Quant Network’s Overledger: Part Eight — Enabling Enterprise Mass Adoption
Disclaimer: Please note this article was accurate to the best of my knowledge at the time of writing. I have not been following developments or invested in Quant for a while now and this information should not be used as a reference source to make any investment decisions (as is the case with all my articles). The Quant team have removed multiple references surrounding tokenomics of the QNT token, including the original tokenomics paper, the Overledger Network for community paper (which you can find an copy on a 3rd party side here ) and archive of removal of medium articles written by Quant surrounding tokenomics can be found here). For clarification around any topics you should seek clarification from other sources rather than rely on any information found in this article.
This is Part Eight in the series looking at Quant Network, where we look at Enterprise adoption, the difference between Permissioned and Permissionless blockchains as well as existing barriers to further enterprise investment which Quant Network help overcome to enable the mass adoption of blockchain by Enterprises.
Part one can be found here and a link to the other parts can be found at the bottom of this article.
DAPPs are still in very early stages of development and for those few that have a small amount of daily users consist mainly of Gambling and Gaming DAPPs. Over 90% of dApps had no volume / users according to data from dAppRadar. So, some might question is Blockchain just a load of Hype?
It’s Enterprises that is going to be the biggest driver of Blockchain adoption. Forbes recently released their list of 50 Enterprises with minimum revenues or valuations of $1 billion, and U.S. operation and that are currently leading the way in adapting decentralized ledgers to their operating needs.
According to International Data Corp, total corporate and government spending on blockchain should hit $2.9 billion in 2019, an increase of 89% over the previous year, and reach $12.4 billion by 2022. When PwC surveyed 600 execs last year, 84% said their companies are involved with blockchain.
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And this isn’t adoption years away, as an example in a few months DTCC will quietly begin the largest live implementation of blockchain. Records for about 50,000 accounts in DTCC’s Trade Information Warehouse, where information on $10 trillion worth of credit derivatives is stored, will move to a customized digital ledger called AxCore. Soon all will have access to a single real-time account of trades, eliminating layers of databases.
The requirements for enterprise blockchains are however different from those developed for consumers and consumer applications. Enterprises are very concerned about the privacy and security of their data. They are also very protective of the intellectual property in their business processes. Most enterprises don’t want their transactions and business processes to be visible to anyone but authorised users and as a result adoption of public blockchains in their current state is limited. Once public blockchains mature and resolve issues such as speed, privacy as well as regulation in this space evolving as well then possibly there will no longer be a need for permissioned blockchains. However today, adoption of blockchain is good, Enterprises are still exploring public blockchains as is the case with Ethereum, its just it will likely be with a combination of permissioned blockchains at least in the next couple of years.
Permissionless vs Permissioned Blockckchains
Permissionless Blockchains — Also known as Public blockchains, these you will likely be most familiar with where anyone can access and interact with the blockchain and consensus mechanisms such as proof of work and proof of stake are used. Anybody can run a node, view transactions on the blockchain. A gas fee is charged via a token. Examples include Bitcoin, Ethereum, IOTA etc.
Permissioned Blockchains — Also known as Consortium blockchains and also commonly misunderstood as private blockchains are where nodes are run only by trusted participants in the consortium and only authorised users can take part in transactions. Even within members of the consortium permissions can be applied so that only certain members can see transactions that relate to them.
Decentralisation is sacrificed to improve speed and privacy. There is no need for the slow and energy intensive consensus protocols such as proof of work or even proof of stake as the network selects the groups that will run the nodes. Since these groups are vetted or selected from a pool of trusted entities, they create ‘trusted’ nodes. Trust is therefore much less of a concern than in a public blockchain where the groups that run the nodes are anonymous. As a result, enterprise blockchains can afford to use much less secure consensus protocols to maximize speed of transactions while reducing energy consumed. In permissioned chains subsets of the nodes can run less intensive consensus protocols, which enables parallel processing of the consensus. Hyperledger fabric is able to hit 20,000 transactions per second with recent improvements and they believe 50,000 transactions should be achievable with optimisation
There are no gas fees with a permissioned blockchain, so all transactions are completely free. Examples of Permissioned blockchains include Hyperledger Fabric, R3’s Corda and JP Morgan’s Quorum
These blockchains aren’t one big blockchain like Ethereum, Bitcoin etc. Each consortium will create their own separate instance of the blockchain. So, if there are 5 EU Large Car manufacturers who decide to create a consortium on Hyperledger then each of those companies will run nodes to interact and verify transactions on the blockchain. Each company will have an equal say / vote on governance for that instance of blockchain. Nobody outside of those 5 companies would be able to interact with that instance of Hyperledger. The nodes only contain data that has been put on the ledger by those 5 companies. All transactions between those 5 companies would be free, fast and private. Privacy can be extended so for example transactions between 2 of the 5 companies would be visible between those 2 companies. The other 3 wouldn’t be able to see them.
