Lyra and the Antonopoulos test
About Private Distributed Ledgers
Lyra and the Antonopoulos test
On May 31, 2017, a new consortium over Blockchain, called Red Lyra, was created by 22 Spanish companies, in order to develop a permissioned Blockchain to provide basic services in Spain, such as secure identification. Among the founders of Red Lyra there are banks, energy corporations, law firms, and consultancy firms. This is not the first consortium created over Blockchain, but it is, in fact, the first one involving only Spanish companies.
In fact, there are currently a lot of consortiums over Blockchain all over the world. William Mougayar, the author of ”The Business Blockchain” has listed some of them here.
Why are consortia created?
This collaborative behavior between big companies in front of the advent of a new technology is not new. Before the Internet crashed in 2001, a lot of different consortia were also created with the aim to develop e-commerce. Most of them just didn’t survive the crisis.
In the case of Blockchain, consortia are born because of one or two of these reasons:
- To help developing Blockchain technology in order to implement it into the current business models of their members, as a way of boosting innovation, getting lower manufacturing costs, and accessing a technical competitive advantage that potentially allows them to increase profits.
- To avoid the potentially disruptive effects that a new technology creates over the old models carried on by incumbents. Blockchain is somehow perceived as a threat for some industry branches, due to the fact it can transform the way that value is captured. This goal is pursued towards the provision of services through ”permissioned” Blockchains before the same services are openly available through new distributed sources, with the hope that the newly created user behaviors and their inherent resistance to change would make difficult the substitution of those services once the open-based alternatives are developed.
In an article published in the January–February 2017 issue of Harvard Business Review, The Truth about Blockchain, Marco Iansiti and Karim R. Lakhani define four stages for Blockchain’s development, i.e., single use, localization, substitution, and transformation. Localization is a stage in which there are innovations relatively high in novelty but need only a limited number of users for creating value. In other words, localization’s stage involves some organizations working together for creating local private networks for building single-use applications. These are the type of consortia we find nowadays.
About Lyra
The Spanish consortium, Lyra, defines itself as a transversal, multisectoral, and neutral network, open to any startup or any company that wants to use it to validate basic services and run applications. One of the first services to be developed is said to be a system of digital identification, 100% compliant with the Spanish regulations, and able to be verified by Spanish notaries. Lyra defines itself as a ”semi-public permissioned network”. In order to develop it, these 22 companies have created a non-profit association.
The Antonopoulos test
Andreas Antonopoulos summarizes the main features of Blockchain as an open, borderless, transnational, neutral, censorship-resistant, and trustless network (see Blockchain vs. Bullshit: Thoughts on the Future of Money).
Can Lyra be considered as a Blockchain network regarding these criteria? Let’s consider each one of them separately, in what I have called the Antonopoulos test.
An open network
Open doesn’t mean that anyone can join it. It means that anyone can do it without previous restrictions or approval by the members of the network. It doesn’t seem clear with the information provided if it is the case or nor for Lyra.
Borderless
Lyra is a network of nodes owned by companies that make up the network. Lyra describes itself as a Spanish Blockchain network, and it seems to be only focused on Spanish users.
Transnational
This is related to network-centric trust, in order to avoid that any government, public or private institution is able to provide a different source of trust, and therefore, network’s users are not able to only trust independently the own network. Network-centric trust (and transnationality) is breached here when the organization says that will follow the Spanish regulations and when it states that Spanish notaries are the ones who finally grant ”trust” as a token of truthfulness.
Neutral
Lyra defines itself as neutral. But what does neutral mean? Neutral means that the network is not serving the goals of any institution or organization. Can a network that is run by banks and big corporations be neutral? Let’s imagine a fintech startup running a successful business model over Lyra but neither being a node of the association nor dealing with it, but at the same eroding with its activity inside the network the market share of banks. Is Lyra still going to be neutral then? What are the governance rules and transparency policies that Lyra is going to adopt to run the network? In other words, how are decisions going to be taken? Are these procedures going to be transparent? Why are we going to believe that transparency is going to be applied inside Lyra when its founders don’t apply it when business as usual? How is neutrality going to be guaranteed?
Censorship resistant
How many nodes is Lyra going to keep? Where are they? Are they together or not, all in Spain? How are they protected? How are they kept independent? What’s the difference between this network typology and a shared VPN between parties? And, more important, how is Lyra going to keep security, not being a purely decentralized system?
The result of the Antonopoulos test
It seems clear then that Lyra is an example of a permissioned network. It seems clear too that it doesn’t pass the Antonopoulos test. It is not open, neither borderless, transnational, neutral or censorship resistant. But it doesn’t mean Lyra is useless. It will probably be suitable for their founders, and it will get some market value, but, please, don’t look for the real transformation assigned to Blockchain here!
Just in the same way that we used in the past different terms for VPN’s and the Internet, I think we should not call these type of networks as Blockchains, as they are in fact ”Private Distributed Ledgers”. If we don’t use the word Blockchain for referring to them, we avoid poisoning the term. The blockchain is currently a difficult concept to understand for most of the people, so I think it’s better if we keep the term for defining only an open, borderless, transnational, neutral, censorship-resistant, and trustless network.
Lyra is, in fact, an example of what is currently happening around the Blockchain’s community worldwide. As said before, consortia are created as private networks that only need a limited number of users for creating value.
Substitution
At the same time that consortia are created, we also see some advances in the field of substitution, the next stage of development according to Iansiti and Lakhani, as more and more companies try to develop simple solutions to be widely adopted, e.g., fintech solutions for the unbanked, or wallets for cryptocurrencies. These solutions need to become mainstream in order to create impact, and this is nowadays the real challenge.
Transformation
But, what about the transformation that Blockchain promises?
In my opinion, the social transformation expected for Blockchain is based on trust and decentralization. This involves new systems of governance to be proved as useful. And it also involves the development of new systems of trust. When I refer to trust, I’m not talking about the kind of trust between parties involved in a transaction, that Blockchain satisfactorily solves, but the trust placed in decentralized systems as a whole, or, in other words, the trust in P2P transactions.
The real mainstream adoption of the open Blockchain is behind the substitution of our delegated trust.
We need to trust decentralized networks instead of, for example, blindly give our trust to some banks just for telling us that they have developed a new, more powerful, and secure network that allows them to keep our money safer, i,e, for just doing the job we pay them for to fulfill.
This is the big challenge. It’s difficult to believe that this change is going to happen from one day to another. It will probably take decades. So, the management of a transition is necessary, and this means that we need time for adaptation and experimentation.
In my opinion, the real challenge is also related to the governance of distributed networks. A lot has to be done here, but I am totally convinced that both two things are correlated. Systems of governance for distributed networks proved successful are going to boost our delegated trust on them.
Both delegated trust and the governance of distributed networks are the minimills of Blockchain.
