Major Blockchain Technologies, Part 1 Of 2 (Blockchain Report Excerpt)

Blockchain digital technology concept

One of the emerging technologies we cover that isn’t directly a clean tech innovation is blockchain, which promises to be a catalyst for innovation in the green economy in the very near future.

Blockchain is probably most widely known to the public as “having something to do with cryptocurrency and Bitcoin, right?,” which is partially correct, but the technology itself has a wide range of applications, some of which will be crucial in the fields of distributed renewable energy, grid management and energy storage, and smart contracts, among others.

The full report Blockchain – An Innovation Enabler for Clean Technology, which was published in July, is a deep dive into blockchain and its potential, and we will be posting more excerpts from the report over the coming weeks. (Read the last installment here.)


The blockchain and related technologies assessed in the first part of this article are:

1. Bitcoin
2. Ethereum
3. Ethereum Casper
4. Hyperledger

Evaluation Criteria

Each technology has its own radar chart showing its strengths and weaknesses on a simple scale of 1-5, with 5 being generally good and 1 being generally weak. In addition, a general discussion of each one will be included. The criteria are:

Settlement flexibility:

Some of these approaches only recognize and effectively work with their own internal coins or tokens. Others intentionally externalize all payments to get around the inherent limitations of smart contract escrow contracts discussed previously. One allows both. Depending on your application, this is useful or not, but more flexibility inherent to the platform will mean less to build on top of it. And, of course, people on the outside of the cryptocurrency world still want to transact in fiat currencies.

Efficient Blockchain:

Two of the major challenges of blockchain approaches have been the slow speed and high cost of transactions. In order to fulfill the promise of the distributed, immutable ledger, these have to be overcome.

Effective smart contracts:

Smart contracts and distributed applications are effectively the same thing. They’ve been implemented in both specially designed and existing languages. Conceptually, they have a learning curve and toolkits are weak right now. Some are better than others, however. Another factor to consider is the cost of publishing and executing smart contracts and distributed applications.

Regulatory ready:

A large portion of the cryptocurrency world wants to avoid regulation, but for blockchain solutions to be useful in the real world of today, they have to be able to play well with existing regulations. Some of that is trivial, as audit-ability of an immutable, distributed ledger is a baked in part of the solution. Other elements, such as identifiable transactors are tougher and indeed often intentionally obfuscated. And obfuscation of sensitive data to align with regulatory requirements can challenge many implementations.

Maturity:

This is a rapidly evolving space. Some of these technologies are still effectively in alpha and none are older than 10 years. Most are under 5 years old in their current versions. There are a couple with intriguing promise which I’ve included, but I wouldn’t bet the farm on either of them right now if I were attempting to solve a problem today.

Generalized applicability:

Some of these technologies were implemented to solve very specific problems. RIPL, for example, is intentionally a foreign-exchange settlement system with no intention to be anything else, although I’m sure someone is using the approach elsewhere. Some are broadly useful.

Security:

It’s important to remember that blockchain is only a component of an architected solution to most problems. It doesn’t exist in a vacuum. While most implementations make the data itself immutable, that isn’t the same as secure. And some solutions have experienced sufficient hacks over the past three years that it’s difficult to consider them inherently secure.

Used in Cleantech:

Not all of these technologies have direct applications today, but for completeness all of the major ones are included. Some are the workhorses in cleantech, especially Ethereum today. Others have significant promise and I’ll try to identify that.


1. Bitcoin

Bitcoin

Bitcoin is the grandfather of this space, and it’s showing its age. It’s the slowest, most expensive to transact, and least flexible blockchain implementation.

Bitcoin set a fairly standard approach for most of these technologies in that it first published a white paper describing the approach and intent, then set up an opensource project to build the solution.

Bitcoin was established specifically as a store of value and to a lesser extent as a currency for transaction. No attempt was made to optimize it for performance, but instead to optimize it for anonymity and lack of transparency to regulators and authorities. It uses the proof-of-work approach to assuring integrity.