Similarly, if 5 Food retailers create their own consortium and instance of Hyperledger then it would be completely separate to the 5 car manufacturers instance. The nodes would be controlled by the food retailers and the nodes would contain data only related to the Food retailers.
Analysing the Forbes 50 Blockchain list
Blockdata did a post analysing the Forbes list which can be seen here
Ethereum is currently the most used platform with 22 of the 50 companies, followed closely by Hyperledger Fabric and then R3’s Corda and JP Morgan’s Quorum.
Ethereum and Bitcoin are Permissionless blockchains, whereas Hyperledger Fabric, Corda, Quorum, IBM Blockchain (based on Hyperledger) and Hyperledger Sawtooth are all Permissioned blockchains.
What’s most interesting is that nearly all of the Forbes 50 blockchain companies are using multiple blockchain platforms and Quant Network’s Overledger is the only interoperability solution that can connect to Ethereum, Hyperledger, Corda, Quorum, Bitcoin, Ripple and IOTA today.
This investment will be led by the financial services sector. The most popular use case in 2019 is cross-border payments and settlements with over $450 million in investment pouring in. And as we wrote about in our report on remittances, technology designed to address existing inefficiencies can be used for intra- and inter-bank payments as well as for individuals to instantly send money abroad at significantly cheaper rates. The use of blockchain technology will help the remittance market to grow to over $1 trillion in the next three years.
The area with the next most investment is trade finance and post-trade/transaction settlements. It should not come as a surprise that a $16 trillion industry where most processes are still done on paper is ripe for disruption. As we wrote recently, a number of consortia are working to use DLT and blockchain to reduce the inefficiencies of legacy systems.
These are all areas that Quant Network are targeting. One solution was the recent announcement of Quant Atlas to enable interoperable banking through cross border open banking.
Open Banking has the power to revolutionise the way we move, manage and make more use of our money. Open Banking is a new, secure way for consumers including small businesses to share bank information, allowing an ecosystem for companies to offer super-fast payment methods and innovative banking products.
It is estimated that in the next 10 years that Open Banking data flows could exceed the current levels of credit card transactions in today’s financial networks.
Atlas uses Overledger to enable a Distributed Ledger Technology (DLT) transfer of secure consent data between different jurisdictions, facilitating interoperability between TPPs and their respective systems and platforms.
You can find out more about Quant Atlas here
Hyperledger is very popular with enterprises with half of the Forbes 50 list using Hyperledger. It consists of many frameworks and Hyperledger Quilt is their tool that provides interoperability.
Overledger is going to enable universal interoperability for Quilt. The past approach to interoperability was quite limited to ILP between Ripple and BTC and was a very specific use case. Quant Network are integrating Overledger’s API and SDK to be the front gateways for Quilt to allow for Enterprise and Developers to be able to use different blockchains, protocols, taxonomies with ease to bring mass adoption and universal interoperability. This allows Overledger to widely support all the different use cases demanded by clients, enterprise and developers and bring mass usage of Overledger and Quilt to a broader market.
Barriers to further investment
Deloitte’s 2018 global blockchain survey of more than 1,000 blockchain-savvy executives globally of companies with at least $500 million turnover is a leading indicator of where blockchain is headed. While blockchain is not quite ready for primetime, it is getting closer to its breakout moment every day.
Within the report they identified several organizational barriers to greater investment in blockchain technology which are listed below. Quant Network is providing solutions to overcome these barriers.
GDPR Compliant — Overledger complies with GDPR regulation as only Hashes are stored on the blockchain rather than personally identifiable information
Quant are working with regulatory bodies — They recently partnered with Data 61 to participate in Cross-border trials with GFIN (Global Financial Innovation Network)
The GFIN is a network of 35 organisations committed to supporting financial innovation in the interests of consumers. Bodies such as the Financial Conduct Authority (FSA), Australian Securities & Investments Commision (ASIC), Monetary Authroity of Signapore, Hong Kong Monetory Authority, Central Bank of Bahrain and many more all participated with in the trials.
The GFIN seeks to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. This includes a pilot for firms wishing to test innovative products, services or business models across more than one jurisdiction.
It also aims to create a new framework for co-operation between financial services regulators on innovation related topics, sharing different experiences and approaches.
Gilbert Verdian was the founder of ISO Standard TC 307 and Quant are a founding member of the European Commission with INATBA so aware of the requirements they would have at that high level.
QNT token is fully in FINMA regulated and supported by KPMG
Quant Network’s Enterprise Treasury means enterprises don’t have to deal with buying QNT from exchanges, they can pay in Fiat and Quant will convert it to QNT and sort the wallets out on their behalf.
Overledger can be used in a centralised solution or decentralised solution (via Hosted gateways later this year)
Implementation — Replacing or adopting to legacy system
There is no need to replace or change existing systems to be able to connect to Blockchains. Overledger greatly simplifies this by presenting an API to connect to and all that is needed to connect your existing legacy systems is 3 lines of code.
