Permissioned blockchains often fill the cryptocurrency and blockchain communities with suspicion. It’s like your grandad showing up to your house party in a snap-back and board-shorts, speaking like one of the kids: it doesn’t look or sound right.
Richard Brown, R3’s CTO, is aware that permissioned blockchains are a tough sell. Speaking to around a hundred cryptocurrency enthusiasts last night in London, Brown emphasized the distinct advantages of R3’s permissioned blockchain, Corda, over public networks.
Although based on the same technologies and broadly designed for the same functions, there are key differences between conventional public blockchains and permissioned blockchains, Brown explained.
Permissioned blockchains can only be used by parties whose identities and role have been agreed by other ledger users or the administrator. They are closed platforms, in which transactions can only be seen by members and only authorized parties can confirm payments.
“Traditional permissionless blockchain platforms…have issues around privacy, scalability, and interoperability that render them largely unsuited for global businesses,” explains a description on the R3 website. “We rethought the blockchain concept from top to bottom and in 2016 we launched Corda, our open source blockchain platform.”
When the company launched in 2015, Brown and the R3 team started off by exploring how to implement cryptocurrencies, like Bitcoin (BTC), in global finance. However, they soon learned the the requirements of major companies, like banks or insurance companies, do not always match up with the uses for cryptocurrencies and public blockchains.
“Blockchain has to be integrated with the real world,” Brown said. “It can’t exist as its own separate economy.” Big corporations have to know the identities of their counterparties, he explained. At the same time, they need privacy, so that transactions and data flow remain limited to authorized parties.
R3 and Corda were not designed to destroy the status quo, Brown added. “Our stakeholders are typically people who want to improve the structure of the existing market.”
Instead of complete decentralization, businesses require something more nuanced. A trading platform between known peers, Brown argued, can provide transparency in existing marketplaces, without the threat of jeopardizing confidential information.
Permissioned blockchains have a place.
For many in the crypto space, decentralization and complete transparency are the sine qua non of the blockchain idea: permissioned ledgers are its antithesis.
The launch of JPMorgan’s permissioned blockchain, Quorum, came as no surprise to the cryptocurrency world, where it was regarded as a cynical or desperate move by a big corporation to strengthen its hold on the economy.
But that may be unfair. Blockchain technology is, after all, a tool to improve human activity and there is no single way this can take place. A transparent, permissionless blockchain could restore trust in how charities use donations; anonymity has advantages for those targeted by oppressive regimes.
But as Brown pointed out, a permissioned blockchain also allows corporations to safely transact with one another without giving away confidential and private information. Corda is the fastest growing blockchain platform in the world, according to Brown, and has seen particular interest from some of the major players in the insurance industry.
Whether we like it or not, permissioned blockchains are on the rise. 21% of the world’s shipping is processed through TradeLens, a permissioned blockchain co-developed by IBM and Maersk. As Crypto Briefing has previously reported, twenty-four of the world’s billion-dollar companies are using Hyperledger to build decentralized applications.
In Brown’s talk, the key takeaway was that Corda had not been developed under the ‘build it and they will come’ mentality. It was designed to meet actual and existing demand in the marketplace.
Global business won’t choose technology platforms based on their love of decentralization, Brown emphasized. Adoption is driven by the market, and users will choose the ledger which best matches their needs.