As an analyst for Arturo Capital I’m frequently asked about blockchain technology and different projects in the space. At a high level many people I’ve spoken to only know of blockchain as some technology that will cut out the middle man, yet they aren’t quite sure who the middle man is or how this intermediary would be disrupted. In this article I set out to explain why an enterprise would want a partnership with a permissionless distributed ledger technology (DLT) protocol, and what benefits and services each side of that partnership would provide or receive (with regards to 0chain).
During the meteoric run up of blockchain hype in 2017, there was misleading partnership after misleading partnership. The most egregious, from my personal memory, being the OmiseGo/Apple¹ rumors all over twitter and reddit, the Microsoft/IOTA² spat that was later clarified to not be a formal partnership, and Tron/every company Justin Sun can think of. Although I don’t think any of these particular projects are necessarily out to deceive investors and exit scam, the misleading narratives frequently lead to unwarranted price appreciation and market caps that are completely divorced from any network effects, tx volume, or community/developer engagement metrics that attempt to compare or value protocols. These steep price increases happen because retail investors, falsely, have the notion that multinational conglomerates are going to reconfigure their software architecture to become compatible with a public protocol, buy tokens, and begin transacting on the permissionless ledger, with minimal onboarding or servicing from the protocol development team.
Blockchain projects that use tokens to incentivize and align an ecosystem have a tough road ahead of them with regards to onboarding enterprises, but that’s not to say it can’t be accomplished. These projects are attempting to bridge two worlds. On one hand you have the crypto culture where a month seems like a year, and poorly designed protocols break or are hacked on a fairly regular basis. On the other hand you have enterprise information technology which needs to be battle-tested and confidently secure before being implemented. Enterprises are looking for credible partnerships that are dependable, professional, and offer solutions that create quantitative benefits.
The hard truth is that enterprises only care about their bottom line. If they aren’t getting production efficiencies, security enhancements, or other monetarily justifiable bottom line savings from a new software implementation, they probably aren’t too likely to move that piece of software into production from the incubation or testing phase (if it ever makes it that far in the first place). This aspect poses a real challenge to public permissionless blockchain projects, as without enterprise revenue streams from a Software as a Service (SaaS) model, or outright enterprise software deployment onto a public mainnet inclusive of token purchases for on-chain transactions, these networks need organic growth and development from decentralized application (dApp) engineers. A beleaguered statistic in the blockchain industry is pointing to the staggeringly low number of active users on these dApps (but the YoY user growth figures and tools available for building are encouraging).
So where would enterprise adoption come from and which protocols would they be working with? The companies that are driving enterprise adoption of distributed ledger technology are mostly unseen on coinmarketcap or your blockfolio app. They are also, generally, permissioned networks. Permissioned networks require credentialled access to read and write information and data to the blockchain.
Properly permissioned blockchain networks differ from unpermissioned blockchain networks solely based on the presence (or absence) of an access control layer built into the blockchain nodes.³
In other words, they’re private. The leaders in this space are the likes of R3, Hyperledger, Enterprise Ethereum Alliance (EEA), Digital Asset Holdings (DAH), Symbiont, Consensys Enterprise, Cobalt DL, SETL, PeerNova, as well as incumbents building their own proprietary offerings (Accenture, IBM, HPE, Microsoft, etc). The majority of these companies are structured in a typical business format, without a cryptocurrency, where they provide software services in exchange for revenue streams from the client (SaaS, BaaS, AaaS, etc.). Each one of these companies employs different strategies that attempt to facilitate the marriage between legacy software systems and distributed ledger technology. Some other strategies, such as the EEA’s approach, is to build out enterprise tooling solutions (both proprietary and vendor owned) within a global set of client specification standards across a predefined architecture stack to enhance interoperability and synergies across companies and industries. There are challenges to either one of these approaches, and Tim Swanson of Post Oak Labs summarizes them succinctly:
“The enterprise sales cycle… can be demoralizing because you have to explain [the product and benefits] to, not just one committee, but like 15 different committees, over the process of a year or two. And then you find out that the software that you built isn’t easily reproducible in other institutions.” — Tim Swanson⁴
If you’re suddenly realizing that enterprise adoption of public permissionless networks is a challenging, slow, and costly endeavor, you’re right.
Enough with the frustrating rhetoric, give me some hopium!
The next logical question to ask yourself is, “so if this is so costly and time consuming, why would an enterprise facilitate a partnership or SaaS contract with a blockchain company/protocol if they aren’t sure what cost benefits or security enhancements they’ll receive?”. More so, if enterprise-blockchain partnerships are primarily products of permissioned private networks, why am I writing an article about a permissionless blockchain with a cryptocurrency?
