Blockchains and distributed ledgers are basically databases with some unique variations/features. When speaking about blockchain, we usually mean the decentralized, public ledger which was first introduced with Bitcoin in 2009. Its key feature is that it operates without the control or interference of a central party. Also, its entries are generally immutable once added to the chain, and all parties are able to verify them and participate in the consensus mechanism. However, the term blockchain is also used for other applications with more centralized structures, so it’s useful to categorize blockchains using two dimensions:
- Public vs. private: Often people differentiate between public and private blockchains, implicitly at least, as public-permissionless and private-permissioned (see below). However, strictly speaking, the public vs. private dimension only refers to who can view the blockchain and its data.
- Permissioned vs. permissionless: This dimension defines who can perform functions such as interacting with the blockchain, executing transactions, maintaining the ledger, and participating in the consensus mechanism.
This results in four possible combinations:
- Public-permissionless blockchain: This is the type that usually comes to mind first (e.g. Bitcoin and Ethereum). They can be accessed and viewed by anyone, are not governed by a central party, plus everyone is able to set up a node and participate in the consensus mechanism.
- Public-permissioned blockchain: Although the name maybe suggests open access to anyone, the circle of entities able to write on-chain is in fact defined by some authority. An example would be an approved decentralized finance (DeFi) chain where all users have gone through a know your customer (KYC) process.
- Private-permissioned blockchain: This is also controlled by a single entity which decides who can participate and maintain the shared ledger. But in addition, it is also shielded regarding who can view its contents. Such a system can even be run in corporate networks or in an on-premises set-up. It’s the most usual case when thinking about private (and enterprise) blockchains.
- Private-permissionless blockchain: Also only accessible to a pre-defined set of users, but in this case everyone with access then has free and equal rights to participate in the network and its consensus mechanism.
Why is blockchain relevant for business?
The arrival of blockchain technology was a breakthrough in how digital information can be stored, verified, and exchanged. The possibility of trustless, secure, transparent, traceable and verifiable interactions and data storage offered numerous business applications – particularly where information needs intensive updating and reconciling, in interactions with third parties (where a higher level of trust simplifies the interaction), and any other areas where accurate, verifiable data is key.
Well-known blockchains used for enterprise applications
There are countless projects building enterprise blockchain applications. While such projects initially focused on private-permissioned blockchains, there are now many being built on open, public-permissionless blockchains. Some well-known chains for enterprise applications include:
- Ethereum: By far the leading public-permissionless smart-contract blockchain. With the majority of decentralized applications and users, it offers security, stability, network effects, and corruption prevention. If an enterprise decides to adopt a public blockchain for its applications, chances are they will go with Ethereum or one of its scaling solutions. There is also the Ethereum Enterprise Alliance (EEA) that helps accelerate ‘business Ethereum’ via professional and commercial support, advocacy and research, standards development, and ecosystem trust services (link).
- Hyperledger Fabric: Hyperledger is an open source blockchain framework and arguably the most well-known technology for private blockchains. It offers multiple products, but Hyperledger Fabric is the most adopted one. Hyperledger was at the core of IBM’s push into blockchain a few years ago and is being developed by the Linux foundation (link).
- R3 Corda: Started as an open-source project with a focus on uses related to financial institutions, Corda has hundreds of regulated financial institutions and fintechs working with its technology. It focuses on direct transactions between businesses, while ensuring privacy on the network (link).
- Quorum: A private-permissioned project tailored to business applications and technically based on Ethereum. Quorum was launched by J.P. Morgan and acquired in 2020 by Consensys, one of the largest software companies building products for the main Ethereum ecosystem (link).
Possible application areas
Businesses are exploring a range of use cases for blockchain, with varying levels of actual, real-world applications and development so far. The following merely indicate areas which may potentially benefit from blockchain adaption:
- Supply chain management: Supply chains have become highly complex and usually employ many independent, centrally organized databases, meaning high fragmentation. So a single, decentralized ledger, maintained and adopted by all relevant parties, could bring significant efficiency gains. In addition, it could improve tracing and trust across the supply chain for items such as pharmaceuticals, food, and precious elements such as diamonds.
- Incorporating regulatory elements: Covering the pros and cons of crypto regulation would require a whole article – but what about already-regulated entities? Blockchain, in the right form, could provide higher transparency and increased security against data fraud. The above-mentioned R3 Corda has such features natively implemented in its service offering.
- Record keeping / sharing: This application area could particularly benefit the public sector. Bringing public records on-chain could allow for improved traceability, accessibility and efficiency. Obviously, such a system would need sophisticated privacy and access controls.
- Governance / voting: Voting is pivotal to our political and economic system – but it’s challenging to transform it into a digital, privacy-protected, and tamper proof form. Blockchain could possibly overcome the obstacles – and help to streamline voting processes in the public and private sectors.
- Financial industry: It’s still not clear whether blockchain will completely disrupt the financial system, or just serve as a new technology sitting within the old structure. Still, many of the advantages of blockchain technology are highly relevant to finance – and the advent of DeFi has driven one of the blockchain boom cycles.
Actual (pilot) projects
When the topic of business and blockchain initially arose, there was a lot of noise about all the great things blockchain would bring to virtually every industry – but not much real-world impact. Since then, the hype has ebbed but now actual projects are being explored, with many large corporations actively exploring the technology. Mind you, it may be some time before blockchain is adopted across a large number of wide-scale applications. A few examples of actual projects are:
- Maersk: This shipping and logistics company partnered with IBM to develop multiple services based on blockchain technology, such as a blockchain-based insurance product (Insurwave), and a platform for global trade and supply chain management (TradeLens). While they’re still in an early-adoption phase, there are many companies on board and the TradeLens platform has already processed over 68m shipping containers.
- Walmart: The retail giant has already tested various blockchain applications. An early example was a successful trial with a Hyperledger Fabric-based system to trace the provenance of products within seconds – trialed initially with mangoes and pork, its results were published in 2018 (link).
- De Beers: In spring 2022 the leading diamond producer announced the deployment, at scale, of its Tracr blockchain platform. It provides source assurance across the value chain and can be applied to all of De Beers’ diamond production.
- J.P. Morgan: One of the first banks to actively work on blockchain solutions, J.P. Morgan has made various announcements so far. Most notable is the introduction of its own stable coin for institutional clients, JPM Coin, issued on Quorum. The bank also established a dedicated blockchain division called Onyx, under which it bundles its blockchain related services and research.
Blockchain does remain a revolutionary technology, with the potential for profound impact in many areas – including enterprise applications. However, there is now a growing realization that blockchain isn’t suitable for all applications. For example, blockchain’s innovation was never really ‘efficiency’ – but rather its openness and the way it enables trusted, verifiable exchanges of information. In enterprise applications, this realization is shifting the focus back to use cases, where blockchain actually makes sense.
Another discussion still highly relevant to the enterprise context, is that of the public/private and permissionless/permissioned dimensions. Overall, there is a trend toward more open blockchains on new projects – or at least a desire for some interoperability across chains. In this regard, it is key to remember the essential advantages of blockchain, which include decentralization, no central point of failure, and protection from manipulation. These are exactly the features that tend to get compromised in private settings – but without these essentials, there’s often little to no advantage over traditional databases. The common excuses for this in business, such as needing heightened security or privacy, could be resolved simply by using additional layers and privacy protocols, such as zero-knowledge proofs, or special smart contracts and sidechains – without losing the advantages of an open, decentralized, public and permissionless blockchain at core.