Transparency: Who Cares?
One of the most significant talking points around blockchain is the idea of transparency. Looking at the first project built using blockchain principles – bitcoin – we can see how transparency is a critical part of service and the value that it brings.
The Bitcoin blockchain is accessible to anyone at any time. Every transaction is recorded on the blockchain. By being open and transparent in this way, it removes the need for intermediaries in peer to peer transfers. If Alice tells Bob that she has sent 2 BTC, Bob can look on the blockchain and confirm that this transaction has taken place.
A network of computers all around the world maintains the Bitcoin network. New information is added to the blockchain according to a set of rules and is secured using a publicly defined cryptographic process. Every computer in the network can see the entire blockchain and can confirm that the information is correct, participate in achieving consensus that the data is accurate and confirm that there was no tampering with the information in the blockchain. This transparency allows everyone to trust the information in the blockchain.
For those who are interested in disrupting the current financial system, transparency is vital. Banks today operate with only minimal transparency. In recent times this lack of transparency has led to a lack of trust in banks and other financial institution. In fact, in response to a possible announcement of a second bailout in 2009 – Bitcoin was launched. With all transactions publicly accessible, there is greater trust in the activity on the network.
When there is no asset, and there is no company to rely upon, the transparency and integrity of the network is critical to trust
When there is no asset (you can’t put bitcoin in your pocket), and there is no company to rely upon (your bank doesn’t manage bitcoin) the transparency and integrity of the network is critical to trust.
But when enterprises started looking into blockchain, transparency was one of the things which they were most concerned. For a wide range of legitimate (and sometimes questionable) reasons, enterprises are very much opposed to complete transparency. For instance, an enterprise does not want to have all of the details of their wholesale pricing made public to customers or competitors.
After the creation of Bitcoin the protocol and bitcoin the currency, there was a constant stream of innovation. The Bitcoin protocol was used to create thousands of other blockchains each running their cryptocurrency. Then came the Ethereum protocol and the Ethereum main net with the ability to automate transfers with software (programmable money / smart contracts). And still, there wasn’t a solution suitable for enterprise customers.
Then came the concept of private and permissioned blockchains. A private and permissioned blockchain is only visible to computers which are authorised to access and add new data or to run the programs to automate new entries on the blockchain. Transparency is restricted to only those computers authorised to access the network. For blockchain purists, a private blockchain is no longer a blockchain at all but rather another form of distributed ledger technology (DLT).
Depending on the size of the network, there could be dozens or even hundreds of participants. In these cases, there was again concern about too much transparency. Everyone wanted to work together on a single source of truth in an immutable blockchain, but they didn’t want everyone to see everything. So technology had to move again.
Today’s brands and the enterprises behind them are focused on building trust through transparency.
One of the more prominent blockchain protocols is Hyperledger Fabric. Within Hyperledger Fabric there is both the ability to have a common blockchain which all participants can see and build private channels within the network so that only those expressly invited to a channel can see the data within that channel. In this case, the number of participants could be as small as only two (2).
Increased privacy has led to a greater willingness by enterprises to participate in the blockchain, only for them to find that they are having to deal with managing hundreds or even thousands of channels. The data within a channel is tiny and the value to the enterprise starts to get called into question. By solving the transparency issue, the resulting architecture becomes more onerous than the systems it was designed to replace.
There are further innovations when it comes to enterprise adoption of blockchain. Newer innovations will focus on designing a data architecture which provides integrity and immutability while also allowing for strict controls on the transparency of information.
Today’s brands and the enterprises behind them are focused on building trust through transparency. Trust with consumers. Trust with partners. Trust with regulators. And they must balance the transparency with commercial and competitive sensitivities.
So, transparency. Who cares? There are a lot of individuals, enterprises and regulators who care not just about transparency but getting the right level of transparency to demonstrate and maintain trust.
Troy Norcross, Co-Founder Blockchain Rookies