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A few years back, enterprise blockchain was the buzzword of choice in boardrooms across the globe. Every industry, from supply chain and logistics to finance, law, aerospace, government, and more, had some innovative use cases to which they could apply blockchain.
While it would always have been difficult for any technology to live up to the hype, it’s safe to say that many of these proposed use cases haven’t emerged in the way that it first seemed. The technology hasn’t gone away - so what went wrong?
The Hype was Premature
The technology may indeed still be there, but the problem is that it was never ready to be used in the way that was initially being sold. Now, a project with an all-star team of business professionals, decorated cryptography academics, and entrepreneurs has assembled to build Concordium, a platform that’s aiming to reboot the enterprise blockchain revolution.
Distributed ledger technologies split into two distinct camps. Those that have been implemented by enterprises on any meaningful scale tend to be private or permissioned blockchains.
For example, JPMorgan’s (NYSE:JPM) Quorum blockchain is essentially a permissioned clone of Ethereum, while the Food Trust application, developed by IBM (NYSE:IBM) and used by Walmart (NYSE:WMT), is based on the permissioned Hyperledger platform. Permissioned blockchains only allow entry to those who agree to all the rules and agreements of the network, and enterprises are usually able to identify with whom they’re transacting.
However, using the technology in this way to ensure strict compliance with know-your-customer regulations, is akin to throwing the baby out with the bathwater. As one critic pointed out, once a group of enterprises has appointed a central party to build a permissioned system, all the true benefits of using a blockchain are diluted. The system isn’t open or decentralized, losing the security and privacy elements that make a blockchain attractive. It depends on a central authority who decides which parties can join.
Public Blockchains - Not Fit for Purpose
The other camp, public blockchains, come with significant challenges for enterprises. Particularly in the US, regulators have clamped down heavily on many projects, all but shutting down platforms such as Telegram’s Open Network.
The President and Treasury Secretary Steven Mnuchin have been openly dismissive on the subject of cryptocurrencies, associating them with crime and money laundering, and failing to acknowledge any of the potential that the underlying technology could bring to US businesses.
While this attitude tends to attract derision and frustration from the cryptocurrency community, Mnuchin’s comments are at least partially accurate. Cash is still the money launderer’s medium of choice in most cases, but public blockchains offer a level of pseudonymity that can make it difficult for a user to know who is the counterparty to any given transaction if they choose not to disclose their identity.
This pseudonymity is perhaps the most significant barrier, explaining why blockchain adoption by enterprises hasn’t taken off in the way it initially seemed to promise. Combined with the fear that regulators will swoop in on any attempt to leverage the benefits of a public blockchain, enterprises have largely decided to opt for a private ledger solution or avoid the topic altogether.
Perhaps the missing link was for someone who understood these challenges to step in with a workable solution for enterprises and regulators. Now, the creators of the Concordium enterprise blockchain appear to be doing just that. Concordium offers a platform that solves the trade-off between identity and privacy, carrying a sheen of reputability thanks to its stellar team of respected academics and industry veterans.
Balancing Identity and Privacy
Under the hood, Concordium has an extremely sophisticated technology stack, comprising multiple layers that enable it to achieve the aims of high throughput, fixed low transaction costs, and easy-to-deploy smart contracts.
However, the unique selling point of the platform is in its ability to ensure that enterprises can meet any legal order to identify counterparts to their transactions, so that the relevant authorities can verify who is involved. At the same time, in the normal run of business, users are guaranteed that they can transact in private without airing their operations or financials on the public blockchains.
An Off-Chain Identification Process
The identity element is achieved through a dedicated identity layer. Before a user can create an account, they have to provide a legal form of ID to an identity provider in an off-chain process. The ID is used to generate an identity object stored locally with the identity provider. The user receives an identity certificate that enables him to open an account. When they open an account, their encrypted identity object is also assigned to a third party called an anonymity revoker. The anonymity revoker doesn’t know the identity of the user.
If there’s a legal order, for example, by the courts or a tax office, to identify the user, then the anonymity revoker can decrypt the identity object to allow the identity provider to retrieve the original ID and hand it over to the authority that issued the order.
On-chain Transaction Privacy
The identity layer operates alongside the execution layer, which provides an assurance of transaction privacy. Users can choose which level of privacy to apply to their transactions. Standard transfers are visible on the public blockchain in a similar way to transactions on Ethereum. However, Concordium’s encrypted transfers use sophisticated zero-knowledge proofs that cloak the value from everyone except the sender and receiver.
Furthermore, the same proofs enable users to send transactions through a “mixnet” which allows them to transact between their own accounts without anyone linking them. This is a valuable feature for companies with multiple legal entities and cost centers, enabling them to keep internal transactions private.
A Distinguished Team
Concordium was founded by Lars Seier Christensen, the founder of the Danish investment bank, Saxo, which he grew to 1,500 employees in 150 locations. Seier Christensen now chairs the Concordium Foundation.
The operational running of the company is under Lone Fønss Schrøder, who joined the company last year after serving 22 years at shipping company AP Moller-Maersk. While at the company, she served as Senior Vice-President and founded Maersk Procurement. Along with her role at Concordium, Fønss Schrøder is also Vice Chairman at Volvo Cars and sits on the board at IKEA.
Lone Fønss Schrøder, Concordium CEO
Professor Ivan Damgård leads the Scientific team. One of the world’s most-cited cryptography researchers, Prof. Damgård is the co-inventor of the Merkle-Damgård construction, which essentially powers all, or at least most, blockchains.
Furthermore, the project has attracted an impressive advisory team. Two of the most notable members are former Secretary-General of NATO and former Prime Minister of Denmark, Anders Fogh Rasmussen, and the former COO of Skype, Michael Jackson.
It has taken several years for a platform to emerge that can solve the fundamental trade-off between privacy and compliance. However, a solution was always going to be needed if enterprise blockchain was ever to gain any real traction. As Concordium moves towards a mainnet launch in early 2021, perhaps the excitement about blockchain for business may become reignited, with a chance of getting it right this time around.