Blockchain technologies face a maturity problem

Why enterprises need to get smarter about blockchain use cases and think more about deployment.

Adoption of Blockchain -- the underlying distrusted technology that powers cryptocurrencies such as bitcoin -- is a bit like teenage sex.

“Everybody is talking about it, not many are doing it, and those that are, are doing it badly,” Vincent Doueizel, vice president for food and sustainability at the non-profit Lloyd's Register Foundation, said at this year’s Blockchain Expo in London.

Dozens of companies, including Maersk, the Australian Securities Exchange, Louis Dreyfus, and Centrica are awkwardly fumbling in the dark. But there are very few instances of a company having succeeded in making a move from trials to fully production-ready blockchain, let alone having replaced any mission-critical processes yet.

A recent report from EY claimed the current enterprise distributed ledger technology (DLT) [another term for blockchain] landscape is fragmented, featuring dozens of different protocol specifications being developed in isolation. The majority of these networks are being deployed at small-scale for testing purposes, generally have a small number of participants and run in simple, safe environments where they do not interact with mission-critical enterprise systems.

But why aren’t blockchain technologies ready for the enterprise, and what’s being done about it?

Current shortcomings of blockchains

Scalability is an issue on multiple fronts. Compared to existing systems, transaction speeds are painfully slow. Ethereum and the bitcoin blockchain are capable of around 15 and 7 transactions per second, respectively. The VISA network is in the 40,000-50,000 range, while IBM claims its latest mainframe can perform 12 billion encrypted transactions per day; that equates to more than 100,000 transactions per second.

As well as low processing speeds, actually confirming a transaction is legitimate is a slow process. As of now, confirming that a transaction has been accepted takes around 20 minutes, but that time delay has gone as high as several days. Ethereum is faster, but still likely too slow for companies wanting meaningful scale.

High energy costs are another stumbling factor. While data centers are continually striving for greater energy efficiency – hence the recent trend for naturally-cooled facilities in Northern Europe – blockchains are energy intensive and therefore costly. The daily energy cost for the entire Bitcoin network is currently around 180 million KWh for just 200,000 transactions. Ethereum is currently consuming 50 million KWh per day for around 1 million transactions. For companies trying to keep costs and carbon footprints to a minimum, that level of inefficiency is unacceptable.

While open blockchains have various benefits around immutability and transparency, the fact that crypto-kitties can slow the entire Ethereum platform proves it isn’t ready for prime-time, and that perhaps open-to-all models aren’t the right model for many companies.

There’s also a challenge with security. Despite the fact it predicts the business value-add of blockchain will grow to more than $176 billion by 2025 and exceed $3.1 trillion by 2030, Gartner has said smart contracts – the rules that govern processes performed on blockchains – "aren’t yet ready for the business world" due to a lack of regulation and testing.

Though the hack of the decentralized DAO investment fund is probably the most notorious case of a smart contract hack, it is far from the only example. A study from the NUS School of Computing in Singapore found vulnerabilities in more than 34,000 current Ethereum smart contracts (worth $200 million in Ether) that left them open to hacking.

“Sometimes there's not enough coding that's going on in the smart contracts,” said Chris Trew, CEO of blockchain consultancy Stratis. He said a lack of experience and scrutiny regarding security processes and auditing is why we’ve seen so many hacks of smart contracts and dapps. Tools do exist for security auditing of smart contracts, but like most aspects of blockchain development, these are new and don’t integrate well with traditional development tools.

The lack of security is just part of a wider problem around a lack of skills in the field. Talent is in high demand and supply is unable to keep up. A new selection of development tools and languages means many are starting from scratch in the field. Those with relevant skills are expensive, and those who do have significant experience are likely to have made a healthy profit off the massive rise in Bitcoin’s value, meaning they can pick and choose projects.

Blockchain browser wars

Another issue for companies seriously looking at deploying blockchains is choosing which horse to back. There are dozens of different networks, each with their own features and capabilities; some are more focused on improving security, others on transaction speed or the deployment of smart contracts or side-chains.

Galen Moore, director of market research at blockchain advisory company New Alchemy, likens the current situation to the web browser, desktop, or mobile platform wars of years gone by; a couple of major powers competing for market share (in this case, Bitcoin and Ethereum) with many smaller, niche players nipping at their heels.

“Who wins the browser wars of blockchain will be the platform that attracts the most developers," Moore said. "The blockchain and protocol that attracts the most developers wins the ecosystem.”

Ethereum is currently the leader in the market, partly due to it being the first chain to offer smart contracts, and partly because of a good leadership and development team. But both Moore and Trew agree it could be disrupted by an upstart that provides what the market en masse wants, whether that is transaction speed, easier development, or some other issue.

Competing blockchain platforms include Neo, Waves, Stella, EOS, Stratis, and Hedera Hashgraph. Some have huge developer funds to try and attract companies onto their platform.  

“Everybody's going after bringing as many developers as possible into their platform, trying to get that killer app to be the one developed on their platform,” said Moore. “Building for Netscape [i.e. Ethereum] right now might turn out to be not the best idea. You might be building a Myspace app and not be ready for the Facebook opportunity that's coming along.”

Another issue is development of the chains themselves. The repeated forks of the Bitcoin blockchain network show that public chains always have the potential to create complications and instability, as well as changing the nature of how the chains operate. The knowledge that such moves can potentially create profit for those that instigate them means further forks are always a potential issue. At the same time, instigating changes in the system requires a consensus amongst the community, which means changes to the main network can also be slow.

