It’s been almost 6 years since J.P. Morgan released the enterprise Ethereum client Quorum (now ConsenSys Quorum), however during the past few years, the focus has shifted somewhat to public blockchain networks.
Last month, the enterprise blockchain narrative was given a new lease of life by VMWare’s announcement
they were adding support for Ethereum to their enterprise blockchain platform.
Back in 2016 when Quorum was launched, followed by the Enterprise Ethereum Alliance a few months later, they brought together many of the world’s leading enterprises including Microsoft, UBS, Santander, Accenture and CME Group.
With this momentum, it appeared to be only a matter of time before these enterprise blockchain networks began to start changing the face of business, moving many of their inefficient non-value driving activities on-chain.
Many firms had been touting the benefits of blockchain in an enterprise setting since 2015 and earlier, hence such industry adoption appeared to be inevitable.
However, whilst a number of initiatives were announced, in the years since, there has been a lot more focus on the public blockchain networks, with enterprise networks falling out of favour with many of the proponents of Web3.
In some instances, this was justified, where companies used blockchain simply as PR machines where they would promote their company’s activities via a press release, then shelve the initiative.
In other instances, it was the challenges associated with network governance between other large, slow-moving, risk-averse participants, or simply the wrong problem to be focussed on in this first instance.
Regardless of the specific reasons, enterprise blockchain technology simply could not compete with crypto, DeFi and NFTs when it comes to the speed of innovation and mainstream appeal of the innovation taking place on public networks.
This isn’t to say activity has fallen by the wayside. The sector is alive and well, with companies and consortia continuing to move forward with their initiatives.
For instance, the interest in wholesale financial markets spanning central bank digital currencies and FX settlement is still very real
, with firms such as Fnality which have been gathering momentum since 2015, back when it was called the Utility Settlement Coin.
Such industry inevitability is mirrored in the supply chain, telcos, pharma, healthcare and government — but what is less clear is when and how these Web3 networks for enterprise will come to fruition.
VMWare’s announcement is important, as it is the most significant enterprise focussed Ethereum announcement since J.P. Morgan announced Quorum and the genesis of the Enterprise Ethereum Alliance.
Quorum was significant in that you had the world’s largest financial firm putting its weight behind Ethereum technology. Now you have one of the world’s largest enterprise technology companies (VMWare’s market cap is larger than HP but smaller than IBM
) adding Ethereum support to their blockchain platform.
Since then we had the DeFi summer of 2020, and the NFT mania of 2021, onboarding many new participants to Web3. The fact that all of this innovation took place on Ethereum caught the attention of many, who started to appreciate just what was possible on the platform.
Enterprises looked with envy upon much of this activity and started to look beyond the private-permissioned networks of old and consider how they may be able to leverage from this public network infrastructure which didn’t come with all of the governance overheads of the private permission networks.
One of the major hurdles to using public blockchain networks is the lack of transaction privacy, limited throughput, and the anonymous nature of participants.
In the past couple of years, layer 2 networks have emerged offering far greater transaction throughput than their layer 1 cousins, and initiatives such as the Baseline Protocol
emerged to held addresses the privacy and anonymity challenges for the enterprise.
This combination of technologies helped the appeal of public permission networks to grow, and as such many organisations are considering how they can best utilise them.
After all, Ethereum’s longer-term role is to be an internet-scale settlement layer, so it completely makes sense to utilise these public networks long term.
The universal connectivity offered by public networks, with appropriate privacy controls in place, is certainly one route that we will see some enterprises take. But it is not the only one.
There will be those consortia that want to remain in tight-knit networks, where they are happy to take on the overhead of managing the network themselves in order to tightly control it. The creation of central bank digital currencies and products in highly regulated industries such as finance will likely remain using such models.
These networks will not remain as islands forever, there will always be points at which the assets that exist on them need to be represented on other platforms, be that a bank or some other institution. It’s therefore likely that blockchain networks will be the natural choice for other platforms on which these financial assets can exist.
This will require interoperability between these private closed networks and other private or even public networks. In order to achieve this, universally accessible blockchain networks will need to be available, which is where a generally accessible settlement layer such as Ethereum comes into play.
With this in mind, what VMWare is doing is doubling down on the market for enterprise blockchains with a view to providing a high-performance platform that near term will appeal to those organisations building consortia chains.
In embracing Ethereum technology they are recognising where the most demand is for Web3 applications, and no doubt over time will look to find ways to interoperate with public networks, as their deployments become more widespread.
Once the Ethereum Merge is out of the way, the next significant milestone will be the implementation of sharding which will see the Ethereum network increase its scalability by providing better support for high-throughput rollups. This will allow networks to persist blobs of data to the main network.
If enterprise blockchains are able to transition to being rollups themselves, with this sharding infrastructure they will be able to secure proofs of transactions taking place against the Ethereum mainnet, which will be very attractive.
At this point, the difference between public and private networks will be less pronounced, as there will be different networks optimised for different use cases. Any companies working on enterprise initiatives should have this point in their sight, as this will be the point where blockchain becomes the fabric that can underpin many of our enterprise applications, without all of the concerns that it faces currently.
This will be the endgame for enterprise blockchain.