Hands-On Blockchain with Hyperledger: Building decentralized applications with Hyperledger Fabric and Composer

What else should be included in enterprise blockchain proposals? Here is a non-exhaustive list of other capabilities to consider:

A significant divided exists between the cryptocurrency and Initial Coin Offering (ICO) world, and the world of regulated business. The latter consists of banks and financial institutions working collectively to assess market potential and operational efficiencies.

Both sides of this division have taken advantage of the momentum around blockchain to further their interests. The blockchain ecosystem has challenged the status quo and defied all odds to make a point—often behaving like an adolescent. It is driven by new business models, promises of disintermediation, and interesting technological innovations. As blockchain gains momentum, the value of bitcoin and other cryptoassets is seeing a meteoric rise, and now that ICO has emerged, it has defied the traditional regulatory framework around fundraising.

On the enterprise side, there are a growing number of industry initiatives around clearing and settlement to enable faster settlement and interbank transfers, transparency through digitization, symmetric dissemination of information in supply chains, and creating adhoc trust between Internet of Things (IoT) devices.

There's a common theme here—that blockchain is here to stay. As it continues to evolve and generate innovative solutions for industry use cases, it will keep inching towards maturity and deliver on its promises of efficiency and significant cost savings built on the foundation of trust.

Business networks, underpinned by blockchain technology, may bring transformation or disruption to industries, but in any case, in order to thrive, blockchain needs an economic model. If disruption is the aim, investments in technology, talent, and market synergy can be combined with the lure of economic incentives. ICOs, for example, typically rely on tokenomics, a term that describes the economic system of value generation in those networks. The token is the unit of value created by the system or network, either through making a platform for providers or consumers, or through co-creating a self-governing value network in its business model that various entities can use to their advantage for creating, distributing, and sharing rewards that benefit all stakeholders.

The ICO front, largely funded by cryptocurrencies, has defied current fundraising mechanisms in venture capitalism (led by crowdfunding projects), and, importantly, the struggle to discern the difference between a security and utility coin is disruptive in principle.

ICOs are looking to create an economic system built on the principles of decentralization, open governance (or self-governance), and transparency, a system that rewards innovation and eradicates disintermediation. ICOs saw some initial failures and some successes, but they nevertheless provided a preview of the future, where cryptoassets will become a basic unit of value—with valuation and fungibility defined by the network they originate from—fueling an economy built for and around innovation.

On the enterprise front, there's been more focus on understanding the technology and reimagining ecosystems, business networks, regulations, confidentiality and privacy, and the business models that impact blockchain networks in various industries. Enterprises looking to explore blockchain want to see quick proof points, use cases that can demonstrate results quickly and help them innovate with blockchain.

Blockchain is helping industries move to a more symmetric dissemination of information by providing built-in control of transactional data, provenance, and historical context. This can lead to more efficient workflows and transformed business processes. Many early projects, however, didn't focus on the core tenets of blockchain, leading to disintermediation, decentralization, and robust self-governance models. There's a good reason for it, though: industries and conventional businesses tend to be focused on their current business agenda, models, growth, and preceding all, regulatory compliance and adherence. This emphasis on current business operations means they're not naturally inclined towards disruptive models.

With any new technology, there is always a learning curve. As blockchain evolved and we began to work with regulated industries, we quickly recognized that in such industries, there are important design considerations to address, things such as confidentiality, privacy, scalability, and performance. These elements can have significant cost implications when it comes to designing blockchain networks, as well as the business models that govern these networks. These challenges have not only been interesting to solve; they've had a positive effect on conventional, regulated industries and businesses by re-energizing innovation in these organizations and inviting the best talent to join in tackling these challenges. Businesses are seeing that ecosystems and networks driven by blockchain technology will contribute to progress and success.

Permissioned networks (regulated, conventional, and enterprise business networks) may also need to begin uncovering an incentive model to motivate organizations to join a platform that promotes the idea of creation, distribution, and sharing of rewards, benefiting all stakeholders. The economic incentives behind tokenomics can't be blindly adopted by a lot of conventional businesses and industries, but that doesn't mean those industries shouldn't start the journey of exploring possible business models that will enable value creation and elevate some desperately needed modernization efforts.

