Transparency and trust are not guaranteed with all blockchains
Reflections on the Blockchain in Energy Forum 2019
Last week, Greentech Media hosted their annual Blockchain in Energy Forum in New York’s Financial District. The event was made possible thanks to the generous sponsorship of IBM and Jelurida, two leading software companies with very different approaches to blockchain technology. I was fortunate enough to speak on the final panel of the day, which focused on increasing transparency in renewable energy markets and green finance.
In a fitting twist, the discussion sidelined away from renewable energy and focused almost entirely on what real transparency and accountability look like with blockchain technology in general.
Perceived versus real transparency
The proposition put forward by my co-panelist from Data Gumbo for increasing transparency is similar to the IBM philosophy: simply having all major players in one industry operate on and maintain a single ledger inherently holds all participants more accountable.
In response, I went in a boldly different direction and it started a heated debate:
Blockchains only enable a real increase in transparency when key milestones from permissioned networks are backed-up to a public domain that is entirely outside the control of the industry players who operate the permissioned network.
So, why does any of this matter?
Blockchain basics for the energy sector
Before diving in to more detail, let’s start with the basics. The value proposition of blockchain technology is the way it secures data. Copies of an accounting ledger are stored across a bunch of computers all over the world and an automated algorithm with a pre-agreed set of rules runs simultaneously on each of these computers to validate and agree on each addition to the ledger. Since every participant on the network has a copy of the ledger and must agree on all changes, tampering with data is nearly impossible if there are enough different validators on the network.
Imagine the benefits for the energy sector: instantly generating renewable energy credits directly at their source and storing them on an immutable, trustworthy ledger — or a GHG sensor writing batches of data to a blockchain to track against a carbon budget so that no one in the future can claim the data was faked. Monitoring battery lifespans in electric vehicles, EVs, and enhancing transparency around energy use in EV charging stations.
Anyways, back to the panel.
The blockchain as a hybrid internet of value
If we think through the IBM and Data Gumbo approach, we can quickly identify some major issues.
For example, if a consortium of participants has a shared interest in seeing their particular industry succeed, and if those same actors control the editing and storage of data on one individual ledger, then they can easily collude to re-write history when it serves their industry’s interests. In fact, just half the network deciding to collude is enough for massive data manipulation on any blockchain.
From this example it is quite clear that simply putting something “on the blockchain” does not inherently increase its transparency.
Going back to my point earlier, blockchains only enable a real increase in transparency when key milestones from permissioned networks are backed-up to a public domain that is entirely outside the control of the industry players who control the permissioned network.
Final thoughts
Unless we see private and permissioned ledgers connected through some public permissionless layer that can be trusted by all parties, similar to what the hybrid Ardor platform is enabling, then any perceived value creation occurring in each of those individual industry networks will remain siloed, untrustworthy, and of limited real value to society.
What do you think? Are consortium blockchains the way of the future or will public networks dominate? Or, do you agree that neither can succeed without the other and that we will soon see permissioned and permissionless projects form a hybrid internet of value? Share your comments below or on twitter.
