Enterprise blockchains are a HUGE overpromise

TL;DR: Enterprise blockchains — if successful — can bring some technical improvements but they will fail to deliver on their hype. Value proposition of enterprise blockchains is nuanced at best. If you don’t understand it, relax and wait until things crystallize.

Blockchain is an ambiguous term

Unfortunately, the “blockchain” word can mean very different things depending on whom you ask (cryptocurrencies community, banks, software vendors, regulators, and everyone in between). Wikipedia won’t help you much as there is an ongoing war between the multiple parties who want to own the word.

Still, the following characteristics seem to be common and safe to assume:

• Blockchain is a linked list (strictly speaking, it converges to a linked list)
• Each node can carry some data
• Each node has a cryptographic hash of the previous node (a form of pointer to its predecessor)
• Each node has a timestamp
• Multiple parties can independently append nodes to the list
• In case of conflicting appends to the list, there can be briefly a fork, and there is some mechanism to come to consensus on which branch is the valid one going forward; the non-valid branch(es) are discarded

Unfortunately, all other characteristics are optional and debatable.

Blockchain can be:

• Local or distributed; some companies claim to build and run their internal, local blockchains (please bear with me)
• Private or public; blockchains can be private to a group of participants, or open in the wild for anyone and their refrigerator to join
• Permissioned or permissionless; in a permissioned blockchain different participants are granted different level of access, there must be some form of authorization; in the permissionless blockchain any (potentially anonymous) entity can fully participate in a sense that all features are technically available, although participant impact can be practically limited by the free-market fees, computing power available and/or his “stake” in the blockchain
• Governed by central party or by decentralized voting
• Correctable or immutable; correctable blockchains allow to “fix mistakes” retrospectively; the immutable blockchains are append-only; their design protects from rewriting the history by making it exponentially expensive

What is an enterprise blockchain?

The typical enterprise blockchain is:

• private (accessible only for approved participants)
• permissioned (different levels of access for different participants)
• centrally governed to some extent (participant approval process, authentication, authorization, etc)
• based primarily on trust to this central entity

On top of that, some enterprise blockchains are:

• distributed (while still being permissioned and at least partially centrally governed)
• immutable (append-only)

What is the Bitcoin Blockchain?

The Bitcoin Blockchain is:

• decentralized (distributed without central point of control)
• trust-minimized (no central entities)
• public (your toster can participate)
• permissionless (children in Kenya have the same permissions level as the FED CEO)
• global (as TCP/IP)
• governed by voting with computing power and economic incentives
• immutable (append-only)

Why can’t banks simply use the Bitcoin Blockchain?

Bitcoin is incompatible with regulations that banks have to follow. Financial services are extremely heavily regulated in all mature jurisdictions. Bitcoin doesn’t give a fuck — and this is by design.

If you think “lets create a better Bitcoin that would fit regulatory frameworks” — you are back to enterprise blockchains. They aim to do just that. To “fix” Bitcoin you basically need to invert all of its fundamental properties. This not only defeats the very purpose of the tech. It simply breaks the basic design assumptions.

Wrapping up

Bitcoin Blockchain to enterprise blockchains is like the Internet to intranets. There can be a value to your intranet but it’s hardly exciting — and hardly an innovation. Do not rush for vendor-pushed, candy-packed “blockchain solutions” that promise to revolutionize everything. Don’t worry, you will be fine.