EY Blockchain Leader: The era of the rise of public chains has arrived, but challenges still exist

Editor’s note: Angus Champion de Crespigny, EY’s U.S. Financial Services Blockchain Strategy Leader, co-authored this article with Andrew Beal, EY West Coast Blockchain and Distributed Infrastructure Group Leader.

In the article, Champion de Crespigny and Beal argue that public blockchain blockchains, long shunned by traditional financial services firms, may soon gain favor.

The past two years have been difficult for public chains.

Many people believe that public blockchains are a social experiment with little practical value beyond anonymous peer-to-peer payments. Financial institutions and others have shunned public blockchains and opted for permissioned networks (private blockchains) that retain some control.

This is not surprising, as it happened a long time ago. In the 1990s, large companies wanted to participate in the construction of the network, but they did not want an open network. In this context, internal networks were born, but in the end, it was the open network that won.

Today, 20 years later, we find ourselves at a similar crossroads.

Private chains feel safer because managers are more familiar with the permission model.

The open, transparent web is very far away from today's "walled garden" internal organizations. It's like moving to the house across the street. Sure, the buildings closest to you are different, but the larger environment you are in is largely the same. It's familiar. Moving to another city is a huge adjustment that takes time. Nothing is familiar.

Practicality is more important than convenience

Despite the many uncertainties surrounding public blockchains, a completely open and transparent network still has a wide range of uses.

When we see transactions being processed in real time on a block explorer, you may exude a childlike excitement. Although public chains are still in their infancy, they have proven to be excellent bookkeepers and have added a usable trust mechanism to the global financial system.

It’s often forgotten that Bitcoin is only the first iteration of a massively distributed public ledger, and that, seven years after its launch, it has already outperformed expectations.

The transaction volume of Bitcoin is increasing every year, and its security is becoming higher and higher. This is also a major reason why many other blockchains choose to anchor the Bitcoin blockchain.

In a world where data integrity and security are top concerns, the power of public chains cannot be ignored.

Public chains still face many challenges

Of course, there are also many challenges in public chains.

The performance and scalability issues of public chains have always been very thorny, and the high cost of energy and hardware required to keep public chains running has also been criticized. But if the 1990s taught us anything, it is that open protocols will make transformative change happen faster.

We are already seeing this trend: the open source community is solving blockchain technical and operational challenges, and developers around the world are accelerating into this space.

The Linux Foundation's Hyperledger project now has more than 100 member institutions, about a quarter of which are from China.

The platforms that have applied for patents have recently been released as open source. Ethereum has made meaningful progress in addressing performance and resource limitations, and many other developers have proposed new solutions for their open systems that are more private and secure.

Technology thrives when there are many vibrant developers in the community testing and iterating, and public chains are the ideal sandbox for experimentation.

Looking ahead

All in all, the future of public chains is bright.

As they continue to evolve in recent years, these open networks will form a (digital, open, automated and interoperable) foundation for a new class of products, services and markets.

As we look forward to 2017, what can we expect? Will it be another year of the sharing economy and the Internet of Things? One thing is certain: everyone and everything will become more connected.

People, infrastructure, devices, data, they all come together to form smarter, more efficient networks. As Bitcoin has demonstrated so well, traditional network and market models with middlemen are no longer necessary.

Identity, ownership, processing, delivery, fees, etc. can all be done and verified through mathematics and code, and are often faster and more accurate. As these new industries that rely on connectivity and interoperability continue to grow and then mature, the value of public chains will become more and more obvious.

Someday in the future, public blockchains and the interoperability they enable may be so ubiquitous that they will be considered public infrastructure, just like the Internet, the postal service, public broadcasting, and the interstate highway system.

Every person and organization will have access to these public blockchain facilities, and private chains and private chain application "stacks" will be plugged into these open networks to make full use of data and customer resources.