This is part one in a three-part series on blockchain technology. Read part two here.
Today, blockchain-based smart contracts and immutable ledgers are becoming viable in enterprise business scenarios—far beyond cryptocurrency use cases. And when an emerging technology takes root in enterprise applications, that’s when you know it’s here to stay.
IDC estimates blockchain spending will exceed $19 billion by the year 2024, proof that banks, government bodies, hospitals, and enterprises are starting to put more firepower behind this technology.¹ Third-party blockchain providers are further bolstering the industry, offering secure, private enterprise-grade solutions that are fueling what MarketsandMarkets predicts will be a $39.7 billion market by 2025.
Here’s a look at how blockchain can benefit enterprise applications. But first, a quick intro to this exciting technology.
Blockchains are permanent, uneditable digital records of information or “ledgers.” They’re designed to be peer-to-peer, without a middleman, and are copied across decentralized computers rather than one centralized location, like a single server.
Say you get an email with 100 people on the thread. You can delete the email from your inbox, but it still will exist in 99 other inboxes. You can’t change the content of the email—it’s there for all to see. That kind of “distribution” makes it immutable.
It’s an imperfect analogy, but it illustrates how decentralization creates accountability and transparency. Because numerous entities own each transaction rather than a single entity, there’s no single point of failure. It’s impossible for one person to go rogue and make changes.
Then, there’s the immediacy of a transaction, whatever it may be—a purchase, a trade, the transfer of a deed, or a supply chain hand-off. Without a middleman, you could remove fees, delays, processing times, and third-party oversight. That can be a powerful efficiency.
Blockchain and the Enterprise
A key benefit for enterprises is in blockchain’s ability to improve certain timeworn processes. To this point, Harvard Business Review argues that blockchain isn’t a disruptive technology; it’s a foundational one. Where there are inefficiencies, lack of transparency, or susceptibility to fraud or costly delays, blockchain will improve them, not replace them. It will likely lead to new value creation opportunities and business models, and it will certainly be a competitive advantage for enterprises that choose to adopt it.
One of the most common implementations of blockchain technology is a “smart contract.” It’s a digital agreement that is secure, tamper-proof, and legally binding, with conditions attached. Couple that with the speed and transparency of blockchain, and you’re looking at opportunities to streamline and accelerate a multitude of transactions. That’s because smart contracts can help with:
- Transparency and traceability—with more visibility and verification of transactions, like an immutable, digital paper trail.
- Tamper- and fraud-proof transactions—encryption packs more security into sensitive data and transactions. For businesses with particular legal, privacy, or regulatory constraints, this can be a huge benefit.
- Reducing disputes and counterparty risk—especially in complex agreements with multiple entities who each have their own processes.
- Cutting costs and operational overhead—by automating certain transactions and authorization/verification steps. When steps happen faster, and even autonomously (without risk), companies can save billions in operating costs.
- Resilience and trustworthiness—by removing central points of failure.
- Streamlining and efficiency—eliminating the need for steps like escrow and settlement, and middlemen, clearinghouses or processing partners.
Open-Source Enterprise Blockchain Protocols
Enterprises now have access to mature, open-source protocols and fully managed services on which developers can build their own private, permissible blockchain apps, ledgers, and smart contracts. Some enterprise-grade projects include:
- Enterprise Ethereum: Smart contract technology with various projects and public and private enterprise solutions
- Hyperledger: Developed by the Linux Foundation, with an array of tools and frameworks
- Openchain: An enterprise-specific blockchain with a slightly different, modular architecture that’s used as a “generic register of ownership”
- Quorum: A protocol developed by J.P. Morgan, specifically for the financial sector, leveraging Ethereum
- Corda Enterprise: Another finance-focused blockchain with support for Oracle and SQL databases and geared toward highly regulated institutions
- Polkadot: A robust, interoperable blockchain technology with a data availability and validity scheme that enables top-notch security and stability
- Avalanche: Another finance-focused, open-source protocol for building interoperable blockchains (important as more blockchain applications are built and will need to cross-function)
These underlying protocols are the foundation, but there are other components to a blockchain stack:
- Oracle network. Middleware that plugs the blockchain into external resources, off-chain data, payment networks, and other entities. Companies such as ChainLink provide integrations for smart contracts and real-world enterprise applications, making blockchain even more viable and scalable.
- Peer-to-peer network. The distributed network where transactions are logged and permanently stored.
- Storage layer. Because data isn’t typically stored “on-chain,” there must be an underlying storage solution where associated metadata is stored and connected to via the oracle network.
Blockchain’s Implications on Data Storage
Blockchains can be public or private, depending on the use case. But there’s one thing they can never be: edited or deleted. This permanence is the cornerstone of blockchain technology and will have very interesting implications on data management.
Each time a transaction occurs, that “transactional data” is logged. This could be a record of purchase, the passage of a shipment along a supply chain, or an exchange of currency. Each event is logged across all of the nodes. This is called “on-chain” data. Any other data related to the transaction—details about the shipment, images of the purchased item, date, time, location, etc.—aren’t stored directly on the chain. That’s known as “off-chain” data.
So how can data-driven apps that need to leverage off-chain data also leverage blockchain? Decentralized oracle networks are the answer here. These networks enable blockchain apps to route data off-chain to be processed, then back on-chain where it can be accessed by smart contracts.
Then, high-performance, underlying object storage will be key for managing data on a distributed system. On premises, off-chain, or in the cloud, all data ends up “in a box.” With object storage, data is stored in discrete units, each with a unique key and metadata that describes the object’s details. It’s lockstep with blockchain design and allows data to be found no matter where it’s stored on a distributed system.
Modern Blockchain Apps Need Modern Data Storage to Succeed
As enterprises embrace blockchain, the need for the right foundation will be more important than ever. Blockchains and bottlenecks don’t mix. Innovators will need a data storage solution that’s powerful, elastic, and scalable enough to meet these demands. Unified fast file and object (UFFO) storage with Pure FlashBlade® can offer near-infinite scalability, integrity, and speed to meet the strict SLAs of blockchain-based applications.
Learn more about how a Modern Data Experience™ from Pure Storage can offer the innovation, flexibility, and future-ready technology enterprises need to meet the demands of modern applications.
Read part two of this series: What Will Blockchain Mean for Data Storage?