Blockchains in Business

The Ethereum main network, and its corresponding test networks, are all open for public use. All transactions made on the networks are 100% transparent, and anybody with access to the network—which is potentially everybody—can see and access all data.

The users of these networks don't necessarily know each other: they are mutually distrustful parties who must assume that the other participants in the network are dishonest. For this reason, public blockchain networks require a way for such parties to reach an agreement without needing to trust each other, and this is where decentralized consensus algorithms, such as proof of work (PoW), come into the picture.

There are cases, however, where transacting parties in a network are more trusting of each other, and where the use of a blockchain isn't solely centered on allowing mutually...

Public versus private and permissioned versus permissionless blockchains

The Ethereum main network is public, meaning anyone is free to join and utilize the network. There are no permissions involved: not only can users send and receive transactions, they can also take part in a consensus, as long as they have the appropriate hardware to mine blocks. All parties in the network are mutually distrustful, but are incentivized to remain honest by the mechanisms involved in the PoW consensus. This is an example of a public, permissionless network. These networks offer high resistance to censorship and good data persistence, but are less performant due to the decentralized nature of consensus.

The idea of permission, when applied to blockchains, could take one of several forms: it could be explicit, as in the case of an access control list, or implicit, as in a requirement placed on...

Privacy and anonymity in Ethereum

We have so far discussed the differences between public and private networks, where it is the network itself, and access to it, which is either public or private. We now turn our attention to the data—both transaction and contract data—inside a given network.
The Ethereum main network can be joined by anyone. Furthermore, all transaction and smart contract data is public, meaning all transactions between a to and from address can be seen by everybody using the network. There is no way to hide these transactions, or the addresses transacting, and as such, there's no way for a user on Ethereum to be truly anonymous. If a way were found to link an address with a real-world identity—either at the present time, or at a point in the future—then the identity of the transacting party would be known. This might seem obvious...

Why are privacy and anonymity important?

If we consider the case of a private or consortium blockchain run by a group of companies, then certain aspects of privacy are clearly important.

For example, companies A, B, and C create a consortium blockchain. Although the network is closed to the outside world, any transactions between A and B are visible to company C, which could be undesirable for a number of reasons, especially if the three companies are in competition with each other. In addition to any business-to-business (B2B) interactions between the companies themselves, it's possible the network would involve some form of business-to-customer (B2C) interaction , meaning further types of confidentiality and privacy would be required.

Before we look in detail at this chapter's project, let's take a look at the currently available Ethereum-based business platforms...

The Ethereum Enterprise Alliance

The Enterprise Ethereum Alliance (EEA) is a nonprofit working group whose aim is to define an open, standards-based architecture for business and enterprise use of Ethereum. Group members include many large companies from the world of software and finance, such as Microsoft, Accenture, and J.P.Morgan. The group is currently working toward defining the Ethereum Enterprise Architecture Stack, which itself will help guide the development of the EEA's overall standards-based specification.

EEA's specification will help define a standard way in which Ethereum's blockchain can be used for business purposes. However, given the opensource nature of Ethereum's codebase, adhering to EEA's specification won't necessarily be required: Ethereum's codebase can be used in any way desired.

More information can be found online...

Blockchain-as-a-Service

Blockchain-as-a-Service (BaaS), is a service that allows customers to create and run their own client nodes on popular public blockchain networks, or to create their own private networks for their own use and testing. The provisioned services are based in the cloud, and are analogous to the Software-as-a-Service (SaaS) model. Several of the large cloud computing providers are now offering BaaS, such as the following:

• Microsoft Azure enables users to quickly deploy and manage applications in the cloud, and has templates available for Ethereum, Hyperledger (see later chapters), and R3's Corda (see https://azure.microsoft.com/en-gb/solutions/blockchain/).
• AWS Blockchain Templates is a very similar offering, and again provides templates for Ethereum and Hyperledger (see https://aws.amazon.com/blockchain/templates/). Further services are offered by IBM...

Quorum

Quorum (https://www.jpmorgan.com/global/Quorum) is an enterprise-focused fork of the Ethereum codebase, and offers a private blockchain infrastructure aimed specifically at financial use cases. It was created by J.P.Morgan, and claims to address three of the topics that would make a public blockchain network unsuitable for business use:

• Privacy, of both transaction and contract data
• Higher performance and throughput
• Permission and governance

Privacy

To achieve its headline feature of making transactions and contract data private, Quorum builds on Ethereum's existing transaction model, rather than completely redefining it.

Public transactions and public contracts are visible to everyone on the network, and make...

Summary

In this relatively short chapter, we learned how to create a private Quorum network inside a virtual environment. We then explored how transactions can be made private by using the public keys of those nodes that we want to have access to the transaction data, or in our specific case, the data associated with a smart contract. We then briefly looked how our network could be permissioned using Quorum's whitelisting and the --permissioned flag.