Blockchain technology promises to be the foundation for a secure transaction network that can induce trust and security in many industries that are plagued with systemic issues around trust and accountability. From a technology point of view, blockchain facilitates a system of processing and recording transactions that is secure, transparent, auditable, efficient, and immutable. These technology characteristics lend themselves to addressing the time and trust issues that current-day distributed transaction systems are plagued with.

Blockchain fundamentally shifts the multi-tier model to a flat-tier transaction processing model. This carries the promise to fundamentally disrupt industries by disintermediation, by inducing efficacy in new system design or simply by creating new business models.

Disintermediation indicates reducing the use of intermediaries between producers and consumers, such as by investing directly in the securities market rather than going through a bank. In the financial industry, every transaction has historically required a counter party to process the transaction. Disintermediation involves removing the middleman, which by definition disrupts the business models and incentive economies that are based on mediation. There's been a wave of disruption in recent years as a result of digital technologies, which have, in turn, been driven by marketing insights and the desire for organizations to provide a richer user experience.

Blockchain is a technology that aims to catapult this disruption by introducing trade, trust, and ownership into the equation. The technology pattern represented by blockchain databases and records has the potential to radically improve banking, supply chains, and other transaction networks, providing new opportunities for innovation and growth while reducing cost and risk.

Organizations will need to establish criteria for use during the application design process to help them assess where they can best apply blockchain technology. The following are some examples of criteria that could help an enterprise determine which applications or systems would benefit from it:

For enterprises trying to either understand or determine where to employ blockchain meaningfully, there's a simple approach to thinking through use case selection. An appropriate use case for a sustainable blockchain solution will achieve long-term business objectives and provide a strong return on technology investment.

This starts with an enterprise problem—an issue big enough for the enterprise to expend resources/time—and the recognition of cohorts that have the same problem. When companies realize that an enterprise problem is also an industry problem (such as security lending, collateral lending, and so on), they've found a use case where the promise of blockchain has the most potential.

While organizations are determining the benefits of various aspects of blockchain for their enterprise applications, they also need to recognize the fragmentation of the whole blockchain landscape. There are numerous innovative approaches available for solving a specific challenge with blockchain. A lot of vendors offer variants of the trust system that are specialized to address particular use cases, and they've defined the use cases that will benefit most from blockchain in a given industry, for example. Such specialized vendors often promise a fast solution to meet consumer demands for quick digital interactions.

The tenets of blockchain can be instrumental in delivering rapid consumer-driven outcomes such as decentralized, distributed, global, permanent, code-based, programmable assets, and records of transactions. We should exercise caution with regards to thinking of blockchain as a hammer to solve every enterprise application challenge, but it can be of use in many transactional applications.

Now, let's discuss how blockchain is perceived in the enterprise and some of the challenges that arise with enterprise adoption of the technology. In the following section, I'll focus on three areas that help set the tone for blockchain in an enterprise context.

Radical openness is an aspect of blockchain as a digital trust web, but in an enterprise, it's vital to consider the impact and implications of radical openness.

A public blockchain can operate with extreme simplicity, supporting a highly distributed master list of all transactions, which is validated through a trust system supported by anonymous consensus. But can enterprises directly apply the model of the trustless system without modifying the fundamental tenets of blockchain?

Do organizations view this disruptive technology as a path to their transformation or merely a vehicle to help them improve their existing processes to take advantage of the efficiencies that the trust system promises? No matter what, enterprises will want the adoption of blockchain to be as minimally disruptive to the incumbent system as it can be, and that won't be easy to achieve! After all, the design inefficiencies of the incumbent system are what have compelled the enterprise to consider this paradigm shift. A lot of the concepts and use cases for blockchain are still distant from enterprise consumption.

The first industry to experiment with and adopt blockchain was the financial services sector, as it has been facing down the fear of being disrupted by another wave of start-ups. Like many industries, it is also driven by consumer demands for faster, lower-cost transactions. Financial services has a well-defined set of use cases including trade financing, trade platform, payment and remittance, smart contracts, crowd funding, data management and analytics, marketplace lending, and blockchain technology infrastructure. The uses for blockchain we've seen in this industry will likely permeate to other industries such as healthcare, retail, and the government in the future.

