Un-blocking the Chain

2019 IT Prediction Series #3: A “network of networks” will mature blockchain for greater business security and monetization

We’ve all heard the buzz around blockchain and how this technology will one day revolutionize the way we do business. There is a wide range of opinions on whether or not investing in blockchain enablement is critical right now. According to McKinsey, the global market is in the very early stages of adopting blockchain strategies and it may take another three to five years before blockchain has a material impact. Other surveys, such as the one from Deloitte, predict a compressing adoption curve among business leaders. Whether you trust McKinsey, Deloitte or your Magic 8-Ball, enterprises should ask themselves these questions:

1) Can blockchain or distributed ledger technologies (DLT) improve my business?
2) Can we overcome legal, commercial and regulatory obstacles?
3) Should we investigate blockchain now?[i]

While public blockchain networks, such as Bitcoin and Ethereum, capture many daily headlines, looking back at 2018, private blockchain networks made headway and could prove to be a game changer in financial services, supply chain, government and healthcare industries. The recent Deloitte survey on global blockchain adoption showed more than one-third of respondents currently have blockchain in production and another 41% are planning to bring blockchain online in 2019.[ii]

Ultimately, blockchain has the potential to empower all industries to radically change the way they interact with customers, vendors, suppliers and partners. It has the potential to reduce cost structures by dramatically improving efficiency models, and to create brand new revenue streams through the advent of new applications. According to Deloitte, “In short, the only real mistake we believe organizations can make regarding blockchain right now is to do nothing.”

Private blockchain networks go mainstream in digital business

Though both public and private blockchain platforms are currently rolling out, we believe enterprise consumption of blockchain technology will evolve into the digital business mainstream through private blockchain networks. These networks will help companies begin the adoption process while retaining the levels of control and security for which they are accustomed.

Private networks currently have a higher probability of being leveraged for new use cases where application performance is critical. For example, the current public network consensus models cannot support blockchain applications with the increasing transaction per second requirements and lower latency mandates.

The framework of permissioned networks also supports greater control over the network participants, ultimately delivering stronger, more targeted security. From our engagements so far, we’ve determined the difficultly in blockchain adoption seems less around the technology and more around governance models. A consortium governance model is leveraged by many of the private networks as a means to manage participants without consolidating power in any one entity. This is an important distinction, as purely private networks with a single leader or owner may not scale as intended. This is highlighted in recent articles around TradeLens, a 90+ member blockchain network led by Maersk, built on the IBM Blockchain Platform. As Maersk controls the network and therefore its intellectual property, gaining participants, especially competitors, can be difficult. In response to this situation, a new, consortium-based blockchain network was announced for the shipping industry, “Global Shipping Business Network,” which includes five of the ten largest container carriers.

Having multiple blockchain networks serving the same purpose means that consortium, private or even public networks can work. How these networks are able to derive internal and external value is critical, as is the ability for the associated data to be accessed by the parties that require it or who are paying for it. The same global, vendor-neutral interconnection hubs that enable private and public blockchain networks can also be leveraged to more efficiently and effectively create gateways to address those access requirements.

In a private network, as some level of trust is present through existing business relationships or contracts, more efficient consensus mechanisms can be leveraged and even the consensus nodes themselves, whether a private node or from a cloud provider, can be proximate to one another.

Multiple blockchain networks require seamless integration

New blockchain ecosystems are bringing new opportunities and demands for business and IT leaders. As mentioned earlier, we expect to see enterprises joining multiple blockchain networks, just as multicloud and hybrid cloud infrastructures have become the norm. Eventually, a typical enterprise may need to connect to dozens of different blockchain networks comprised of differing blockchain protocols leveraging multiple cloud providers.

Based on Equinix research, we’ve seen a growing number of blockchain networks forming in different verticals: financial, healthcare, pharmaceutical, retail, shipping and government. In all of these verticals, whether it’s confirmation of a cross-border payment or the shipping of pharmaceuticals, the requirement for near real-time transactions is becoming critical.

Whether an enterprise joins its first or fifth blockchain network, creating the connection between its internal enterprise infrastructure and the blockchain network is key. Modifying internal enterprise data structures is not an option, so enterprises are looking for application-level gateways to help them address these integration challenges. Application-level gateways typically reside in proximity to the enterprise edge where it connects to the blockchain network nodes. This hub offers network integration and real-time blockchain network interaction with consistent performance.