Treaty Contracts will also greatly simplify the smart contract functionality deployed across multiple blockchains even those that don’t support smart contract functionality natively such as Bitcoin. I discussed Treaty Contracts in Part Four which can be found here
Potential security threats
There isn’t another blockchain team that has as much security experience as Quant. Gilbert the CEO whilst Chief Information Security Officer (CISO) for Vocalink (Mastercard) was responsible for the security for all the payments in the UK, £6 Trillion per year done through Pay.UK. They have recently been made a Guarantor for Pay.UK as well as appointed the Cybersecurity Advisory board to help advise and guide the security strategy going forward.
More recently Tech Nation, the Government funded UK network for ambitious tech entrepreneurs, has chosen Quant Network as one of the 20 leading scaleups for their national cybersecurity growth programme. More details can be found here
With the teams strong background in cybersecurity they will also be offering new security products that sit on top overledger such as Identity-as-a-service, Firewalls, Deep packet inspection and Intrusion Prevention Systems as well as GoVerify (there solution that allows people to verify and check that any email, SMS, letter or phone call received is legitimate and actually from the company they are sent from.
It’s still very early days in the blockchain space and enterprises and it’s not clear which of the blockchains are going to succeed and which will fail. As a result, enterprises are obviously cautious about spending millions on a project for a blockchain only to be locked into a particular blockchain with the risk that there are better blockchains available at a later stage or in the event of a hack that compromises the blockchain, resulting in not being able to offer service to their customers which is unacceptable.
Overledger solves this problem by allowing enterprises to migrate to other blockchains with minimal changes to the Mapp saving having to completely rewrite it App and learning a new programming language. Overledger also provides multiple resiliency options with being able to connect to multiple blockchains. Suppose a MAPP wanted to make a payment some options that may be available through Overledger would be to either use Ripple, Stellar or the more traditional non DLT method such as SWIFT. They are also adding the ability into Overledger to perform least cost routing so not only do you get resiliency with multiple options, but it can also automatically determine which option at that time would be the cheapest to send the transaction.
For enterprises to implement blockchain technology takes around 8 months with a cost of £3 million, by using QuantNetworks Overledger they can be up and running in 8 minutes with just 3 lines of code. Allowing Enterprises to perform quick low-cost proof on concepts to determine whether blockchain can benefit them.
Lack of in-house skills/understanding
Running a Node and integrating with the blockchain is not easy (even for an advanced user) and is the main reason that services such as Infura gained a lot of popularity as they provide a simple way via API for developers to connect their DAPPs to so that they can interact with the blockchain using Infura’s Ethereum Nodes rather than running a node themselves. Never heard of Infura? A couple of DAPPs that use their service are Metamask, MyCrypto wallet and Cryptokitties
Each blockchain uses a different programming language, using Ethereum again as an example utilises Solidity as its programming language which isn’t that widely used, and staff would be required to retrain / face difficulty hiring staff with the knowledge due to being in short supply. In addition, you would then have to rewrite your existing applications to work in that language.
Technology is unproven
Overledger is not a blockchain and the technology utilises scalable, stable, secure and proven technology based on a microservices architecture across multiple Public and Private Clouds.
Overledger provides a Fast, Simple, cost effective way to perform Proof of concepts across a variety of blockchains so you can find out whether a blockchain is going to be suitable and if so which one is best without having to spend millions testing each one out individually.
Concerns over sensitivity of competitive information
Permissioned blockchains are going to play an important role for privacy and Overledger is able to connect to all of the leading permissioned blockchains as well as public blockchains.
Only Hash of information is stored on the blockchain and also allows completely private transactions to occur even across public blockchains. (details in part three)
Quant network are providing the rails to move data and value between different blockchains and existing systems. All transactions are owned, signed and encrypted by the senders/applications. We or any third party have no way of seeing any transaction’s data or tamper with it. This is the same approach that financial market and payment infratructure is architected and operates.
With the recent expansion to the US to meet client demand and the appointment of Guy Dietrich, Managing Director of Rockefeller Capital (which manages £18.4 Billion in assets for clients) joining Quant Network’s Board of Directors to further expand into the US market.
Quant Network are sponsors for the upcoming Consensus event on the May 13th — 15th and are holding events for clients as well as sessions for attendies of the conference to learn more about Overledger. you can find out more about these sessions here and they have a large suite on the 4th Floor.
I hope you found this series informative and if you have any questions feel free to ask me any questions in Telegram Chat https://t.me/QuantOverledger. If you want to learn more from the Team they can be contacted via their website here as well as book a demo.
Part One — Blockchain Fundamentals
Part Two — The Layers Of Overledger
Part Three —Verification and the Tokenisation of data
Part Four — Features Overledger provides to MAPPs
Part Five — Creating the Standards for Interoperability
Part Six — The Team behind Overledger and Partners
Part Seven — The QNT Token
Part Eight — Enabling Enterprise Mass Adoption