From Hyperledger to Ethereum, the quest for privacy is shaping the future of enterprise blockchain technology. While many believe that public networks are the future of blockchain, there is still a significant demand for permissioned, enterprise-focused blockchains.
Just as private computer networks still exist alongside the public internet, private blockchain networks will continue to thrive alongside the rise of Web3. Central bank-issued currencies, which are of systematic importance to specific jurisdictions, will not end up on public blockchains. This has led to numerous highly regulated financial infrastructure providers and central banks working with and evaluating enterprise blockchain networks.
In recent years, the dominance of the Ethereum Virtual Machine (EVM) in public blockchain networks has influenced enterprises as well. Hyperledger Besu has emerged as the most compelling option for firms looking to deploy new networks, due to its compatibility with both enterprise and public network deployments. It is considered the most battle-tested and future-proof technology available.
However, Besu does not solve the privacy challenges faced by companies. On public blockchain networks, activity takes place using pseudo-anonymous identities, making it fully transparent to all network participants. While there is an expectation that these privacy challenges will be solved in the near future, it seems unlikely to happen within the next 12 months.
To address these challenges, cutting-edge solutions are being developed. Fully encrypted blockchain networks such as Obscuro and Aztec, which are built on Ethereum, are being utilized. Obscuro relies on SGX enclaves, while Aztec uses its own zero-knowledge technology (ZK-ZK rollups). Other approaches, like EY’s Nightfall project, utilize zero-knowledge technology for smart contracts that issue shielded tokens.
For enterprises, privacy is crucial due to specific needs related to identity and data security. They need to be certain of whom they are dealing with and ensure that sensitive data is not readily available for anyone to consume. This presents challenges when all on-chain activity is shared with all participants of the network. Privacy measures are necessary to address these shortcomings.
J.P. Morgan’s Quorum blockchain technology was developed to address the lack of privacy for Ethereum networks. It added a private transaction capability, where a transaction could be marked private for certain participants, encrypted, and propagated only to the intended recipients. However, this approach had challenges, and the functionality is being phased out of Hyperledger Besu.
While no elegant solution currently exists, there are potential pathways for addressing privacy challenges in both public and private blockchain networks. Zero-knowledge proofs and other enterprise blockchain technologies, such as R3’s Corda and Hyperledger Fabric, have their own approaches to privacy. However, many companies want to utilize Ethereum technology in their blockchain networks, as it is the closest thing to TCP/IP in Web3.
Addressing privacy challenges on public networks will not necessarily bring enterprises onto them, but it will provide them with a mechanism they can incorporate into highly regulated environments. This will drive further adoption of blockchain technology in these companies. With the right privacy measures in place, the potential opportunities for blockchain will grow larger, benefiting all stakeholders.