Multiple blockchain platforms, nodes and bigger payloads 

Not only does Equinix see the enterprise connecting to multiple blockchain networks, but they are also leveraging different protocols, platforms and node deployments. Cloud service providers (CSPs) are working to simplify blockchain deployments by offering a blockchain Node-as-a-Service (NaaS) solution. The aim is to provide a frictionless deployment of blockchain nodes for enterprises or even smaller blockchain solution service providers around the world. Equinix is working with these CSPs to make their NaaS solutions available for the enterprise like any other cloud service. In addition to these cloud-based node services, some enterprise customers are deploying private nodes for specific blockchain networks. These can work in place of an NaaS solution or in parallel, similar to a hybrid multicloud architecture. Since all of these nodes are proximate to one another and the core enterprise infrastructure, they are able to achieve high levels of performance.

Today’s blockchain networks have focused on basic transaction information. This is in part based upon the genesis of the use of blockchain for Bitcoin, to transfer a cryptocurrency between two parties. Once the world saw the potential, new use cases for blockchain and distributed ledger technology grew. We believe that in the future, use cases that require larger transaction sizes will emerge. To support these larger requirements, participants will need to leverage local and cloud storage resources, as well as private network connectivity.

Distribute the Ledger – Converge the Geography

As time progresses, enterprise customers will be participating in many different blockchain networks. To efficiently connect their core enterprise infrastructure to blockchain nodes, it’s logical those nodes would be placed adjacent to those infrastructures. As the number participants increase, it becomes more efficient for them to deploy in the same metro area to increase overall performance, availability, flexibility, scale and, eventually, functionality.

To achieve a high-performing blockchain network, enterprises and blockchain providers will require proximate, vendor-neutral interconnection hubs that are distributed worldwide and can deliver the predictable private bandwidth, low-latency interconnection required without going over the public internet. This will also open up the list of potential use cases not possible in today’s architecture. Regulations notwithstanding, imagine a healthcare-related blockchain network supporting the inclusion of both procedures and payments, but also patient MRIs, test results, high-resolution imagery and more. Patients could grant access to their relevant encrypted medical data to doctors providing treatment and to pharmacies filling prescriptions, or they could monetize it by pooling their data with other anonymized records managed by Clinical Research Organizations.

Interconnection is a critical component of enabling blockchain technology

Across vertical markets, early blockchain adopters are beginning to realize the critical nature of having a neutral, interconnected platform with dense, globally distributed blockchain solutions to quickly, accurately and securely transfer data between their blockchain provider nodes and their legacy IT systems. By deploying Interconnection Oriented Architecture® (IOA®) best practices and blueprints, blockchain network participants can leverage a proven and repeatable architectural framework that directly and securely interconnects people, locations, clouds, data and things. An IOA® approach can help blockchain adopters deliver fast and secure transactions within existing and emerging interconnected ecosystems, even ones as demanding as financial services.

Equinix’s pivotal role in accelerating blockchain adoption

As more digital business transactions take place across different blockchain networks, enterprise customers are strategizing how to efficiently connect their core enterprise infrastructure to blockchain networks.

Platform Equinix® can provide blockchain ecosystem participants:

  • Density. Private interconnectivity to a choice of multiple blockchain, vertical industry and digital ecosystems that drive a high volume of local interconnection and collaboration.
  • Proximity. Deploying core enterprise IT infrastructures close to multiple blockchain networks via private interconnection enables faster and more secure transactions.
  • Bypassing the public internet to avoid network contention, performance and security issues allows blockchain participants to move big data and transaction payloads faster.
  • Deploying private blockchain nodes or leveraging multiple Nodes-as-a-Service solutions from different CSPs provides much-needed choice and scalability among blockchain platforms, without vendor lock-in.
  • Growth. As blockchain networks and their payloads grow, connecting to long-term storage options to manage database performance and compliance requirements will be essential.
  • Integration. As with cloud and network ecosystems, a globally distributed interconnection platform will help integrate blockchain ecosystems and augment any blockchain solution using greater capabilities (e.g., security, atomic timing, application gateways, translation services).

Blockchain will ultimately become a disruptive force in digital business and Equinix will be here to help our customers get onboard.

For more information, check out the Platform Equinix Vision paper.

[i] McKinsey, “Blockchain beyond the hype: What is the strategic business value?,” 2018.

[ii] Deloitte, “Breaking blockchain wide open,” 2018.

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