“The Bitcoin network has all of these proposals that could solve all the issues they have,” said Trew, “but it's actually implementing them which is the issue.”

And even a fairly stable platform such as Ethereum – led by creator Vitalik Buterin under what Moore describes as a "benevolent dictator model" – can still have issues. A fork was created in the wake of the DAO hack, and another one is being proposed by some within the community. Private chains can reduce some of this volatility, but lose certain beneficial aspects such as large-scale immutability.

Blockchain startups are starting to grow up

The features of blockchains are also evolving. A number of companies large and small are looking to remove the need for proof of work/proof of algorithms that help drive the consensus among the voting nodes and instead replacing them with Byzantine fault tolerance (BFT). BFT algorithms are closer to a voting system and removing the proof-of-work requirements means energy costs are lower and network performance is better. 

As well as greater performance, blockchains are becoming more flexible thanks to side-chains. Side chains are separate chains attached to a parent chain. Running in parallel to the original chain, these side-chains can have different characteristics – for example, running processes on data from the main chain and then restricting access to the results to a smaller set of trusted parties. That could provide greater flexibility and keep the core chain lean and optimized for performance.

As well as evolving blockchain technology, there are a growing number of startups looking to bring maturity and enterprise-grade experience to the space. These include R3, Tymlez, Symbiont, Interbit, dApps inc., and others. One of the main challenges for these startups, however will be to show legitimacy and staying power. Half of the companies that offered an ICO – a cryptocurrency-powered alternative to raising money – in 2017 have already ceased operating, demonstrating high levels of volatility in the market.

Trew uses Bitconnect as an example of the murky nature of some ICOs.

“When we went to a San Francisco Expo, Bitconnect was an exhibitor. It just shows you that they can come, they can pay their money, they can have a nice fancy booth, but it doesn't protect you.

“With traditional VC funding, you've got a lot of protections in place to protect you as an investor, which there just isn't in this space," he said. "I think that we do need regulations to come in to really take it to the next level. The space is maturing all the time, and the next three years is going to be very, very important."

Stratis, founded in London in 2016, is targeting the enterprise and financial services markets. Trew's previous experience was in consulting enterprises, and he wants to bring a similar level of professional service to the blockchain space. Part of that comes in ease of use around development; Stratis’ platform is developed in C# and .Net, enabling developers to create smart contracts and decentralized apps (for both the Stratis chain or Ethereum) using industry standard tools such as Visual Studio and overcoming a shortage of developers proficient in blockchain-specific languages and tools such as Solidity.

“You can't actually find any developers with more than two or three years’ experience with Solidity because it hasn't been around for any longer than that," he said. "However, with C#, you can find developers with 20 years’ experience; it’s one of the dominant languages in corporate and financial services development and there's also 20 million developers around the world that know the language.”

Another blockchain startup looking to make the technology enterprise-grade is Hedera Hashgraph; the Texas-based company founded in 2016 promises over 250,000 transactions per second on its chain [compared to the previously mentioned 15 and 7 transactions per second of Ethereum and the Bitcoin networks, respectively].

“People have said you’ll never need tens or hundreds of thousands of transactions, but there’s the old legend that Bill Gates said nobody would ever need more than 64mb of RAM,” said founder Mance Harmon.

“If you provide more, the market will find ways to use it. Absolutely there’ll be a market of millions or tens of millions of transactions per second.”

Hedera’s private blockchain offerings are written in Java, which Harmon said makes developing atop it easier, and claims its governance council is made up of 39 enterprise organizations from various industries – they “aren’t just a bunch of banks” – to ensure no one entity has too much control over the public version of the chain.

Enterprise companies lead the push towards mature (and private) blockchains

While none of the blockchain startups looking to cater to the enterprise can say they are enterprise-sized themselves yet, there’s no shortage of established giants looking to stake a claim in the space.

Large consultancies such as Accenture, Deloitte, Cognizant, and Capgemini all offer blockchain services, companies such as VMware and Appian are looking to introduce tools to better manage and integrate blockchains.

SAP has launched its own blockchain offerings, while Dell Technologies is looking to build a whole "enterprise-grade blockchain stack" across its different units:  Dell, Dell EMC, VMware, RSA, Pivotal Software, Virtustream and SecureWorks, with each unit focusing on a different aspect. VMware for example, is focused on consensus algorithms multi-chain management; Pivotal is chiefly looking at improving smart contract development; and Dell Boomi is looking to facilitate on-chain/off-chain integration.

To help speed adoption, major cloud providers including AWS, Oracle, IBM, Huawei, Microsoft, Baidu, Tencent and Virtustream all have or will soon be launching blockchain as a service offerings. The Linux Foundation’s Hyperledger project acts as the basis for many of these Blockchain-as-a-service (BaaS) offerings and is fast becoming the de facto standard for private blockchains.

While purists would argue any private blockchain isn’t a true blockchain, others understand that businesses need solutions that are both scalable and flexible to their needs, even if in being "permissioned" they aren’t true to Bitcoin founder Satoshi Nakamoto’s original vision.

“These are the largest cloud providers on the planet, so if they can simplify and accelerate companies deploying the blockchain then it can only be a good thing,” said Trew. “Microsoft's got a huge, huge customer base, and if they can start to sell blockchain to that customer base, it can only be good.”

This story, "Blockchain technologies face a maturity problem" was originally published by IDG Connect.

Copyright © 2018 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon