Blockchain Outside Cryptocurrency: A Brief Analysis

William Zhu

September 30, 2022
TABLE OF CONTENTS

Cloud Computing has been expanding in a growing industry in the past decade for the delivery of services on the internet, this technology is considered especially valuable for enterprise-level operations. Blockchain, although not a new technology, is gaining popularity in recent years beyond cryptocurrency. The fusion of the two technologies can be referred to as Blockchain-as-a-Service (BaaS)

Blockchain and cloud computing

Blockchain was popularly introduced in 2008 as the technology behind Bitcoin, a system to keep an unchanging and unalterable ledger of information. A transaction in a blockchain system is added to a pool of unconfirmed transactions called “block”, it is then verified and validated by other participating nodes of the network and if everything checks out it is then appended to the blockchain. There are multiple ways for the network to reach a consensus but the most popular ones are Proof of Work and Proof of Stake. This technology allows transactions to occur without a central authority. It can be categorized into three types: public blockchains (permissionless, mainly used for cryptocurrency), private blockchains (permissioned, used mainly for non-monetary applications) and hybrid blockchains (used in a consortium). 

There are various definitions of Cloud Computing. We will go with the one provided by the National Institute of Standards and Technology of the U.S Department of Commerce. Cloud Computing is defined as a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.

Blockchain-as-a-Service combines the aspects of the blockchain with cloud computing to facilitate the management and the creation of blockchains for its application beyond cryptocurrency. It aims to completely rehaul the digital economy, starting with applications in the supply chain, human resources, HR management, etc…

Aviate Labs is involved with ICP (Internet Computer Protocol), a permissionless blockchain that aims to replace centralized web services with a decentralized web hosted in independent data centers around the world.

Walmart and DLT Labs 

New use cases for blockchain technology are emerging rapidly, but the expertise and resources to build blockchain apps are not yet widely spread. We will explore one of its applications: supply chain management.

One of the backbones of modern society is its complex supply chain system, the flow of goods from the raw form into the final processed form ready to be sold and consumed by the population. Conventional supply chain systems have been disrupted and reshaped by the pandemic. One of the biggest players to have implemented blockchain technology into their supply chain is Walmart Canada

Walmart industry supply chain | Figure by Sudeep Tanwar

DLT Labs, a company focused on blockchain solutions at the enterprise level joined hands with Walmart Canada to develop a solution using Hyperledger Fabric (a private blockchain). For example, invoicing is a massive problem in the industry, with around 70% of them having lengthy and costly disputes. It is calculated that just in the U.S alone 140 billion dollars are tied up daily in invoice disputes. Administration fees usually take up 20% of the transportation cost. 

The conflicts can be boiled down to one specific cause: trust. There is a general lack of trust between members involved in a supply chain. Blockchain solves the trust issue by keeping the data immutable, transparent and secure. Currently, the only blockchain that DLT Labs deemed mature enough to provide a working solution to the issue is Hyperledger Fabric

It is an open-source blockchain framework developed by The Linux Foundation. A private blockchain was chosen for the privacy and confidentiality of the data within the network (different members cannot view other members' transactions and members need to be authenticated). Walmart is unifying all management systems under one network with a universal workflow, around 70 carriers with 70 different systems under one solution called DL Freight. Currently, DL Labs is operating around 600 nodes to keep up with the heavy usage of the network, with the nodes being spread around geographically so a power outage or a failure in the system in one specific data center won’t affect the whole network. For security purposes, this network doesn’t use the internet but instead relies on a series of microservices and firewalls to connect.  

Under the official data provided by Walmart, the disputed cases for invoices went from 70% to just 1.5% under this new system. Francis Lalorde, Walmart Vp of Transportation remarked “Something unusual has to occur to have a dispute now. There are small items to resolve, but as we all have the same information, there is simply no need for disputes anymore.”

Blockchain is a technology that will allow many obsolete centralized institutions to switch into open, safe, accessible and inclusive networks. This system has proven to be reliable and in case of any disputes, the origin can be traced back to the source of the contamination using blockchain records and traceability. 

Blockchain Comparison

Data Privacy, Permissioned vs Permissionless

Hyperledger Fabric framework is currently seen as the best enterprise-level blockchain solution, with an alternative called Hyperledger Sawtooth (Hybrid) developed by the same people. Sawtooth can support permissionless blockchain. Most of the time a permissioned blockchain is preferred over a permissionless blockchain on the enterprise level because of the confidentiality of the data, to not let it be exposed by unwanted parties and for the privacy of the users. Fabric networks also have an additional layer of security called “channels”, which are private subnets between two members of the network, where each member must be authenticated and authorized to be able to transact on the channel. 

Permissionless blockchains allow for more transparent data, but this same approach has turned some enterprises back because companies want to keep their data confidential. Also, public permissionless blockchains like Bitcoin and Ethereum are in no way equipped with the power to directly process the number of transactions needed on an enterprise level. It is possible to create a private blockchain using Ethereum, it is being developed under the name of Enterprise Ethereum Alliance.  

Permissionless blockchain and permissioned blockchain have different use cases. On a permissioned network, it is impossible to create a truly decentralized app. ICP is a permissionless blockchain not suitable for business-to-business operations, a permissioned blockchain built on top of it would be needed to make it enterprise-grade, like what is being done on Ethereum. On native ICP it would make sense to build a business-to-customer management system where transparency and decentralization are valued. Everyone can access the information of the transactions happening on-chain. One of the most significant issues with public blockchains is scalability issues, ICP is designed to be scaled with its canisters.

Biggest Players in the Enterprise-Level Blockchain

Hyperledger, Quora and Corda are the most important enterprise blockchain, they together occupy most of the market share for this niche, development of all three started in 2016. All of them are private blockchains, but the way they achieve data privacy is different.

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Popularity chart of enterprise-level blockchain until 2019 | Figure by Blockchain Simplified

Hyperledger is the biggest player on an enterprise-level blockchain with various projects for different applications with more than 260 major organizations. IBM is one of the major backers of Hyperledger. Fabric 2 is currently the most popular option. Most Hyperledger frameworks focus on a modular design.

Quorum is a fork of Ethereum and it relies heavily on Microsoft Azure to function, built by JP Morgan for the financial sector. 

Corda is developed by the R3 consortium and is designed to record and automate legal agreements between identifiable parties.

There are many factors one has to consider before choosing which blockchain to use, some blockchains are more suitable for some industries than others. Hyperledger Fabric takes the crown for logistical purposes for its incredible 20,000 tps (transactions per second), while  ICP can handle 11,500 tps, which also shows why it is the most widely adopted one. Despite being limited by its speed as it is an Ethereum fork, Quorum has better identity management, so it is generally preferred over Fabric for banking purposes. Corda can also contain legal prose in addition to the code, making it ideal for a highly regulated financial and banking services environment.

Both Quorum and Corda cannot compete with Fabric other than in the financial sector, Fabric thanks to its modular design can be used in many more applications. 

Technical comparison between Hyperledger, Corda and Quorum
| Figure by Blockchain Simplified

ICP and Enterprise Computing

ICP is not designed to be an enterprise-level solution but rather as an alternative that challenges Big Tech cloud providers, currently solutions like Hyperledger are built on top of services like AWS, Microsoft Azure and Google Cloud. ICP is still very young compared to Ethereum, Hyperledger and Corda, it doesn’t have any enterprise-level solution built on top of it. 

In conclusion, ICP is not mature enough to withstand full industrial use yet, but with the current development track, we can expect supply chain solutions to come out on ICP soon. We at Aviate Labs are developing a supply chain system for the pharmaceutical industry, but further information cannot be discussed here.