Private Blockchains != Intranets
In the debate surrounding the ideal form of blockchains, one of the most commonly-drawn parallels is what I’ve termed the intranet analogy:
Public Blockchains : Internet :: Private Blockchains : Intranets
Or, in plain English: “public blockchains are to the internet as private blockchains are to intranets”.
Intranets are notorious for failing to live up to expectations — as one Gartner report notes: “Since the emergence of the intranet in the mid-1990s, organizations have seen wave after wave of intranet failure, renewal, stagnancy and failure once again”. Thus, they are often invoked to condemn private blockchains as sub-par iterations of this technology, destined for eventual failure. Brian Forde, Director of Digital Currency at MIT Media Lab, is one of many to have drawn this comparison, stating:
“A private blockchain is an intranet, and a public blockchain is the Internet. The world was changed by the Internet, not a bunch of intranets. Where companies will be disrupted the most is not by private blockchains but public ones.”
To be fair, Forde doesn’t condemn private chains outright; he simply uses the intranet analogy to conclude that their disruptive potential will be dwarfed by that of public chains such as Bitcoin and Ethereum. And although this is likely true for a number of reasons, this kind of statement allows the merits of private blockchains to be overlooked.
After all, just because I can use my powerful laptop for online gaming, this doesn’t diminish its utility for word processing. Similarly, just because blockchains can disrupt the world through public iterations, this doesn’t preclude them from having usefulness in a more banal private context. (See? I can draw analogies too!)
Is the analogy valid?
The intranet analogy is usually justified through the parallels it draws in relation to accessibility. As with the internet (which, in this context, actually refers more specifically to the world wide web), read/write permissions for public blockchains are theoretically unrestricted. Conversely, both intranets and private blockchains restrict read/write permissions to a closed in-group, arguably reducing their circle of influence and thus their “disruptive potential”.
I initially set out to expose this analogy as flawed, but as I went through the various arguments, I came to see the existence of many parallels. I had my change of heart while writing the following argument:
But of course, at least with today’s technology, public blockchains don’t quite live up to the reputation of universal accessibility which would put them on par with the internet. Yes, they are “permissionless” in the sense that anyone is allowed to read and write to them, but the practical barriers to entry are orders of magnitude higher than those of the internet (although, perhaps if compared to the internet in its early days, public blockchains would fare a bit better in this regard).
In order to write to most public blockchains today, a user has to have an amount of processing power (or wealth under PoS) so high as to be prohibitive for many individuals, meaning that accessibility is restricted in practice (though not in theory). Although any user can broadcast transactions to the network with relative ease, they still require a single central entity (i.e. a miner/staker) to attribute any validity to this.
While I had set out to distinguish these characteristics from those of the internet, I quickly realised that there are more similarities than differences:
- Anyone can read the contents of the web/chain, but only by hosting the information themselves, or requesting the information from another entity (ISP/block explorer), which usually receives it from yet another entity (server/full node).
- Anyone can write to the web/chain, but only by broadcasting the information to another entity (server/miners) via another channel (ISP/network), or expensively serving/mining it themselves.
- In the early days of the internet (i.e. before client-side scripting), the barrier to entry for writing information to the internet was high. However, as the underlying technologies were developed (e.g. JavaScript), accessibility for the average user greatly increased. If we extrapolate the same kind of developments in public blockchain protocols (e.g. a more decentralized consensus mechanism), we can expect accessibility in terms of direct participation for the average user to increase accordingly.
But even if Public Blockchains = Internet, does this mean that we can extrapolate to Private Blockchains = Intranets?
Private Blockchains = Intranets?
How are private blockchains similar to intranets? We must first establish what each of these entails.
An intranet can be defined as “an infrastructure based on Internet standards and technologies that supports sharing of content within a limited and well-defined group.” This is in contrast to the web, which supports sharing of content with an unlimited group.
Changing a few key terms, we could define a private blockchain as “an infrastructure based on blockchain standards and technologies that supports sharing of transaction data within a limited and well-defined group.” This is in contrast to public blockchains, which support sharing of transaction data with an unlimited group.
