Given all the exciting projects being developed in the cryptocurrency world, it’s been quite easy to overlook the technology that may prove to be the sleeper hit of 2015 - private blockchains. This term may initially appear to be a bit of an oxymoron; however, private blockchains have the potential to:
• Allow for a reduced need for trust and financial exposure in existing agreements
• Simplify deployment and maintenance of internal or inter-organizational infrastructure
• Improve security and uptime
• Lower the fully-loaded cost of running your service as compared to a traditional fully-centralized service
• Improve transparency and auditability
Decentralization and Interacting with the Outside World
When you start looking at the areas traditional institutions have been considering moving to a blockchain, you start to find there are practical, regulatory, and business reasons why a global, fully-decentralized blockchain is a non-starter in the short run.
This is a significant class of problem to solve because most of the more interesting use cases address interactions with the existing world and additionally remove significant friction in the day-to-day business people already go about, without requiring them to care about the fact they’re using a cryptocurrency ledger in the background.
If even a small subset of the problems these organizations are seeking to solve can be made more frictionless, you overnight have more users, transactions, and value using blockchains every day than you have in the entire six years Bitcoin has been in existence; and all end users have to do is keep using the services they’re already accustomed to using.
The Decentralized vs Centralized Continuum
One common theme amongst much of the cryptocurrency conversation these days is the vision of every service being built in a decentralized manner, piggybacking on one main blockchain as a source of truth and settlement.
Some of the analysis done to this end will extrapolate out that the Bitcoin network will be able to handle Visa or Paypal level transaction levels within the next X years, but this neglects the latent demand for transactions that could be released if transfers became flexible and frictionless enough to allow for millions of new business models.
In a future crypto-utopian world where calling for and then unlocking an on-demand, self-driving car are two separate Cryptocurrency transactions, Visa-level processing capabilities won’t nearly suffice.
There is an inherent tradeoff between how decentralized a system is and how performant it is. We already struggle to scale many of these services within a centralized model; moving much of the internet’s interactions into a completely decentralized model would mean doing without much that we’ve come to depend on during our day-to-day lives.
The good news is that companies building these services now have an option to choose exactly how decentralized their services will be, based on what makes sense for their use case and business requirements.
Trust, but Verify
However, moving centralized services to a hybrid model (one that fits somewhere on the continuum between completely decentralized and transparent versus completely centralized and opaque) allows you to pick both a trust model and a performance model that suits your service’s unique needs.
As a business, you can keep full control of your services and administer them much as you would a fully centralized model, and still retain many of the benefits of transparency and auditability that come with building a service into the blockchain.
Timeframes & Options
At Pythia we (through our brand new cryptocurrency Credits) are quickly preparing to deploy such systems in short order. Production trials, in real-world systems, are expected to commence within the month.
As we prove these first use cases during these trials, we will standardize the basic building blocks and best practices needed for most use cases, then make them readily available for use in organizations large and small.
Even as a relative veteran in the Cryptocurrency world (as much as is possible this early in the game), it’s incredibly hard to predict how these various factors will play out in the long run. However, it is clear to me that even if the end goal/result is every financial transaction in the world running on the main Bitcoin blockchain, there is much low-hanging fruit that cannot currently be implemented on top of the Bitcoin blockchain today.
Very real pain points can be solved for millions (billions!) of consumers, within a relatively short period of time, by recognizing the various real-world tradeoffs that exist in these legacy systems.
Rather than offering a one-size-fits-all, long-term solution when approached by these organizations, we can very quickly hit the ground running and give blockchains a real foothold in the corporate and government world through solving the pain points that weigh on them every day and not insisting that every solution be completely fitted into the worldwide ledger du jour.