Public, private and hybrid blockchains: what makes sense where

13
EY Global Blockchain Summit San Francisco, CA April 26, 2017

Transcript of Public, private and hybrid blockchains: what makes sense where

Page 1: Public, private and hybrid blockchains: what makes sense where

EY Global Blockchain Summit

San Francisco, CA

April 26, 2017

Page 2: Public, private and hybrid blockchains: what makes sense where

Page 1 EY Global Blockchain Summit

Public, private and hybrid blockchains: what makes sense where?

Page 3: Public, private and hybrid blockchains: what makes sense where

Page 2 EY Global Blockchain Summit

Blockchain: going public about it

Page 4: Public, private and hybrid blockchains: what makes sense where

Page 3 EY Global Blockchain Summit

Bitcoin, why would you even get involved with that?

► October 2013: FBI closed Silk Road, seized bitcoins worth approximately $3.6m

► February 2014: Bitcoin’s main exchange went bankrupt after being hacked, $600m worth of

bitcoins

► Validation time can be considerable when fees are miscalibrated

► Difficult to scale: 200,000 transactions per day

► Mining centralized in China

► Intense controversy in the development community, stalemate about the future of the protocol,

cf. “block-size debate”

Page 5: Public, private and hybrid blockchains: what makes sense where

Page 4 EY Global Blockchain Summit

Bitcoin is a tremendous tool for sending large amounts of money.

► Transactions move the asset itself,

there are no IOUs, no third party and

no regulatory authority.

► The ledger is fast to read, secure and

temper proof.

► Since 2009, bitcoin is still public, has

no central authority, had experienced

no downtime and no hack exploiting the

core protocol.

► To get a glimpse, search bitcoin block

380943:

► $47.5m in a single transaction for

a fee of 12 cents

► Confirmed in 10 minutes

Source: http://www.louvre.fr/

Source: http://bitcoin.i-rme.es/img/Bitcoin%20Logo%204096%20PNG%20Forocoches%20(RME).png

Page 6: Public, private and hybrid blockchains: what makes sense where

Page 5 EY Global Blockchain Summit

Ethereum: blockchain as a general-purpose and distributed computer

► Smart contracts: software living inside

the blockchain

► 20,000 developers, cloud offerings from

Alibaba, Microsoft Azure, Red Hat

OpenShift, Pivotal Cloud Foundry

► Huge security setback in June 2016 as

The DAO loses $50m embezzled by a

hacker and refunded by forking the

chain

► Focus on security

► Clearer scaling perspectives and add-

ons for decentralized cloud storage and

computing, Internet of Things

Source: https://www.ethereum.org/

Page 7: Public, private and hybrid blockchains: what makes sense where

Page 6 EY Global Blockchain Summit

What did we learn so far?

► “It’s been a tough two years for public blockchains.”Angus Champion de Crespigny, EY Americas Blockchain Strategy Leader for

Financial Services

► Smart contracts need their own best coding practices.

► Private environments look more comfortable and

familiar, similar to the 1990s with the discussions

around the internet vs. the intranet

► OK to go online but not OK to go public

► Radical changes happen faster in open environment

► Blockchain technology is counterintuitive and has

steep learning curves.

► “You don’t need a blockchain for that.”

► Experimenting brings high rewards and valuable

skills.

Source: https:qph.ec.quoracdn.net/main-qimg-

794d92aeb2318c6d1993057397a613a1?convert_to_webp=true

Page 8: Public, private and hybrid blockchains: what makes sense where

Page 7 EY Global Blockchain Summit

Blockchain: bespoke or one size fits most?

Page 9: Public, private and hybrid blockchains: what makes sense where

Page 8 EY Global Blockchain Summit

Miscellaneous considerations

► Blockchains rely on a subtle equilibrium between

game theory, computer network and cryptography.

► Blockchains are both a network of peers, a shared

ledger and a shared token. Taking out the latter is

nontrivial because it is a powerful means of aligning

the incentives.

► For tryouts, see Hyperledger decentralized ledger

technology

► The main benefit of a blockchain is providing trustless

and governance-less reconciliation between multiple

nodes.

► Governance moves (i.e., forks) hard to perform, even

with a governance committee

► Central authority performs better if need to intervene

often

Network Ledger

Tokens

Blockchain

tri-force

Page 10: Public, private and hybrid blockchains: what makes sense where

Page 9 EY Global Blockchain Summit

Metrics to consider

► Metcalfe’s law + peer’s heterogeneity = the blockchain golden rule:► The more peers you have, the more diverse they are, the more useful your blockchain

► Heterogeneity in terms of objectives, expected behavior, allegiance, downtime

Too bad that bringing consensus among numerous nodes comes with scalability limitations.

Who can write in the ledger? How fast? How much payload?

How many

replications of

the ledger?

Who can

modify the

ledger?

Traditional

public blockchain

Traditional

database

Permissioned

public blockchain

Permissioned

private blockchain

Many

One Owner group

Anyone Anyone

Trusted users

Who maintains

the integrity of

the ledger?

Page 11: Public, private and hybrid blockchains: what makes sense where

Page 10 EY Global Blockchain Summit

What technologies are available?

► 700+ different cryptocurrencies with their own consensus algorithm derived from proof of work,

proof of stake, proof of activity, proof of burn, proof of capacity, proof of elapsed time

► “Pluggable consensus” is a chimera, the consensus’s constrains spread all over the protocol

► Few clients have been tested and hardened at large scale

► If you need smart contracts, consider bitcoin and its derivatives: BTCsuite, Bitcoin Core,

Bitcoin Unlimited, Zcash for privacy

► If you don’t need for smart contracts, consider Ethereum and its derivatives:

► Parity (3000tx/s) with Proof-of-Authority Round and TendermintBFT

► Quorum by JP Morgan (2000tx/s) with transaction and contract privacy and Raft Consensus

Page 12: Public, private and hybrid blockchains: what makes sense where

Page 11 EY Global Blockchain Summit

Key contact

Jerome De Tychey

Blockchain Technology Leader EY Paris Lab,

Ernst & Young Advisory

+33 1 46 93 81 87

[email protected]

Page 13: Public, private and hybrid blockchains: what makes sense where

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisory

services. The insights and quality services we deliver help build trust

and confidence in the capital markets and in economies the world

over. We develop outstanding leaders who team to deliver on our

promises to all of our stakeholders. In so doing, we play a critical role

in building a better working world for our people, for our clients and

for our communities.

EY refers to the global organization, and may refer to one

or more, of the member firms of Ernst & Young Global Limited,

each of which is a separate legal entity. Ernst & Young

Global Limited, a UK company limited by guarantee, does not

provide services to clients. For more information about our

organization, please visit ey.com.

© 2017 EYGM Limited.

All Rights Reserved.

EYG no. 04033-173GBL

1705-2288253

ED None

This material has been prepared for general informational purposes

only and is not intended to be relied upon as accounting, tax or other

professional advice. Please refer to your advisors for specific advice.

ey.com