The blockchain is a nascent technology that brings together a lot of good ideas, but it still has some maturing to do for enterprise use. The lack of defined standards to promote interoperability between multi-domain chains could be a challenge. Enterprises that adopt it will therefore need to build competency so that they can contribute to further innovation and help with necessary blockchain standards development. This, in turn, could help bring unique opportunities to both improve existing business practices and develop new business models built in a blockchain-powered trust web:

Fundamentally, blockchain addresses three aspects of the transaction economy:

The notable technology elements of blockchain are:

While the implications of blockchain technology may be profound, organizations should devise a set of enterprise-specific criteria that can be applied to existing or new projects that may gravitate towards enterprise blockchains.

Given the versatility of blockchain technology and the current hype curve, enterprises should use a chain decision matrix as a tool to ensure that they have a structured approach to apply a foundational technology to a business domain. This approach will also lend itself to a consistent blockchain infrastructure and trust system management, which will prove vital as many application-driven chains evolve and the demand for enterprise visibility, management, and control grow.

Any enterprise adoption of blockchain should have the goal of disrupting incumbent systems. Thinking about integration with enterprise systems of record is one way to work towards this. In this manner, an enterprise can implement blockchain-driven transaction processing and use its existing systems of record as an interface to its other applications, such as business intelligence, data analytics, regulatory interactions, and reporting.

It's vital to separate the infrastructure for enterprise blockchain technology from the business domain that uses chain technology to gain competitive advantage. Blockchain can be seen as an enterprise chain infrastructure that's invisible to businesses and operating behind the scenes, while promoting the interprise synergy between various business-driven chains. The idea is to separate the business domain from the technology that supports it. A chain application ought to be provisioned by a business domain that has a suitable trust system. The trust system, as I've stated repeatedly, is central to any blockchain endeavor, and therefore it should be appropriate to the needs of a given business application. The cost of the infrastructure and compute requirements will be dictated by the choice of trust system available to an enterprise.

By separating out the blockchain technology infrastructure, designing an architecture around a pluggable trust system by using trust intermediaries and a design that promotes flexibility, and a modular trust system, the business can focus on the business and regulatory requirements, such as AML, KYC, nonrepudiation, and so on. The technology infrastructure for blockchain applications should be open, modular, and adaptable for any blockchain variant, thereby making the blockchain endeavor easy to manage.

Interprise synergy suggests driving synergies between numerous enterprise blockchains to enable inter and intra enterprise chain (interledger) connections. In this model, the transactions would cross the various trust systems, giving visibility into the interactions to enterprise governance and control systems. Fractal visibility and the associated protection of enterprise data are important to consider when looking at these interactions between business units and external enterprises. An invisible enterprise chain infrastructure can provide a solid foundation to evolve enterprise connectors and expose APIs to make incumbent systems more chain-aware.

Interprise synergy will flourish due to conditional programmable contracts (smart contracts) between the business chains:

How can an enterprise know if it is ready for blockchain? More importantly, when considering blockchain consumption, should its focus be on integration with incumbent transaction systems, or an enterprise-aware blockchain infrastructure?

To take full advantage of the promise of enterprise blockchain, an integrated enterprise will need more than one use case and will need to drive interprise synergy. The most successful blockchain consumption strategy should focus on technology initially and then consider integration with existing enterprise business systems. This will facilitate collective understanding and accelerate enterprise adoption of the blockchain, hopefully on the path of least disruption.

In the recent past, organizations would run internal business systems and IT infrastructure out to the internet to harness the collaborative potential of interconnected and accessible systems. Blockchain technology is taking this to the next level, offering true digital interaction facilitated by trusted business networks. In the internet era, successful enterprises adopted and adapted to technological challenges, whereas in the blockchain era, business, rather than technology, is the driver for proliferation.

While blockchain technology is interesting on its own, there are a lot of other mechanics of a business network that ought to be evaluated as well, including:

We imagine a purpose-built blockchain network that's focused on a plurality of business domains, for example, mortgages, payments, exchanges, clearing, and settlement of specific asset types. In an enterprise context, we visualize a centralized network in which like-minded business entities share a consensus consortium. There are several practical reasons to back this idea of a centralized network, including the following:

We've now covered the business drivers for enterprise blockchain, so next let's consider what can ensure the sustainability and longevity of a blockchain network.

