Enterprise Blockchain: Which platform?
An executive’s guide to distributed ledger technology (Part 3)
TLDR: When evaluating blockchain technology for enterprise use, a look at both the technology and the strategy is needed to determine fit. From the current major protocols, Ethereum, Stellar, and Hyperledger Fabric seem most enterprise-ready, with Tezos as a high-potential newcomer.
In the first and second part of this mini-series, I’ve been writing about the value potential of distributed ledger technology for enterprises and about collaboration and exploration efforts in various industries. There definitely is value potential from the inherent benefits of the technology itself as well as the new economic systems that it creates, and almost 300 companies across all industries are already trying to build, regulate, define or integrate blockchain technology, through consortia and / or pilots of their own.
Recent research is further underlining these activities. Gartner and PWC anticipate that blockchain-focused initiatives will generate some 3t in business value annually by 2030. A Deloitte survey among corporate senior executives finds 74% who consider the business case for blockchain compelling, and 59% that think blockchain could disrupt their industry. Consequently, IDC forecasts the enterprise blockchain market to 11.7b by 2022, with a 75% CAGR from today’s 1.5b.
In this third part of the series, I will look at how to determine the enterprise-fit of different blockchain solutions.
Part 1: Where is the business value?
Part 2: What is the state of industry adoption?
Part 3: Which solutions are enterprise-ready? (this post)
When evaluating blockchain technology, two types of criteria should be considered: Technical requirements and strategic criteria.
Technical Requirements
There are 5 key technical requirements for enterprise use:
- Security: The network needs to be able to withstand attacks from malicious actors (e.g. 51%, Sybil attacks) and there need to be means for smart contracts (if available) to be secured (e.g. formal verification).
- Robustness: The network being able to cope with e.g. DoS attacks, but also needs to be able to remain stable despite eventual forks.
- Privacy: Both transactions and data need to be protected from competitors. Transaction privacy is what e.g. privacy coins have built in, data privacy is about the payload data.
- Scalability: The network needs to be able to process high volumes of transactions (i.e. Transactions per second / TPS).
- Smart contracts: Smart contract functionality needs to be available that is able to implement the intended use case.
It’s important to note that especially 3, 4, and 5 highly depend on the use case. E.g. for transactions within a supplier network, financial transactions, or customers transactions, strong privacy is needed so competitors won’t be able to collect market intelligence. And not all use cases need very high TPS and turing-complete smart contracts, for e.g. B2B invoice processing even the transaction speed of Bitcoin might be sufficient.
Strategic criteria
There are 4 key strategic criteria to determine how well a platform is suited for enterprise use:
- Enterprise-focus: The core organization should have enterprise use in mind as expressed by e.g. their strategy, industry collaboration, or participation in industry consortia.
- Vital developer ecosystem: There should be developer tools, reliable standard software, efforts to integrate with enterprise systems, and availability of sufficient skills to scale activities.
- Enterprise service providers: Competent and scaleable enterprise-grade 3rd party services should be available on the market for consulting, development, design, architecture, and operations.
- Standards & compliance: There should be efforts to achieve both certification to standards and verified compliance to industry regulation.
Whereas technical requirements are typically must-haves for a certain project, platform criteria may seem a bit more fuzzy at first. However, they will most likely decide which projects can move beyond experimentation and pilot stage into real adoption.
When reviewing current major blockchain protocols against the technical requirements, there are a few considerations:
- In protocols that don’t support turing-complete smart contracts, the smart contracts (if any) are a lot easier to secure for obvious reasons
- Robustness can come from either a time-proven and strong decentralized network (e.g. Bitcoin), a centralized approach (e.g. permissioned), or built-in mechanisms such as on-chain governance
- Robustness and scalability go hand-in-hand in centralized setups, but at cost of dependency on the central entity (e.g. Ripple, EOS)
- Data privacy can easily be realized on layer 2, transaction privacy (e.g. ZK proof) usually has to be baked in at inception (as shown below); it’s fair to note though that full transaction privacy is rarely a hard requirement
- Permissioned networks are not necessarily more private; the decision between permissioned and public is more about who operates it; a token economics-managed network or a contracted tech provider
From the current major protocols, I would consider the enterprise-readiness of Ethereum, Stellar, and Hyperledger Fabric highest — primarily based on strategic criteria — and Tezos as a high-potential newcomer.
Ethereum is robust and time-proven, has a large developer and tools ecosystem (Consensys!), the by far largest ecosystem of solutions, and collaborates closely with enterprises through e.g. the EEA. It does lack high transaction volumes capacity and private transactions, is working on at least the first though.
Stellar is equally robust and time-proven, and already supports higher transactions volumes which make it interesting for payment use cases. It has a small but growing ecosystem of solutions, driven by big tech collaborations and M&A. They don’t support private transactions either, though.
HyperLedger Fabric is the de facto industry standard for custom-built (permissioned) solutions. There are service offerings by e.g. IBM, various industry projects that use the technology, and some 250 firms are members of its open-source organization. A new custom network has to be set up for each project though, and they don’t support private transactions either.
Tezos just recently launched. They are not that far yet on the strategic criteria, but look promising on the tech side. The language they use for smart contracts can very easily be formally verified. On-chain governance makes it fork-resistant and lets them add new functionality in-flight. And solutions for high transaction volumes & private transactions are already in development.
Over the past months, we saw several new blockchain startups that focus on enterprise use from the beginning, such as Aergo, Nervos, or Axoni. Especially Aergo is one that I’ll keep an eye on; it is being created by a firm with a significant existing footprint in enterprise blockchain.
There is still high and increasing interest by corporates in blockchain and use cases it can drive. They don’t care for movements on the cryptocurrency market, and are rather considering the current “winter” as a sign that the space is finally maturing.
And as a key milestone, just a few weeks ago, IBM and Maersk went live with a blockchain-based supply chain tracking solution; the biggest productive enterprise blockchain system yet.
All this are just precursors to what will happen next. I expect that
- A lot more enterprise solutions (see part 2 of this series) will move from pilot to production use over the next 12 months, and that
- This will lead to enterprise adoption to outrun consumer mass adoption.
Please let me know what you think about this post, and if you think there’s something to add, please let me know, too!