So, in their form, private blockchains appear sufficiently comparable to intranets. But what about their purpose? The primary reasons to use a private blockchain coincide exactly with the main limitations of public blockchains: control, scalability, and privacy.
- Control — A company or consortium which runs a private blockchain can control the chosen consensus mechanism, change the rules, reverse or modify transactions, regulate on-chain actions and interactions, choose who can participate, etc. Just as this does not diminish the value of decentralized control on public chains, so the possibility of public chains does not diminish the value of this model.
- Scalability — Because transactions on private chains only need to be verified by a few trusted nodes, the cost/tx is significantly lower than on public chains (by many orders of magnitude, although this gap will likely be reduced as scalability is improved on public chains). Transaction throughput (i.e. the blockchain’s speed) is also significantly higher under private models, with finality occurring much more rapidly.
- Privacy — Read permissions can be restricted on private blockchains, allowing for greater privacy. This is especially important for companies/consortia dealing with sensitive information such as customer data (e.g. financial data, medical records) or internal confidential data (e.g. proprietary research).
What about intranets? Like private blockchains, they are preferred over their public alternative for reasons of control and privacy (though arguably the internet doesn’t suffer from the same scalability issues that public chains do, so intranets don’t meaningfully improve on this aspect). And like private blockchains, their purpose is to increase internal productivity by reducing latency, improving communication, reducing costs, targeting a narrower data set — essentially, increasing overall efficiency through a customized network.
So, given these similarities, why does the intranet analogy still feel so weak? Perhaps the answer is not in the analogy itself, but in the conclusions drawn from it.
Why intranets fail = why the intranet analogy fails
According to just about every organizational development blog, intranets fail because of poor user experience, outdated information, ineffective search features, complicated navigation, etc. The common trend here is that these shortfalls all result in a lack of employee engagement with the platform.
And here is where the intranet analogy fails.
Unlike intranets, the success of private blockchains doesn’t rely on humans’ continued attention and engagement with them. Their continued use requires a change in technical standards, not in culture. Whereas a disengaged employee may quickly cease to use their company’s intranet, a piece of code will not grow bored and abandon the private blockchain which relies on it to function properly.
The extent of human engagement which is required for private blockchains to succeed is already in place; banks already have customers, doctors already have patients. The internal implementation of a private chain will speed up processes and increase efficiency behind closed doors, but it certainly won’t lead to a mass exodus from these institutions. In fact, whether they know it or not, individuals will be interacting with this chain whenever they interact with its parent institutions.
To reiterate, the intranet analogy is imperfect not because private blockchains are unlike intranets, but because those who invoke it interpret the widespread failure of intranets as resulting from a weakness in the underlying model, rather than the implementation. The idea that private blockchains are are a weak and unremarkable alternative to public blockchains stems from a failure to make this important distinction.
So where does this leave private chains?
Although public blockchains possess enormously widespread disruptive potential, they cannot solve every problem. In fact, in the context of certain trust relationships, private chains have properties which will make them much more useful than their public alternatives. As Vitalik Buterin has noted:
“[B]y creating privately administered smart contracts on public blockchains, or cross-chain exchange layers between public and private blockchains, one can achieve many kinds of hybrid combinations of these properties. The solution that is optimal for a particular industry depends very heavily on what your exact industry is. In some cases, public is clearly better; in others, some degree of private control is simply necessary. As is often the case in the real world, it depends.”
To be clear, I am a massive proponent of public blockchains and I strongly believe in their potential to change the world for the better. I am, however, conscious of their limitations — and I’d hate to see valuable opportunities discarded for the sake of ideological purity. Private chains have an important role to play in the coming technological revolution, and we would do well to treat them accordingly.
TL;DR — The intranet analogy is imperfect not because private blockchains are unlike intranets, but because those who invoke it interpret the widespread failure of intranets as resulting from a weakness in the underlying model, rather than the implementation. The idea that private blockchains are are a weak and unremarkable alternative to public blockchains stems from a failure to make this important distinction.
Note — This article covers just one angle of a multifaceted discussion happening in the blockchain space right now.
- Some believe that maximum control, scalability, and privacy will eventually be achieved solely with public chains.
- Others believe that human trust networks will always have a role to play, regardless of how advanced our digital trust networks become.