Blockchain-based business networks are continuing to evolve and grow, and as they do, there will be no turning back on core issues such as trust models, data visibility, and exploiting a network for competitive advantage.

Focusing on sustainability can seem paradoxical because it promotes open collaborative innovation while at the same time locking down constructs such as consensus or trust systems and the governance systems for managing assets, smart contracts, and overall interaction in a multiparty transaction network. Blockchain system design needs to take all of this under consideration.

A business network with a successful system design needs to align well with the blockchain tenets of trade, trust, ownership, and transactionality in a multi-party scenario. Without building on these core tenets, business networks may not realize the promise of blockchain technology in a sustainable way.

Here are seven design principles to support and sustain growth in a blockchain business network:

We will list the design principles graphically as follows:

In any enterprise, blockchain adoption is driven by three principles: the business blueprint, the technology blueprint, and enterprise integration.

The following are some indispensable things to consider when choosing a blockchain framework according to these three principles:

In the following sections, I cover each of these design considerations in a bit more detail.

Identity management is a complicated, involved topic, especially in regulated industries where identities must be managed and have significant business consequences, such as around activities including Know Your Customer (KYC), Anti-Money Laundering (AML), and other reporting and analytics functions:

Other identity management considerations include:

Scalability is both a business and a technology consideration, given the way downstream transaction systems can affect critical business systems. Technology choices for scalability, for example database choices for the shared ledger, adjacent system integration, encryption, and consensus, bring about a system design that can accommodate the predictable costs of growth in network membership or transactions.

There are three layers of enterprise security to think about:

Considerations for development tooling include an integrated development environment, business modeling, and model-driven development.

The crypto-economic model refers to a decentralized system that uses public key cryptography for authentication and economic incentives to guarantee that it continues without going back in time or incurring other alterations. To fully grasp the idea of blockchain and the benefits of cryptography in computer science, we must first understand the idea of decentralized consensus, since it is a key tenet of the crypto-based computing revolution.

The old paradigm was centralized consensus, where one central database would rule transaction validity. A decentralized scheme breaks with this, transferring authority and trust to a decentralized network and enabling its nodes to continuously and sequentially record transactions on a public block, creating a unique chain—thus the term blockchain. Cryptography (by way of hash codes) secures the authentication of the transaction source, removing the need for a central intermediary. By combining cryptography and blockchain, the system ensures no duplicate recording of the same transaction.

Blockchain system design should preserve the idea of decentralized digital transaction processing, adapting it into a permissioned network, while centralizing some aspects of regulatory compliance and maintenance activity as needed for an enterprise context.

Having enterprise support for blockchain is important for the same reasons as the reconsideration of estimation effort. Remember that blockchain should not be thought of as just another application. It's a production network that involves risks and costs for upkeep and maintenance, and it won't be able to simply use existing applications for development, infrastructure, and services.

To make sure your blockchain solution can allow for use case-driven pluggability choices, consider the following issues.

A consensus model will never go to 0 because when NoSQL became the standard, various NoSQL systems solved their problems by understanding this CAP theorem, and the RDBMS enterprise community held steadfast to their ACID properties. Blockchain might well provide the primitives to break CAP and maintain ACID. Here are some thoughts.

In secure service containers (SSCs), the software, operating system, hypervisors, and Docker container images cannot be modified. Certificates may be included in the SSC so that they can probe themselves into being genuine to a remote a party. For example, including an SSL certificate when building SSCs helps ensure that you're speaking with a genuine instance, since the SSL certificate always stays protected (encrypted) within the SSC.

According toWikipedia, a hardware security module (HSM) is a physical computing device that safeguards and manages digital keys for strong authentication and provides cryptoprocessing. These modules traditionally come in the form of a plugin card or an external device that attaches directly to a computer or network server.

Administering a high-security device such as an HSM can be a real challenge in relation to sufficient security and controls. In fact, today's standards mandate certain methods and levels of security for HSM administrative (and key management) systems.