No Country for Private Blockchains
For some reason, people keep asking us why Grid+ chose to operate on the public Ethereum blockchain as opposed to a private build. This may be surprising to those in the Ethereum community, but in traditional industries (healthcare, energy, etc.) there is still a lingering fright of public blockchains. We believe public Ethereum will one day be used in every industry, but for now Grid+ remains an anomaly. So why did we choose the public network? Because private networks have serious deficiencies.
Private Non-EVM “Blockchains”
Alex Miller often refers to me as hidden viper because I patiently listen to business people talk about their stack and its benefits, then I strike with technical questions for which they often lack passable answers. Recently, I spoke to a counterpart at a large, competing firm who, by his own admission, “just sells this stuff” and was not able to articulate any technical details as to how their proprietary system defends against infinite loops. As it turns out, the node operator of their platform must manually take down the node and restart it or else add a time restriction to kill any process that does not execute within 30 seconds.
This architecture, obviously not EVM (Ethereum Virtual Machine) based, is perhaps not ideal. Fortunately, anyone can start a private Ethereum network and benefit from years of development by some of the brightest people I’ve ever met at no cost. It baffles me why anyone would choose a non-EVM build, but I suspect they won’t be making that choice for too much longer.
Private Ethereum Blockchains
Back in August of 2015, I led a team that sold a loyalty platform built on a private Ethereum blockchain to a regional bank in the Northeast United States. These were very early days for Ethereum (no Truffle, MetaMask or INFURA) and this project was my personal introduction to ConsenSys. While working at Deloitte and leading their blockchain experiments, I hired the proto-ConsenSys Enterprise team to actually build the tech while I ran project management. Shortly after that project I joined ConsenSys to help form their Enterprise group. This loyalty project made sense to me as the goal was to expand the infrastructure to commercial clients and have them share in validation. This is also the project that inspired Igor Lilic to build and bootstrap the single-click Ethereum instantiation on Microsoft Azure, which became a cornerstone of Microsoft’s BaaS (Blockchain as a Service).
One saving grace of the Enterprise Ethereum Alliance (EEA) is that they remain committed to the possibility that private chains will one day go all but extinct (insert obligatory intranet vs internet analogy). This means the EEA software stack is designed to be convertible to the public Ethereum chain and any enterprise apps built on an EEA blockchain will (at least theoretically) be able to migrate to the public Ethereum network without having to rewrite all of their business logic. This cannot be said about other enterprise “blockchains” and truly does represent a major competitive advantage.
While I believe private Ethereum chains are invaluable as sandboxing and development environments, I still think they lack fundamental value that is only offered by the public chain. Consensus is expensive; millions of dollars are paid to miners every day to secure major public blockchains and as such the public Ethereum blockchain will always be more secure than a private build protected by a firewall. One of the most beautiful aspects of public Ethereum is that participants all around the world secure their assets natively rather than having to actively build protection to ring-fence data which could very likely be penetrated by an attacker. Currently, if a nefarious actor wanted to attempt a 51% attack on either Bitcoin or Ethereum, they would incur hundreds of millions in cost, possibly more. Once Ethereum moves to the Casper version of proof of stake, the recovery from this type of attack will be swift and extremely expensive for the attacker.
One of the fundamental accomplishments of Satoshi’s design is that human behavior is incentivized in such a way as to secure the protocol itself. This crypto-economic incentive mechanism does not exist to the same extent in a private blockchain instantiation because there is no broadly fungible token of value. This crypto-economic dynamic is a fundamental innovation — we have a system that allows for permissionless natively digital transfer of value with any and all other actors in the system.
Thinking about Grid+ design decisions
Our system depends on the notion of user agency which we describe in this blog. We desire to build a solution wherein customers can pay for near-wholesale priced electricity in real time. We need an architecture that enables customers to securely retain custody of their assets at all times. We also need a solution where we do not have to rely on the legacy banking and payments rails while still having finality on transactions.
Mike Goldin said in a recent interview for AdChain:
What blockchains give us, fundamentally, is programmable money. When you can program money, you can program incentives. When you can program incentives, you can kind of program people’s behavior.
The Grid+ incentive system works because we can program money and thus, program human behavior. We cannot achieve this objective in a private blockchain that lacks a globally recognized, natively digital asset of value.
When Alex and I presented these thoughts that coalesced into Grid+ at the Rockstart accelerator in Amsterdam earlier this year, only a few utilities in the room were able to understand the profound implications. Only one other startup suggested a solution that utilized the public blockchain, and all others instead opted to sell their proprietary stacks while citing various reasons that a public blockchain would be illogical. Many of the competitors we see in the energy space who desire to utilize a private blockchain would be better off looking at a simple database instead. Alex Miller recommends MySQL for many of our enterprise clients, claiming it can easily scale to millions of customers, has been battle-tested for decades, and costs $0. Perhaps some of our competitors should consider this option as well.
The future is open and public
As the Ethereum community continues to evolve we believe it is imperative that public blockchain infrastructure emerges as the de-facto standard, especially because of user agency and the notion of “open execution” (having certainty that programs execute as described or intended). These are benefits that no software stack on Earth can give you by itself. The most interesting part of Ethereum isn’t the specification — it’s the network.
The silver lining is that we’re already starting to see the shift to public Ethereum. For example, Alex Miller, Matt Corva, John Lilic and I have been working for almost a year on an engagement with one of the world’s largest energy companies. Their roadmap includes a migration from their current (private) instantiation to the public Ethereum network. I am confident we will see a massive shakeout in time as the buzzwords tire and we all become more savvy as to what the “blockchain” is good for and what it was never capable of solving.
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