Blockchain development and investments are on the rise. According to Outlier ventures, blockchain startups have raised US$822 million in seed and venture capital in the first half of 2019 alone, with strong representation from the enterprise and even government sectors. The biggest application so far is still in fintech.
One of the most pressing concerns evident is a multitude of blockchains — both private and public — have so many gaps in terms of interoperability, and how the ecosystem can potentially benefit from chains working together across private and public ones.
In a March 2019 paper, the Institute of Electrical and Electronics Engineers (IEEE) pushed the idea of interoperability as a paradigm shift in how blockchains and businesses work. It will usher in the or the internet of value.
In this new perspective, interoperability will usher in a transfer of cross-chain digital assets, the recommendation of digital currency, a synergy of distributed storage, real-time cross-chain liquidation, identity authentication of users with multiple roles, cross-chain data share, cross-chain certification and so forth.
I have reached out to subject matter experts from some of Asia’s blockchain startups, technology advisory firms, and the academe, who all agree that such interoperability across blockchains will be essential to ensuring scalability and security in enterprise use cases.
Benefits of interoperability
There is a real need for alliance chains and private chains, such as interbank settlements, or the need for this inside the enterprise, says Eric Gu, Founder and CEO at Metaverse, explaining the differences and need for a combined approach. He adds that interoperability between private and public blockchains will be essential in ensuring consensus.
Such things still require third-party audits or third-party supervision. When you do an internal settlement, or internal information exchange, when you want to tell people outside, you have to prove it or give it to them when the third parties conduct an audit. It is better to place on the public chain.
Generally speaking, if a large company wants to use the blockchain to do the process or value transaction, the alliance chain must be used.
The alliance chain can achieve relatively high speed, but it cannot be self-certified. The nodes are not enough, and security technology is not enough. Therefore, the public chain must be used, and the public chain is safe and transparent.
Public and private chains can work together
Due to the sheer number of nodes involved in public blockchains, there might be a performance hit when it comes to high-speed transactions, especially when it involves large amounts of data, and particularly when it is proprietary or privacy is necessary.
Second-layer chains can improve the performance or add features on top of a public chain. Private chains are necessary in ensuring data is kept within control by an enterprise, whilst consensus via the public chains ensure immutability.
In this regard, it would matter how enterprises and blockchain providers package their different services. Enterprises can’t make everything public. Business users can directly refer to the public chain if the user information isn’t made public, so there will be the second layer we are going to do now. The agreement appears at this level: there are more than just blockchains, there are also different services.
Li Ning, former Technical Director of Alipay‘s Blockchain team states that building interoperability between various blockchains allows each of them to focus on specific needs as a solution that can balance security, performance, and usability.
After processing the data, the more pure and clear digital assets are handed over to the public chain. I think that the future alliance chain and the public chain will become more and more extensive … The composition of the future alliance chain and the underlying public chain is a very wide field in every industry.
Despite the buzz surrounding the various applications of distributed ledger technology, blockchain’s biggest impact in the next three to five years will still be in asset digitalization and finance.
In this regard, interoperability between private and public blockchains will particularly benefit use cases like digitalisation of assets and ensuring authenticity thereof, an application that LUXCHAIN is focusing on.
Digital assetization is a very important beginning. One is that you have to make sure that there is a permanence — and this is what the public chain can do — then to combine the businesses of the alliance chain and public chain. Anti-counterfeiting will play a bigger role in the public chain of fintech supply chain in the future.
The issuance of digital assets plus finance is our main battlefield, says Dr. Jason Gan, alumni of the Hong Kong Polytechnic University, citing that most alliance chains are still in the proof-of-concept stage. He cites how finance will greatly benefit from the interoperability and from alliance chains — again featuring both the transparency aspect of transactions and security of data.
We see that the biggest application of the blockchain is finance, because it is an encryption database technology, in the form of encryption to different parties, including the issuer’s database, the exchange’s database, the broker’s database. Clear settlement can be transparent, and encryption will not lead to malicious disclosure of your information.
Fundamentally, this will mean that enterprises can comfortably interface their own private chains with public ones without having to worry about the loss of privacy or proprietary data being shared outside of the company.
Source: e27
