Undermining the principles of openness and trustless-ness, the EU Blockchain Observatory and Forum recently has suggested that permissioned blockchains with specific use-cases will lead the adoption of blockchain in the first wave.
The EU working group is assigned with producing thematic reports relating to blockchains and this recent report is titled “Scalability, Interoperability and Sustainability of Blockchains”. The group is also expected to present another report by the second half of 2019 related to other issues of blockchain such as privacy and confidentiality.
A blockchain is essentially a distributed database maintained by decentralized nodes present in the network instead of just a single party. Within the domain of a blockchain, it can either be public, private or permissioned.
In a public blockchain, anyone can enter the network and act as a node. It is fully open in nature and the data is visible to everyone in the network.
In a private blockchain, the nodes in the network are added by a single controlling party. For example, a bank can select the nodes to run a blockchain network itself. One can think of a private blockchain network as a centralized-decentralized framework where a decentralized network is controlled by a centralized party.
In a permissioned blockchain, although anyone can join the network, the amount of data visible to a node is controlled by its role in the network. This is the kind of blockchain structure that makes the most sense for businesses and industries. For example, a node in the supply-chain department only needs to access the data related to it and does not need to get involved in what’s going with the logistics.
Permissioned blockchains have an access control layer built directly on top of a node which filters the amount of data visible to a node and this feature of permissioned chains will drive the adoption of blockchain as the role of every node in the network can be designated for a specific purpose, which is desirable by almost every network in the world.
Although private and permissioned blockchains go against the main principle of decentralization and transparency, this is something that is desirable by many businesses and companies that do not want their processes to be visible to anyone outside of a trusted network.
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As stated by Ian Kane, the founder and chief operating officer of Ternio, a scalable blockchain platform capable of performing 1 million transactions per second:
“Private or permissioned blockchains have their place specifically in an enterprise environment. Companies will not want to put sensitive data on a public blockchain, because of competitive intelligence issues. I think the future of blockchain will be a combination of both public and permissioned blockchains that have interoperability.”
Within a private system of operations, it does not make sense to make use of public blockchains. Public blockchains can expose internal mechanisms and processes of a company or a corporation to the competitors in the game. But for a specific company, a specialized blockchain that holds data relevant to that entity only, internal frameworks can be more transparent and efficient. This is the reason why the usage of permissioned blockchains is expected to drive adoption in the corporate sector.
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Permissioned blockchains are dedicated to specific purposes. If a blockchain is dedicated to the logistics of a hospital, there is no need for the entire world to see what is happening in the hospital. Only the relevant parties need to see the local proceedings. This makes public blockchains of little use in such scenarios as not everyone wants their activity to be visible to the entire world.
Despite the potential to drive the wave of blockchain adoption, permissioned blockchains still face a lot of issues, one of them being interoperability. Public blockchains make everything visible but with private blockchains, transfer of information from one native ecosystem to another is an issue.
Permissioned blockchains make their own little ecosystems and when there is a need to transfer from one blockchain to another, there is no protocol defined yet to do that. What framework is going to be used for cross-chain communication and how much information is going to be shared in order to maintain the validity, are some of the questions that need to be answered. This area needs to be explored and these questions need to be tackled before the adoption can be made widespread.
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Even though the EU report threatens the principles of openness put forward by public blockchains, such as that of bitcoin and ethereum, it might just show the way to making blockchain adoption more widespread.
The answer to the interoperability question has already been solved by Quant Network (QNT) who’s CEO Gilbert Verdian was a key and noted contributor to the study you quoted – “Scalability, Interoperability and Sustainability of Blockchains” and a leader in EU blockchain space.