Angus Champion de Crespigny is EY Americas blockchain strategy leader for financial services, where he works alongside Andrew Beal, a West Coast lead for the firm’s Blockchain and Distributed Infrastructure Group.
In this CoinDesk 2016 in Review special feature, Champion de Crespigny and Beal argue that public blockchains – long eschewed by traditional financial services firms – may soon come back into favor.
It’s been a tough two years for public blockchains.
Regarded by many as a social experiment with little practical value beyond anonymous peer-to-peer payments, public blockchains have been shunned by financial institutions and others who have opted for permissioned networks with a little more control and perceived privacy.
This shouldn’t have come as a surprise. It has played out this way before. In the 1990s, big companies wanted to be online, but they wanted to do it without the open web. Intranets were born out of this desire, yet, in the end, the open Internet won out.
Now, 20 years later, we are at a similar crossroads.
Private blockchains feel safer because the permissioned model is more familiar.
Open, transparent systems are a far cry from the “walled gardens” inside institutions today. It is like moving to the house across the street. Sure, your immediate surroundings are different, but your environment is largely the same. It is familiar. Moving to a new city, on the other hand, is a big adjustment, and it takes time. Nothing is familiar.
Utility over convenience
And yet for all of the uncertainty around public blockchains, there is still an enormous amount of utility in a completely open, transparent network.
Not to mention the almost childlike excitement that still comes from watching transactions being processed in real time on a block explorer. Even in their infancy, public blockchains have already proven to be superior record-keepers, and capable mechanisms for injecting trust into a global financial system.
People often forget that bitcoin was only the first iteration of a massively distributed public ledger. And still, seven years after its release, it is exceeding expectations.
In a world where data integrity and security are the number one concern for corporate boards, the power of public blockchains cannot be overlooked.
Progress not perfection
Of course, public blockchains are not without their challenges.
There are nagging issues around performance and scalability, and the energy and hardware required to maintain massive public blockchains have at times rendered them too costly to operate. But if the 1990s taught us anything, it is that transformational change generally happens faster on open protocols.
We are already seeing this play out: open-source communities are tackling blockchains’ technological and operational challenges, and they are doing it globally at a rapid pace.
Platforms that began as proprietary creations have been recently released as open source. Ethereum has made meaningful progress in addressing the performance and resource limitations, and many others have developed novel solutions to introduce more privacy and security into these open systems.
Technology thrives when there are vibrant developer communities testing and iterating, and public blockchains are the ideal sandbox for experimentation.
All in all, the future of public blockchains is bright.
In the coming years, with continued development, these open networks will form the basis for a new class of products, services and marketplaces: digital, open, automated and interoperable.
As we look forward to 2017, with another year of experience with the sharing economy and the Internet of Things under our belt, one thing is certain: everyone and everything are becoming more connected.
People, infrastructure, devices, data – they are all coming together, forming more intelligent, more efficient networks. And as bitcoin has proved, the traditional network and marketplace models with a central authority sitting in the middle are no longer necessary.
Identity, ownership, processing, delivery, fees — it can all be accomplished and verified via math and code, often faster and more accurately. The value of public blockchains will become more evident as these new industries that depend on connectivity and interoperability continue to grow and mature.
One day in the not-too-distant future, public blockchains and the interactions they enable will likely be so ubiquitous that they are considered public utilities, like the Internet, the postal service, public broadcasting and the interstate highway system.
Access to these public blockchain utilities will be an assumed and expected right of every individual and organization. An open fabric for things like identity and payments will emerge. Private chains and applications higher up “the stack” will plug into these open networks to leverage the data and the customers they support.
But, public blockchains are one necessary piece of a larger puzzle that will transform how we do business.
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