The answer is that 0chain has set out to capture a niche space of the enterprise-blockchain market. 0chain has developed, from the ground up, a full-featured blockchain that can deliver thousands of transactions per second with sub-second finality, all without sacrificing blockchain’s core benefits. 0chain’s enterprise grade solution also enables decentralized storage via blockchain and 0chain’s native token ZCN which has disruptive ramifications for enterprise cloud-based storage. There are several areas relevant to the enterprise and required flexibility for broad adoption including: support for Blockchain as a Service (BaaS), required customization, and the support for decentralized storage (dStorage). Enterprises can purchase and lock tokens for the contracted period of time that they want data to be securely stored. At the end of the contract, the tokens are free to be used as the enterprise sees fit including sold at current market value, held or repurposed. This asset-based approach can eliminate monthly OPEX charges for cloud-based storage.⁵
In other words, 0chain has positioned themselves to compete with existing enterprise blockchain companies while also having the capacity to integrate enterprise software, through BaaS, onto either public or private chains, AND it also allows enterprises to store their mission critical data, on-chain, with the speed and reliability of current cloud storage solutions. This point cannot be belabored enough. The partnerships that 0chain are engaging in are not experimental test-runs. They are working with enterprises to move critical infrastructure and tooling solutions onto their network. Let’s explore the most critical aspects of why an enterprise would choose to engage in these partnerships in further detail.
The security enhancements that DLT protocols can provide to enterprises are probably the most important aspect of every engagement. Using a product like 0chain to create and host enterprise tools (via BaaS), eliminates the single point of failure that plagues most enterprise databases. This is because the data is encrypted, replicated throughout the network, and stored across multiple hosting services. This means that if AWS goes down, your data is still retrievable, and the network still lively. If the enterprise’s proprietary servers are compromised, the data is still retrievable, and the on-chain solutions are still lively.
“If you want to run your own system or create your own system, you’ll have a database that needs backing up and needs to be replicated with hot spare, you’ll have a middleware server with microservices on it, you’ll have maybe a memcached server, you’re going to have web servers… and you’re going to have business logic that’s distributed over that whole system over multiple components…and in that kind of system there will be some logic inside the web server that generates the pages, there will be some logic inside those microservices, there will be some logic in the database… and all of these components fail independently… and of course it’s completely insecure. There’s no way to make that secure. So what you do is you surround it with a firewall and you hope that the firewall will keep everybody away from your system. But sadly, a firewall isn’t much good these days.” — Dominic Williams⁶
There have been so many hacks recently that enterprises are now looking into different security measures than a simple firewall to protect their networks.⁷ It is truly not a conspiratorial thought anymore. Reading about the Maersk NotPetya attack should enlighten every CIO and CTO to start testing DLT systems immediately. DLT is a step forward in securing software systems through decentralization while simultaneously increasing transparency and immutability of past transactions.
0chain offers Auditability as a Service (AaaS), a solution designed to meet the compliance, security, and data access needs for enterprises of all sizes. AaaS enables the immutable storage of all transactional data for virtually any system. Mirroring existing transactional data to the blockchain enables out of band audit and access without any performance issue to existing systems or impact to customers. This non-intrusive system leverages blockchain’s core strengths and 0chain’s optimized performance. The AaaS solution has the flexibility to operate across both private or public cloud environments.⁸
This aspect is fairly intuitive. Blockchains in general allow for real time accessibility of an immutable ledger to observe and analyze retrospective events without the fear of inaccurate data. Enterprise Resource Planning (ERP) systems integrated with 0chain will enhance transparency and accountability as there is a public record of each transaction submitted to the network (assuming it’s on a public chain). This allows enterprises to build tools to quickly and effectively query data, as well as own and control their data for monetization purposes.
Other Enterprise Use Cases
Although auditability and security act as conduits to lure enterprise adoption into the distributed future, there are truly limitless amounts of tools, applications, and ideas that can be integrated into a blockchain.
It is up to each individual enterprise, engineer, and entrepreneur to assess which implementations or products are enhanced through cryptographically securing them to an immutable ledger. However, there are more tools and resources available today to software developers and engineers than ever before. Enterprise focused BaaS companies work with their customers to educate, collaborate with, and execute solutions that provide value and streamline IT solutions.
Aside from engaging experts in the field and assessing the viability of the solutions to be worked on, enterprises should still adhere to a well-designed — development, test, deploy, and train — operational methodology.
