We Need to be Blockchain Agnostic, but not Decentralization Agnostic

I often ask Ethereum maximalists:

“Do you know anyone who has used an ERC20 token for anything other than speculation?”

People usually hesitate for a moment before sheepishly answering that no, neither them nor any of their acquaintances have ever used an Ethereum-based token to do anything other than multiply their net worth. At New York Blockchain Week in May, I received this response time and time again.

The mixture of confusion and surprise that this question commonly evokes, even from seasoned blockchain people, highlights an inherent bias existing throughout much of the blockchain community; a bias that is slowly but surely revealing itself to those who have placed all their proverbial eggs in the Ethereum basket.

As a protocol, Ethereum has excellent properties for a few narrow use cases (think ‘Capital Markets 2.0’), but has under-delivered on much of the hype of the last three years. While great for conducting ICOs, it’s actually a lot less effective in enabling decentralized applications than most of us (myself included) originally thought. There is a justification for this — it’s hard to build a good decentralized protocol — and people are slowly starting to realise this, and are looking for alternatives.

Blockchain Agnosticism

Although not universally, the community is gradually opening up to the idea of building on new and existing protocols with allegedly better performance characteristics. Even at Ethereal (the flagship conference of Ethereum-maximalist venture studio ConsenSys) the change in focus was palpable. Quite surprisingly, the term “blockchain agnostic” was thrown around even by the most die-hard Ethereum fans.

This openness to building on new protocols is incredibly important for enabling technological progress in the space. After all, different use cases will require different performance characteristics, and it’s likely that a single blockchain won’t be able to accommodate all of these.

But even more surprising than the rise in blockchain agnosticism, while most were still touting the use of “fully” decentralized protocols, there were also whisperings of moving onto permissioned chains.

A Semi-Centralized Future?

As scaling issues continue delaying the widespread adoption of public blockchain use cases, enterprise use cases are becoming both more plausible and more relevant. Many projects and platforms across the industry are shifting their focus towards more enterprise-specific use cases.

Instead of waiting for Ethereum to meet the market’s scaling demands, many of the businesses which were exploring the possibility of using a public chain are now moving onto permissioned chains. When we consider the relative robustness of BFT consensus mechanisms for permissioned groups, we’re left with practically similar security parameters as public chains, but orders of magnitude more scalability, regulability, and financial certainty.

While this doesn’t seem like the decentralized paradise we’ve all been dreaming of, it’s where the majority of real demand (i.e. money) seems to be targeted. For most businesses, especially the ones with significant capital and market share, processes that are at least semi-centralized work just fine. For these companies, embracing decentralization initially seemed like a handy way to stay relevant and see some efficiency gains — but this process is slower and harder than everyone expected, and many of these efficiency gains can be realised using blockchains without “pure” decentralization.

Many enterprises are worried about uncertain expenses and relinquishing control over the parties who can participate in achieving consensus. Most businesses don’t want (or need) their transactions to be verified by an anonymous server farm in the middle of nowhere; they want certainty and accountability.

So, Where to Next?

While the die-hard decentralists patiently wait for (and hopefully continue working towards) the perfect public chain with infinite scalability, enterprise use cases are quickly taking up more and more of the market — in terms of developer resources, capital, and sheer attention.

Permissioned chains certainly have merit in many scenarios, but for many others, public chains would be the best model if only they could achieve the desired performance characteristics. If permissionless protocols don’t close the performance gap between themselves and their permissioned alternatives, the blockchain sector may just become another industry ruled by middlemen.

I see two solutions to this problem: first, continue working relentlessly to improve permissionless consensus so we can have more robust and efficient public blockchains. Second, tackle the issue at the application layer; we may not be able to cut out all of the middlemen at the protocol level yet, but applying strong decentralization use cases to the application layer will set a standard for the development of decentralized platforms moving forward.

At Centrality, we’re striking the balance between decentralization and scalability with our native blockchain and cross-chain protocol, PL^G.

PL^G aims to fix many of the security and scaling issues that have plagued cryptocurrency-based blockchain technologies, such as insecure language design, reliance on a globally-shared blockchain, and contentious governance problems. It natively offers both a permissionless chain, and permissioned chains which can talk to each other and the public network.

To read about our philosophy and features, check out the PL^G whitepaper. For more technical info, read our technical documentation.