Consensus algorithms can be engineered to unlock blockchain for business
Below is a guest post by Christopher Louis Tsu, CTO of Venom Foundation.
Connecting blockchain to traditional businesses is not a simple process. The so-called non-crypto industries, especially finance, banking and insurance, are significantly 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 this fits into implementing on-chain technologies. There are two disparate worlds here that can be brought together through fintech and blockchain innovation. However, this is not a simple process.
The truth is that it is difficult to create a blockchain, a layer 1 solution that adheres to the principles of decentralization and transparency, without sacrificing important aspects of data privacy and regulatory compliance.
Those looking to build a blockchain-based future should pay close attention to the latter feature. In the absence of suitable data protocols, traditional finance professionals are less likely to adopt this technology, and less relevant banking and insurance industries may not, but be cautious to avoid the wrath of legislators. should be considered.
An attractive solution for hungry innovators is to abandon basic cryptographic principles. In the process, we can lose sight of why the technology is robust and inherently scalable. But it doesn’t have to be.
Alleviating the hype around blockchain is critical to creating sustainable, versatile and relevant solutions for the non-crypto industry that technology can actually improve. Not every sector needs blockchain. The article mentions finance and banking as potential leaders in adoption. Because these are examples where the application makes a lot of sense.
Increased security and efficiency is an attractive case for the financial sector, with the added benefits of more transparent governance, lower fraud risk and reduced counterparty risk. Insurance companies will look to smart contracts to streamline claims processes and enjoy greater security. Clearance and settlement, on the other hand, can be done much cheaper and faster using a distributed ledger. Big companies with huge capital flows can obviously save a lot of money.
As always, implementation poses challenges for innovators. However, we can identify key prerequisites for adoptable blockchain networks. Must provide complete data privacy. and It must comply with laws that have not yet been written and with relevant existing legal structures. Enterprises can only work with solutions that are compliant with certainty, and no major public blockchain currently meets these standards. However, skillfully engineering new solutions promises a lot.
The key lies in the iterative advances in technology that we’ve seen over the past two decades. Blockchain works in the enterprise without compromise, but it needs to be configured in novel ways.
Of course, the choice of consensus algorithm is very important. But the steps taken to implement this on a blockchain and how the system is designed stand out as well. It cannot be satisfactorily solved without a well-designed system that makes good use of multiple technologies.
Consensus is an ever-growing area of research related to blockchain. It’s no surprise in the tech world that there are hundreds of Layer 1 solutions ready for the market, sometimes using completely different approaches.
One compelling technical solution lies in the Practical Byzantine Fault Tolerance (pBFT) consensus algorithm, a sustainability-driven shift away from Proof of Work. But pBFT alone cannot do the hard work. If possible, companies should already be doing so.
To unlock blockchain’s immense potential with pBFT, we need to look at a technology that is still heavily used in Web2. This technology, when properly integrated, offers significant benefits to businesses that are not yet convinced by existing chains.
Merging two evolutionary cycles
pBFT has proven to be a highly streamlined method for reaching consensus in a decentralized environment while maintaining demonstrable bulletproof robustness in a huge ecosystem. Static and dynamic sharding are undoubtedly one of the fastest approaches to consensus in production that pBFT does.
However, I haven’t seen many pBFTs implemented with an asynchronous model. This is the golden ticket to meet the needs of traditional enterprises. and Maintain impregnable cryptographic security while keeping the door wide open for decentralized applications.
pBFT has evolved as an energy-efficient way to execute smart contracts in a trustless, distributed environment. At the same time, the asynchronous model has become preferred by traditional enterprise architects such as Kafka and Akka as an efficient way to parallelize execution. 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 doesn’t need to keep track of session details or multiple links, and the asynchronous model itself means nodes don’t have to wait for other nodes to receive messages , the transaction throughput can be kept 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 often means 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 machines, you can effectively store vast amounts of data and scale to manage ever-increasing data flows and rapid traffic growth. increase.
The combination of pBFT and the asynchronous model characterizes the architecture for creating blockchains that work quickly and at scale to meet the high requirements 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 Byzantine fault-tolerant solutions available. Each organization can represent a node on the network, making it suitable for those involved in a consortium of corporate organizations. Each of these nodes is programmed to have a cluster of instances and a load balancer behind it. Node endpoint.
This means that computing power can be scaled significantly without sacrificing fast response times. A high level of security is ensured without sacrificing highly cost-effective communication overhead.
Since transaction confirmation requires a sizable majority, the system is set up to work in situations where validators crash or maliciously broadcast false information. And the key functionality of nodes here is underpinned by validation. Each network user must verify their identity. This allows such a system to pass her KYC with flying colors.
Fundamentally, pBFT is designed to ensure robust data consistency in the event of multiple nodes going offline or hardware failure, with no risk of data loss.
Data can still be protected Keep your transactions private without compromising the transparency of your transactions to those who are authorized to access them. A node that does not have a user’s private key cannot forge her identity or message signature. The system is inherently reliable because the cost of attempting such a forgery is astronomical.
Furthermore, pBFT allows distributed systems to reach consensus even in the event that multiple nodes overthrow the system. All nodes perform computations for verifiability, security, and peace through the use of built-in cryptographic algorithms such as signing, signature verification, and hashing.
The go-ahead from lawmakers is plausible as imminent regulation could be considered, especially regarding potential fraud and money laundering. Traditional companies, on the other hand, must remain compliant without abandoning proper data protection. While required in the EU with GDPR, it is even more desirable for many jurisdictions, businesses and customers. Also, you don’t lose the privacy of your data.
Anti-money laundering (AML), standard banking transactions, and clearing and settlement are possible on blockchain without drawbacks or legal issues, a far superior solution to those already in use. As such, it could lead to a wave of adoption in the financial and banking industry.
And from an economic logic point of view, the strong case of the asynchronous model here is wrapped in the parallelization aspect. Major blockchains grapple with scaling problems to handle large 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 dictates that businesses will certainly adopt blockchains with fast network speeds and low transaction fees. Cost, second only to the need for compliance and data protection, forms a key hinge that enables widespread adoption. Combined with the asynchronous model, pBFT promises low cost, high speed and reliability, and data redundancy when implemented.
The asynchronous model enhances network security by allowing a limited number of nodes to behave unpredictably or arbitrarily without compromising system security. pBFT tolerates Byzantine faults in asynchronous networks and uses a view-change protocol to guarantee liveness. This means that the client will eventually receive the correct response to the 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 indefinite, asynchronous stateless models can create blockchains that serve both the traditional and crypto worlds.
Business demands have not changed widely. Therefore, innovators should provide blockchains that meet these demands. Achieving this opens the door to hiring.