Below is a guest post by Venom Foundation CTO Christopher Louis Tsu.
Connecting blockchain to traditional businesses is not an easy process. The so-called non-crypto industries, especially finance, banking and insurance, are severely disconnected as each has common techniques that do not fit well with current blockchain solutions.
There are many concerns in these areas around security, compliance, cloud computing, and how it fits into implementing on-chain technologies. Here we present two disjointed worlds that can be brought together through fintech and blockchain innovations. However, this is not a simple process.
In truth, it is difficult to create a blockchain that is a Layer 1 solution that adheres to the principles of decentralization and transparency without sacrificing important aspects of data privacy and regulatory compliance.
Those working to build a blockchain-based future should pay close attention to the latter feature. Traditional financial industry executives are unlikely to adopt the technology in the absence of the right data protocols, as are the closely related banking and insurance industries, but caution should be exercised to avoid the wrath of legislators. Consideration is required.
An attractive solution for starving innovators is to abandon the basic principles of cryptocurrencies. In the process, they will lose sight of what makes the technology robust and inherently scalable. But it doesn’t have to be this way.
overcome challenges
Calming down the hype around blockchain is critical to creating sustainable, versatile and relevant solutions in the non-cryptocurrency industry that technology can actually improve. Not every sector needs blockchain. The article cites finance and banking as potential leaders for adoption. Because these are very meaningful examples of applications.
Increased security and efficiency is a compelling case for the financial sector, with the added benefits of greater transparency in governance, reduced risk of fraud and reduced counterparty risk. Insurance companies will look to smart contracts to streamline claims processes and enjoy greater security. Distributed ledgers, on the other hand, make payments and settlements much cheaper and faster. Clearly, huge amounts of money can be saved by large companies dealing with huge capital flows.
As always, implementation will be a challenge for innovators. However, we can see the key prerequisites for adoptable blockchain networks. That is, it must provide complete data privacy. and It must comply with not-yet-written laws and relevant existing legal structures. Businesses will ensure that only compliant solutions are used, and currently no major public blockchain meets these standards. However, a lot can be expected if the new solution is skillfully engineered.
The key lies in the iterative advances in technology that we’ve seen in the last 20 years. Blockchain works flawlessly within enterprises, but it needs to be configured in new ways.
Of course, the choice of consensus algorithm is extremely important. But the steps taken to implement this on the blockchain and the way the system was designed are equally remarkable. The Blockchain Trilemma and the Enterprise Blockchain’s aforementioned prerequisites cannot be satisfactorily resolved without a wisely designed system that makes intelligent use of multiple technologies.
Consensus is an ever-growing area of ​​research related to blockchain. No wonder there are hundreds of Layer 1 solutions ready for the market in the technology space, sometimes with very different approaches.
One attractive technical solution lies in the Practical Byzantine Fault Tolerance (pBFT) consensus algorithm, a sustainability-driven shift from Proof of Work. However, this heavy lifting cannot be done with pBFT alone. If it could be done, companies would already be doing it.
To unlock the immense potential of blockchain with pBFT, we might look to a technology that is still heavily used today in Web2. This technology, when properly integrated, offers tremendous benefits to companies that are not yet convinced by existing chains.
Fusion of two evolutionary cycles
pBFT has proven to be a highly efficient method for reaching consensus in a decentralized environment, preserving its proven bulletproof robustness in large ecosystems. Examples include Tendermint Consensus, Cosmos Blockchains such as Hyperledger. Static and dynamic sharding are undoubtedly one of the fastest approaches to consensus in production. This is what pBFT does.
But what I haven’t seen much of is pBFT implemented with an asynchronous model. This is the golden ticket to meet the needs of traditional enterprises. and Keep the door wide open for decentralized applications while maintaining impregnable cryptographic security.
pBFT has evolved as an energy-efficient way to execute smart contracts in a trustless distributed environment, while at the same time the asynchronous model has emerged as an efficient way to parallelize execution in traditional enterprise applications such as Kafka and Akka. Architects now prefer it. Clustered environment.
asynchronous stateless communication, as opposed to stateful, typically used by all traditional clustered databases, all distributed queues, and even many app caches. Stateless is much less resource intensive as the system does not need to keep track of session details or multiple links, and the asynchronous model itself as nodes do not have to wait for other nodes to receive messages can keep transaction throughput high.