Enterprises in the past moved applications from on premises to public cloud to lower IT operational and management costs. We expect with offers like 0chain’s many will move from public cloud to a public blockchain based cloud (dCloud) to continue to lower IT costs. However, enterprises like anyone, require a level of confidence before embracing new technology and will continue to test and pilot dApps on their private networks. This is a solid first step, and 0chain is enabling customers to do just that. Then when we believe we will see an evolution to our public dCloud and by acquiring ZCN tokens they can take advantage of dStorage which virtually eliminates monthly cloud storage costs.⁹
To elicit enterprise customers and BaaS customers, word of a company looking to work with enterprises needs to get out. For a typical SaaS vendor, this is the job of their sales team. However, companies and projects that are smaller in workforce capacity and without the sales teams need to leverage other options. Most of the protocol layer cryptocurrency projects today rely on scaling network effects and the networking of their community to gain developer adoption. Although this “if you build it, they will come” mentality is low cost from a perspective of not needing to hire sales and marketing teams, it relies almost entirely on organic networking and organic application development initiatives. There is nothing wrong with this approach and it could lead to development of the next great social media application, game, betting website, etc. 0chain doesn’t forego this aspect of the stack as it is a public, soon to be open-source protocol. By holding ZCN tokens, any user can develop on, transact with, and build tooling solutions for their business or personal project. Much like other Proof of Stake (PoS) networks, holding a requisite amount of ZCN tokens allots the user a specified amount of transaction capacity or storage space if they want to stake their tokens.
However, 0chain is also interested in onboarding enterprises through BaaS. Unlike the other enterprise specific BaaS companies listed previously in this article (R3, Hyperledger, etc), 0chain’s network effects are greatly enhanced by both organic development on the platform (see the growing list of crypto partnerships on 0chain.net) AND enterprise BaaS implementations. 0chain is taking the first steps by making inroads with enterprises in the form of joining both the Oracle and Amazon Web Services partner networks. Although conglomerates such as Oracle, AWS, SAP, HPE, and others have thousands of partners in their partner networks, there seems to be a lack of cryptocurrency projects that have partnered with these networks. From my perspective this is due to a lack of a mutually beneficial relationship between DLT protocols (and their cryptocurrencies) and SaaS providers. DLT protocols generally present themselves as competitors to SaaS providers. What gets lost in the noise is that certain DLT protocols such as 0chain have synergistic relationships with incumbent vendors because ZCN holders can use incumbent vendors such as AWS to mine or shard, thus making the partnerships mutually beneficial. It is because of these mutually beneficial relationships that you see R3, Hyperledger, and the EEA logos when you type“AWS crypto partnership” into a search engine¹⁰. 0chain is vying to be among those ranks but is attacking the situation much more dynamically.
From a non-crypto perspective, we are a startup building a cloud solution we want to market to enterprises. We’re acting our age — operating precisely how a Silicon Valley startup would at our stage of development. Our team is putting in thousands upon thousands of man hours on code, writing our own IP to leapfrog the market with better, more efficient software solutions.
The Enterprise market is equally skeptical of blockchain/cryptocurrency, and partnerships with AWS (world’s largest cloud provider) and Oracle (one of the Largest SaaS, Cloud provider) help us gain immediate credibility. Access to their customer base and being formally recognized as a “partner” is a valuable requirement to begin discussions with many Enterprise customers nervous about blockchain/crypto, and concerned about compliance, security, high availability and economic viability from their vendors. Presenting visibility to these relationships by publishing articles announcing and describing them are also important.
Both of our partners to date have provided investments in people and money relative to the costs of porting/building our system to run on their platforms. Our global DevNet is expensive to run and AWS has been very generous to date in deferring those costs in large part, and to say more would betray trust with them and create other issues.
To build lasting real demand for ZCN in the Enterprise space, partnerships with industry leaders like AWS and Oracle are exactly what a CIO or VP of IT would want to see to feel comfortable moving forward with a pilot/trial or take the first meeting. Some of our best early prospects have been through introductions made by executives at these firms. SO, while we understand the skepticism from a crypto lens, we need to build credibility and viability with Enterprise skeptics as well and these partnerships help.¹¹
I personally think 0chain is well positioned for the next stage of blockchain/enterprise initiatives. The groundbreaking technology combined with the capacity for both organic development and non-fabricated enterprise adoption make it an attractive project.
If you want to learn more about the team or the project, reach out to the team at email@example.com to discuss a workshop or to simply learn more about your specific needs!
The above references an opinion and is for informational purposes only. It is not intended to be investment advice. Please do your own research and consult a licensed professional for any investment advice or related questions. Arturo Capital holds a long position in ZCN as of the writing of this article.