A View from the Trenches
While blockchains look identical to the untrained eye, the reality is quite different, says Marta Piekarska, Director of Ecosystem Development at the Hyperledger consortium.
Piekarska is a veteran of the blockchain space. Before joining Hyperledger, she was a Security Architect at Blockstream Corp and a co-chair of the World Wide Web Consortium’s Blockchain Community Group. In other words, Piekarska is in the trenches of the blockchain revolution.
I spoke with her on the phone recently as part of my ongoing effort to demystify the blockchain marketplace. Piekarska’s commentary was clear and lucid. I strongly suggest reading all the way to the bottom, especially if you’re thinking about investing in cryptocurrencies.
It helps to understand the technology. Please, please, please remember that. Otherwise, you’re just another speculator stumbling in the dark, hoping to trip over a gold mine.
In any case, I hope you find the interview as illuminating as I did, especially the part where Piekarska argues in favor of permissioned private blockchains (don’t be scared by the technical terminology; she explains it all below).
So, without further ado, here is my interview with Hyperledger’s Director of Ecosystems, Marta Piekarska.
Gaurav Iyer (GI): Let’s start with the basics. What is the difference between enterprise blockchains like Hyperledger and public blockchains like Bitcoin?
Marta Pierkarska (MP): Well, there is a spectrum. Blockchain technology predates Bitcoin and cryptocurrencies, going back to the nineties, but mass adoption did not take place because there were many problems we couldn’t solve. When Satoshi Nakamoto published the Bitcoin whitepaper in 2011, we finally saw a proof of concept of what blockchain technology can do.
This is where everyone started adopting “permissionless public blockchains” like Bitcoin. It was the beginning of the story. And then we went back and said, “This technology can be adapted to many more fields.”
What if we tried building networks where we say, “Not everyone can join this network, not everyone can put information on the blockchain, like in the case of Ethereum or Bitcoin?” What if, instead, we focused on accessibility and visibility?
That’s what “permissioned private blockchains” are; it is about who can write to a blockchain and who can read from a blockchain. So permissioned versus permissionless is about who can write to a blockchain, and public versus private is about who can read from a blockchain.
GI: Why would it be important to restrict who can write or read a blockchain?
MP: Well, think about medical records, for instance. You don’t want your medical records to be accessible to everyone, right? That would be crazy. You want your doctor, or a set of doctors, to be able to input information about what medication you’re taking or what diseases you went through. This is a permissioned private network.
When only certain people can write to the blockchain, and everyone can read it, that is a permissioned public blockchain. For example, university degrees are a great use case. Only Harvard can issue its certifications, but anyone can inquire whether you studied there.
Elections offer a third model, known as permissionless private blockchains. Anyone can input a vote, but only some people can calculate and verify the votes. This is why we have a spectrum of blockchains. Moving forward, we will not see “one blockchain to rule them all,” but instead a mass adoption of various blockchains, depending on the use cases.
Some will issue tokens, some will not. Some will have financial use cases, some will have insurance use cases—there’s just a very broad spectrum.
GI: Where would you put Hyperledger on this spectrum?
MP: Hyperledger does not focus on cryptocurrencies; we focus on permissioned private blockchains. We bring large enterprises together through open-source software.
GI: Some people argue that what you’re doing contradicts the core purpose of blockchain technology. Wasn’t the original idea to be based around decentralization? Working with large enterprises seems to run counter to that idea.
MP: The fact that something is decentralized doesn’t mean it cannot have permissions to join, because there is still a consenting mechanism. There is no central governance. It’s a bit like saying, “We all have to agree on certain rules for anyone to join, but once we’ve agreed on those rules, there’s no one person to control that network.”
Plus, there are so many reasons we don’t want complete anonymity and anarchy on the blockchain.
GI: Could you expand on that a little? Why is anarchy on the blockchain a bad thing?
MP: Well, in an enterprise setting, you want a certain level of verification of where your data goes. If you’re in a competitive setting, you don’t want your competitor to be able to access your information; you want to be able to hold the information within your company. It’s one thing to decentralize the information within your firm, but it’s another thing to leave it open it to everyone on the outside. That’s why enterprise offerings have to be different.
We want to decentralize the nodes, we want to achieve a consensus mechanism, but that’s not a consensus that is based on mining. By creating a consortium of nodes that collaborate with each other, but agree to join, we remove the incentive for “mining.” This means we don’t need cryptocurrencies, we don’t need to waste energy. We completely change the game.
GI: So, what is the difference between Hyperledger and, say, Ripple? You are right that some banks are using Ripple’s blockchain without adding XRP into the mix. But recently, some of Ripple’s partners have implemented the “xRapid” software, which makes use of XRP, in order to increase the efficiency of cross-border transactions. How do you square that circle?
MP: We don’t see ourselves competing with any of those projects. As a matter of fact, Ripple is still considering joining Hyperledger. They have even contributed code from their Interledger protocol to one of our projects, which shows you how closely we work with them.
But if you’re looking for differences, there are a few.
What we do at Hyperledger is open-source. So that’s a big difference. We are not pay-to-play; we believe in developing code as open-source and bringing enterprises together to share knowledge and experience. This leads to much faster adoption and better solutions than if we simply built in-house.
Second, everything we do is universal. The software we develop at Hyperledger have been adopted in supply chain, as well as healthcare, as well as financial technology. It is much more versatile.
Third, “Hyperledger Fabric” allows you to create private channels in public settings. So in a consortium of multiple parties, you can have a private communication channel with a certain party. The rest of the parties can see we’ve exchanged information, but they don’t know what that transaction is or for how much, because those details do not need to be public. This is something the Ripple network cannot provide.
GI: Okay, final question: do you believe that the cryptocurrency market is in a bubble? Or will blockchains, with their various use cases, eventually grow into the exorbitant valuations placed on them by investors?
MP: That’s a very interesting question. Blockchain is an extremely valuable technology that going forward we will see applied to every industry. But it will be part of the solution, not the solution to every problem.
Blockchain is not fairy dust. You cannot sprinkle it on cake and hope you won’t gain weight. We have to develop solutions that are wholesome and built in a very good way. We have to think about the consequences of what we do. This goes for everything, including cryptocurrencies.
If we build wallets that are not secure, people will continue stealing money. If we don’t build [user interfaces] that are good, people will forget their passwords and simply lose money by not remembering their keycodes. So I guess it depends on what you mean by a “bubble.”
GI: Well, there is a significant amount of investors for whom nothing matters except the price of a cryptocurrency. They expect it to go up forever. I suppose that’s what I mean by a “bubble.”
These investors could be right by accident. The value created by blockchains could fill into the price over the long run, making them lucky enough to have been in the right assets at the right time. Or it might not happen. Which scenario do you see happening? Boom or Bust?
MP: It’s hard for me to speak to the value of Bitcoin or cryptocurrencies. That’s not what we deal with at Hyperledger, because we decided to focus on enterprise blockchains. But I will say that what John Oliver said on Last Week Tonight was hilarious. These companies changing their names to include “blockchain?” That’s definitely a bubble. I’ve been living in San Francisco for a while and I can tell you, this stuff is definitely a bubble.
Eventually, we will get to a point where blockchain is hidden from everyday users. And that, I think, is when we will arrive at a sensible price point.