A stateless system does not need to store any information, and does not need to respond, track, or resend a request if there is no response. Think of the protocol as a highly streamlined engine that eliminates as much bandwidth-hungry processes as possible.
When we talk about execution parallelization, this can often be interpreted to mean dynamic sharding and static sharding. This is the most common method, especially within the context of blockchain. By splitting and storing datasets across multiple databases and adding more machines, you can effectively store vast amounts of data and manage ever-increasing data flows and rapid traffic growth. increase.
The combination of pBFT and the asynchronous model presents architectural features for creating a blockchain that works quickly and at scale, meeting the high demands of legislators and business leaders.
The new role of pBFT in the enterprise
pBFT is a consensus algorithm designed in the 1990s to solve the problem of many available Byzantine fault-tolerant solutions. Now it appears to be tailored for blockchain applications in non-crypto businesses. It is suitable for applications involving a consortium of enterprise organizations, as each organization can represent a node on the network. Each of these nodes is programmed to have a cluster of instances and a load balancer behind it. Node endpoint.
This means that computational power can be significantly expanded without sacrificing fast response times. A high level of security is ensured without sacrificing communication overhead, which is incredibly cost-effective.
Since transaction confirmation requires a fair amount, the system is set up to work even in situations where validators crash or maliciously broadcast false information. And the key functionality of nodes here is underpinned by validation. Each network his user must verify his identity so that such a system can successfully pass her KYC.
pBFT is inherently designed to ensure robust data consistency without risk of data loss, even if multiple nodes go offline or experience hardware failure.
Data can still be protected It is kept private without compromising transaction transparency for authorized users. A node that does not have a user’s private key cannot forge her identity or message signature. The cost of attempting such a forgery is astronomical, so the system is inherently reliable.
Additionally, pBFT allows distributed systems to reach consensus even in the event that multiple nodes attempt to destroy the system. All nodes perform computations for verifiability, security, and peace with built-in use of cryptographic algorithms such as signing, signature verification, and hashing.
Lawmakers’ go-ahead is plausible, especially as imminent regulation could be considered, especially regarding potential fraud and money laundering. Legacy businesses, on the other hand, remain compliant without abandoning proper data protection, and in the EU the GDPR is required, but even more desirable for many jurisdictions, businesses and customers. You also need to keep your business running without losing data privacy.
If anti-money laundering (AML), standard banking transactions, clearing and settlement could be made possible on the blockchain without drawbacks or legal issues, it would be a far superior solution to the solutions already in use. and a wave of adoption in the banking industry.
And from an economic logic point of view, the strong case for the asynchronous model here is built into the parallelization aspect. Major blockchains grapple with scaling issues to handle massive amounts of traffic, but here we have a built-in sharding protocol that exponentially increases limits without increasing costs.
A viable path to adoption
The general logic is that businesses will certainly adopt blockchains with high network speeds and low transaction fees. Cost follows the need for compliance and data protection, but forms a key hinge to achieving widespread adoption. Combining pBFT with the asynchronous model promises low cost, high speed and reliability, and data redundancy when implemented.
Using an asynchronous model enhances network security by allowing a limited number of nodes to behave unpredictably or arbitrarily without compromising system security. pBFT tolerates Byzantine failures in asynchronous networks and uses a view change protocol to guarantee liveness. This means that the client will eventually receive the correct response to its request. This works very well in asynchronous environments such as the Internet.
Using pBFT makes network attacks very unlikely. With the confidence that the delay to consensus is not infinite, an asynchronous stateless model can create a blockchain that serves both the traditional and crypto worlds.
Enterprise demand has not changed significantly. Therefore, innovators should provide blockchains that meet these demands. Achieving this will open the door to hiring.