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Why Ethereum is the Right – and Wrong – Foundation for Enterprise Blockchain

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Comtrade Digital Services
  • Date Published
  • Categories Blog
  • Reading Time 7-Minute Read

In this blog, we’ll show you why Ethereum is a necessary, but not sufficient, technology for building real-world blockchain apps.

Depending on which surveys you look at, Ethereum is the foundation for anything from “most” to “nearly all” serious business blockchain development. More than 90 percent of the blockchain tools and libraries on GitHub are Ethereum-compatible. For the foreseeable future, Ethereum is the standard platform for enterprise blockchain projects.

This is true despite the fact that Ethereum has serious shortcomings that make it unsuitable for enterprise-scale projects.

In this post, I’ll show you why Ethereum is a necessary, but not sufficient, technology for building real-world blockchain apps. Combined with tools and protocols that address its limits – technology like Kaleido from ConsenSys – Ethereum is a very solid foundation for enterprise-scale blockchain.

Real World Use Cases

Herd mentality explains part of the rush to the blockchain. Many companies are rushing to launch blockchain initiatives because of a vague sense that the technology is important and a fear of being left behind, as so many companies were a generation ago when they delayed embracing the internet.

But in the real world of customers and deadlines, real use cases are emerging – application spaces where blockchain technology can solve real problems.

Consider banking. Blockchain-based cryptocurrencies were invented largely to eliminate banks as gatekeepers and intermediaries in financial transactions. The antipathy between the financial world and blockchain technology is well-founded. Yet financial institutions have a real need to keep sensitive data private and secure from tampering. Consider the simple case of transferring funds from an account at one bank into an account at another. It happens millions of times every day, and each transaction requires a complex series of confirmations and entries into record-keeping systems. Blockchain technology can eliminate much of the complexity and make the whole process fast, transparent, inexpensive, and secure. That’s a big win.

Or healthcare. Every medical service provider must access and manage sensitive financial and medical information for patients. Blockchain technology could serve as the foundation for a medical record-keeping system that keeps patient data secure while providing immediate, appropriate access to healthcare providers. No more shuttling physical records from office to office, no more dangerous delays as medical offices wait for records before beginning treatment. Blockchain can provide data that is more accurate and more timely – and help doctors save lives. All while keeping the information encrypted and secure.

Enterprise Needs

Could your business benefit from blockchain technology? That depends on whether you would benefit from the permissioning, privacy, performance, and finality that blockchain-based apps can provide.

Permissioning is about data access. You need to ensure that only authorized people and systems are allowed access to data. Real-world solutions require different roles that afford different permissions to different team members.

Privacy has emerged as a defining issue in the way businesses handle customer data. Hacks and breaches have led to governmental regulation and new policies. In the enterprise, data storage and access must be strictly controlled in accord with government policies and government regulations.

Performance is a key issue in any enterprise-level information system. A solution isn’t a solution unless it can scale up to thousands of transactions per second or more – and it can accommodate sudden surges in activity as well. Blockchain technology is not known for delivering high performance, but some are successfully solving performance issues and achieving a high number of transactions per second.

Finality is about delivering funds or data unequivocally and quickly. Transactions must be verified as quickly as possible and funds must be available immediately. Blockchain’s transparency delivers finality and transparency to prevent disputes.

Why Ethereum?

Given the benefits, it’s clear that many enterprises can benefit from blockchain technology – at least in theory. Transitioning from theory to reality requires hard work and clever code. And it requires a solid foundation. Ethereum blockchain is the right technology to serve as that foundation. Here are some of the reasons:

Network size: Existing, public Ethereum network works with hundreds of nodes and millions of users. Offbrand competitors are trying to address enterprise challenges with eight or 10 nodes. The potential to scale the network beyond a handful of nodes is key for most of the enterprises.

Data coordination: With a decentralized architecture, Ethereum is an ideal solution for allocating information and trust. This means that network members do not have to rely on a central entity to manage the system and verify transactions. The system is faster, cheaper, more private, and more reliable.

Finality: A blockchain’s public consensus algorithm ensures confidence that transaction records are tamper-proof. To further improve this, Ethereum offers customizable consensus mechanisms, including RAFT and IBFT, for different enterprises and their needs. Ethereum ensures immediate transaction finality and reduces the need for a slow, bulky infrastructure verification code.

Standards: Ethereum is where the standards are – and that’s a huge benefit. Protocols around token design (ERC20), human-readable names (ENS), decentralized storage (Swarm), and decentralized messaging (Whisper) are readily available. Enterprise Ethereum Alliance’s Client Specification 1.0 defines the architectural components for compliant enterprise blockchain implementations. If you choose Ethereum your project will have access to tools and code libraries to speed development. And you’ll have an easier time finding programmers who are familiar with the platform.

What Does Kaleido Bring to the Table?

All of this makes Ethereum the inevitable choice for enterprise blockchain. And enterprises agree. World-class organizations like Citigroup, Microsoft, Santander, Thomson Reuters, and British Petrol are all working on enterprise-level applications with Ethereum.

Choosing Ethereum is a great first step, but it’s not sufficient. The Ethereum mainnet can’t deliver enterprise performance, for instance. What you need is a way to employ Ethereum standards and protocols on your own network so you can scale up to real-world processing speed of hundreds or thousands of transactions per second. Kaleido is all about creating Ethereum-compatible private blockchains.

With Ethereum alone, you have to recruit and train blockchain programmers. That can delay your project’s launch by years. Kaleido’s SaaS approach to the blockchain means your developers can focus on your specific business needs without becoming blockchain experts.

Interested in the cloud? You don’t want to shut down for months of retooling when you make a strategic decision to move to a private cloud or another public cloud provider. Kaleido’s cloud-based private blockchains work on all public and private clouds. You can even run on multiple clouds if you want to.

When you are ready to get serious about blockchain development, you have a choice. You can jump into the deep end with Ethereum alone, or you can look to platforms like Kaleido to deliver the benefits of blockchain technology in SaaS form. You’ll build and manage borderless blockchain networks with all the advantages and none of the shortcomings of Ethereum alone.

What Are the Benefits of Kaleido?

For one, rapid deployment. Using a SaaS platform like Kaleido, enterprises can quickly easily deploy and manage private blockchain networks instead of coding a new implementation.

Even more important is building permissioned networks. Kaleido’s Blockchain Business Cloud allows enterprises to form consortium networks in which privileged nodes can function as gatekeepers.

Cross-cloud capabilities could take you years to achieve with your own developers. With Kaleido, it’s in the box. Your enterprise blockchain implementation is not limited to a single infrastructure. It can run on several cloud services at the same time, like Microsoft Azure and Amazon Web Services, which brings the flexibility you need.

That’s why Comtrade Digital Services is doubling down on its partnership with ConsenSys. Our clients need Ethereum – with the enterprise-level functionality provided by Kaleido. Working closely with ConsenSys, the Comtrade team has implemented Kaleido-based Ethereum enterprise blockchain solutions already. We’re one of the few enterprise-level blockchain companies with an actual track record.