While it’s possible to execute smart contracts on Bitcoin’s underpinning blockchain and at least one organization has done so, the only value proposition for this is if you must transact in Bitcoin itself. Even then, new solutions like Ethereum and currency bridges allow easier and more performant solutions.

Bitcoin is completely generalized, in that it’s specifically intended as fungible currency. It has no target market although it does have natural users in Libertarians, survivalists, and criminals.

In cleantech, the only use identified for Bitcoin is payment for electricity, something Bas Nederland started allowing in 2014.

Project | White Paper

2. Ethereum

Ethereum

Ethereum is much more dominant in blockchain than many people realize. Most non-Bitcoin cryptocurrencies and applications are actually running on the Ethereum approach, either directly or indirectly.

It’s achieved substantial maturity, but in the world of blockchain it’s starting to be a little long in the tooth as well. It’s faster and cheaper to transact in than Bitcoin, but it’s still slow and expensive for a lot of purposes.

Ethereum’s main innovation was the introduction of smart contracts. Its use of the Turing-complete Solidity as a language which effectively compiles into the blockchain itself allows distributed applications to be built. And due to its dominance as a platform, there are a lot more Solidity programmers and resources out there than there were a handful of years ago.

While Solidity allows for complex distributed applications to be created, executing them is moderately expensive compared to some other platforms.

From a settlement perspective, while there are lots of equivalents to foreign exchange offices out there, Solidity smart contracts and applications really only understand Ethereum (or tokens built on the Ethereum protocol inside that implementation). Settlement is fairly restricted to the cryptocurrency without a lot of bolt-ons.

At present, Ethereum uses the slow, computationally expensive, and arguably now obsolete proof-of-work mechanism for assuring integrity.

Like Bitcoin, Ethereum isn’t architected for regulatory compliance, but it’s not quite as intentionally unfriendly to it as Bitcoin. As a platform, it might inhibit some applications in regulated domains without special attention and extra work.

From a cleantech perspective, Ethereum is the dominant platform for grid-related tokens and other use cases.

Project | White Paper

3. Ethereum Casper

Ethereum Casper

Ethereum is about to undergo a hard fork, which isn’t an instrument for eating tough food, but a non-reversible alteration to its code and approaches. It’s called Casper — yes, after the friendly ghost — and it shifts from Ethereum’s proof-of-work protocol to the more efficient proof-of-stake approach.

This should increase its speed substantially while also dropping the underlying costs of transactions. Whether this alters the $0.50 to $1.50 average price of transactions remains to be seen.

This should make the Ethereum platform and technology an arguably more dominant player than it already is. However, competition is arising, and settlement is still relatively inflexible.

Project | White Paper

4. Hyperledger

Hyperledger

Hyperledger is a different beast than Ethereum or Bitcoin. It’s a B2B collaboration technology with no cryptocurrency. It’s intended to automate aspects of human-negotiated legal contracts, not to be a contractual vehicle by itself.

All payment mechanisms are externalized and there is no means to automatically trigger payment within and from Hyperledger. It’s such a non-currency platform that only one cryptocurrency appears to have been built on it, VIVA.

Use cases include sharing common metadata be- tween organizations, metadata and security, with a heavy focus on financial services, government, supply chain, and health.

Hyperledger initially used the Go programming language to write distributed applications. While Go is a moderately commonly used language, if not nearly as prevalent as Java, Javascript, or C#, it’s an interesting choice for enterprise-oriented infrastructure. However, subsequently the Hyperledger Composer has started supporting Javascript, a much more widely known language.

Its efficiency comes from centralizing the block creation into a single computing cloud resource rather than competing for the resource. Blocks are validated by the other organizations that are participating. This means that the computationally intensive portions run only once and can be scaled appropriately for performance.

From a cleantech perspective, most of the examples appear to be on IBM’s implementation, so they will be covered in the next section.

Unsurprisingly, given the corporate heavyweights involved in creation of Hyperledger, the whitepaper comes in volumes.

Project | White Paper

Part 2 of this article will include evaluations of IBM Blockchain (Hyperledger), IOTA, NEO, RIPL, EOS, and Stellar.


Source
Author:  Michael Barnard
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