A year ago, I wrote an article about how in my view the Permissionless vs. Permissioned Blockchains discussion would evolve .
In that article, I took a brief look at how the narrative this year would in my view be written, and I predicted it would mainly be about Permissionless vs. Permissioned blockchains.
It has played out that way, although not in the explosive way I imagined.
Instead of taking on permissionless blockchains head on, the trend is to co-opt the term “blockchain” and change it’s meaning to suit your needs, it seems.
This year has seen the release of Corda and a lot of work on Hyperledger Fabric, both building on the work of thousands of open source blockchain enthousiasts, and in my opinion, they’ve delivered a truncated product that is mislabelled.
To clarify what I mean by this, let’s go over the key attributes of the blockchain definition:
- Public key cryptography
- Peer to peer (all nodes are equal)
As usual, the sting is in the tail. While both Corda and Fabric at the very least get #2 and #3 right, they both incorporate a role based system in $4 and so lose the benefit of #1.
Corda is “Corda is designed for semi-private networks in which admission requires obtaining an identity signed by a root authority”, while Fabric is a membership based system.
This architecture only moves the goalposts and still leaves one of the key problems Bitcoin (and as a result any permissionless blockchain platform) set out to solve. As Satoshi Nakamoto said in the Introduction of his whitepaper
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party
I quote this so extensively, because the reason Bitcoin and subsequent permissionless blockchains emerged in the first place has nothing to do with facilitating “just transactions without banks”. Permissionless blockchains aim at a much deeper level, which is fundamentally changing the trust based model.
Any platform that does not take this basic (and simple) understanding to heart, is basically missing the point of what a true blockchain is bringing to the table.
Permissioned blockchains: playing with language
From the above follows, that while it is certainly possible to create a platform with some of the basic characteristics of a blockchain (and you can bet these will mainly be assymetric cryptography and timestamping, because they do not force you to significantly change your way of thinking), you cannot just take out the two others. Immutability is guarantueed by the peer to peer permissionless model.
Sadly, most people in the fintech industry have a severe lack of knowledge about what blockchains are actually about, and they are spending a lot of money on what will most likely be boring projects in the end, not bringing anything significantly new to the table. Coindesk already put “Blockchain tech will become boring” on their list of predictions for 2017, which is surprising for a magazine that until recently was constantly bullish on anything bitcoin or Ethereum (to which I might add “and refusing to acknowledge anything else”).
The fact of the matter is that we are at that stage where corporate parties are talking about “blockchains”, they are in fact not talking about blockchains at all anymore. Instead of having a dispute about “permissioned” vs. “permissionless” in a manner that would create some true debate about their respective merits, they have just sidelined the whole discussion and decided a blockchain is what they want to create.
Let’s take a stab at next year
Having said all this, and being an insider of the permissionless “camp”, what can we expect next year?
If I may summarise Coindesk’s list of predictions into “We’ll all be terribly bored by blockchains by the end of the year because boo-ha, they’re just boring databases and making money is boring, too”, then we will definitely see a lot of that.
The hype for blockchains for enterprises has run it’s course for this year, and the unsurprising results of the work the banking consortia have done is “Well, it’s not all that special, isn’t it?”.
And I have to agree, it isn’t. A permissioned blockchain is about as special as a car being drawn by a horse: impractical and unlikely to show the innovation of the product.
Which brings me to my second prediction: just as any p2p technology cannot be stemmed, but takes a lot longer to mature, we will see some interesting permissionless initiatives pop up. These will likely take a form that comes as a surprise to enterprises, and the whole circus of stemming the tide will start over.
Let’s be clear: blockchain technology is extremely young. It hasn’t existed for 10 years yet, so to describe it as “boring” is definitely one of the most silly things I’ve seen put down in writing for a long time. What is boring is trying to think in old terms when you see a new paradigm.