissioned ledgers. This is to address a number of challenges that exist with working with public ledger currently:

  • Performance - public ledgers are very slow (low tens of transactions per second), plus you're at the mercy of what other participants on the network are doing - cryptokitties slowing down the Ethereum network is one such example
  • Permissioning - enterprises need fine-grained permissioning at the user, business unit and organisational level, these controls do not exist on the public networks
  • Privacy - transactions on the network are in full view of all participants. Enterprises need to be able to keep data private, especially in light of legislation such as GDPR
  • Secure key management - transaction finality is the norm with public ledgers, this gives little protection for organisations should keys associated with public blockchains be compromised

Although over time, the public networks will be able to address many of these items, right now it makes total sense for many enterprises to be using private ledgers. In some respects it's similar to the internet versus intranet argument.

InfoQ: Some technologies represent a minor enhancement to the state of computing and some represent a true sea change. For example, we might characterize Complex Event Processing (CEP) as an example of the former, and the arrival of Hadoop heralding general purpose Big Data processing as an example of the latter. Thinking about the technology in those terms, where do you see distributed ledgers as sitting along that spectrum? Can you point to any indicators in the market that support your position?

Davies: CEP and BigData are recent "technologies" and for those who know me you'll also know I'm not a fan of BigData. To me it's what happens when you take normal data and store it inefficiently, it gets big. CEP was OK, just another name for SOA, SCA, ECA etc. each vendor would sell the same idea with a different name.

Blockchains are databases and usually slow ones at that. They have all the same problems and issues as databases, we solve a few problems but 95+% of todays "blockchain problems" can be solved equally well with a standard database, Oracle, Postgres, Neo4J, but probably not MongoDB.

That said, just like any of the more niche database technologies that 5% opportunity where the blockchain is the perfect solution is worth billions and that's the niche I think I've found for our systems.

Svensson: I see distributed ledgers as representing a true sea change, especially when you look to what is taking place with the public blockchains, such as Ethereum. The amount of innovation taking place here is phenomenal. The web 3.0 as it's been referred to fundamentally changes the incentive structure for the actors on the web.

A case in point is the adoption of peer to peer technologies. Although widely used for certain use cases (file-sharing), there is little incentive for participants to run peers on the network. Decentralised networks such as Ethereum, IPFS and the multitude of services being built on top of them solve this. By providing value in the form of cryptocurrencies or utility tokens you are able to provide an incentive model for participants providing value on the network to consumers, which is a whole new paradigm on the web.

It's going to take time for this change to reach the average person - the technology is still too complex to work with for the average person. However, we are still in the early days of this technology and there's a huge amount of infrastructure still being built propelling us closer to this new more arguably fairer model with more control in the hands of the many rather than the few.

In enterprise environments, I believe we will end up with a number of core DLT platforms, much like we have databases now. However, there will be governance models supporting them which streamline the deployment and management of them for the consortia or organisations they support. Some of these will be plumbed into the public blockchain networks to support the transfer of assets or other types of value between different networks, within this internet of blockchains.

About the Panelists

John Davies, CTO and co-founder of Velo Payments, has over 30 years in IT from hardware though C, C++, Java to enterprise architecture and board membership. Lived all over the world from the Far East, though Europe to the US. Currently working on a stealth product in a stealth company, more when we pop above the radar. His expertise is large scale and high performance architectures, enterprise to global. He ran the FX trading systems at Paribas, headed up global architecture at BNP Paribas, global head of architecture at JP Morgan Chase and chief architect on Visa's V.me (now Visa checkout) in the innovation team. John is a regular speaker at Java and banking conferences around the world, QCon, JavaOne, Devoxx, JAX etc.

Conor Svensson is the author of web3j, the Java library for working with the Ethereum blockchain. He’s also the founder of blk.io who provide an enterprise blockchain platform based on Ethereum.

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