Scaling new heights in blockchain

What happened at the European Union Blockchain Observatory & Forum workshop on scalability, interoperability and sustainability in Berlin on October 2, 2018

Published 14 November, 2018

The full minutes of the workshop are available here.

Video from the workshop are available here.

As blockchain technology turns 10 years old, much has been achieved, but we are still waiting for mass adoption. While predictions that 2018 would be the year that blockchain “becomes real” have proven premature, there are a significant number of large-scale projects that look certain to go into production in 2019.

While this is good news for the industry, there are still hurdles to be overcome before reaching any significant milestones on the road to mass adoption of this technology. Among the obstacles to the implementation of truly large-scale, broad-based blockchain platforms are scalability of blockchains and the ability of different blockchains to talk to each other (or “interoperate”). First generation blockchain technology, based on Proof of Work consensus, has also proven very costly in terms of energy consumption, raising questions about sustainability.

At the fourth workshop of the EU Blockchain Observatory & Forum, held on October 2, 2018 in Berlin, blockchain thought leaders and practitioners gathered to look at the state of the technology today in terms of these three important parameters, and to look at what needs to be done to build a truly large-scale blockchain infrastructure in Europe, both in terms of the technology and platform governance.

The state of the art

On the tech side, the most pressing issue is probably scalability. Compared to traditional databases, current blockchains cannot handle high volumes of transactions. That is set to change. Advances on the network level and through such techniques as sharding (breaking up the blockchain into pieces that are processed concurrently) and alternative consensus algorithms (to replace the secure but cumbersome and energy inefficient Proof-of-Work currently used by most blockchains) look set to increase blockchain capacity. More promising still are a variety of off-chain (or Level 2) solutions, some of which are production ready, and which offer near instantaneous and low to zero-cost transaction capabilities.

That said, there are technical hurdles to overcome. Sharding is highly promising too, but devilishly complex. Much work still needs to be done. A lot of progress has been made on alternative consensus algorithms like Proof of Stake and Proof of Authority, yet these often involve tradeoffs in terms of trust or security.

Spoiled for choice

Still, designers and developers of blockchain platforms have more viable technology choices now than they have ever had, with a number of different options to choose from to best fit their particular use case. From today’s vantage point it seems clear that the future will be one of many different blockchains that “interoperate” (communicate and share data) with each other, as opposed to one all-purpose global blockchain, which had been one of the dreams of the early days of the technology. Such a multiverse is likely to consist of numerous industry-specific chains that interoperate via a base public layer, benefiting both from the efficiency of tailored chains and the security guaranteed by the public layer.

These use-case specific blockchains will typically be run by industry consortia of the kind that we are increasingly seeing. A number of these – including IBM-Maersk project, the Interbank Information Network, Alastria, Komgo, LiquidShare, the Australian Securites Exchange, Vakt and the Federation Francaise de l'Assurance – are set to go live on a large scale in 2019.

Experience with these and similar projects has already revealed a set of common characteristics for success. They are based on strong foundations, including comprehensive identity and permissioning frameworks, strong security policies and audits, and evolutive legal terms and conditions, and share a number of common enabling features, from shared workflows and a service-oriented architecture to a homogeneous production environment and a dedicated team for upgrades and maintenance.

The human element

For projects large and small, the human element remains important. This means above all getting governance right, whether on chain or off chain, and whether dealing with technological, operational, legal or other types of risk. Standards are also extremely important, with efforts like ISO TC/307 and others likely to make a significant positive impact sooner rather than later. Developing large platforms with decentralised technologies also requires a new mindset among technologists, especially in an enterprise setting where people may not be used to collaboration outside their organisation.

As with the technical hurdles, we can expect governance, standards and organisational challenges to be mastered over time. Momentum is building for blockchain-based platforms to go mainstream, and for the evolution of a European blockchain infrastructure. With that, blockchain in Europe seems poised to scale new heights.