“Blockchain, not Bitcoin.”
This rallying cry became a hallmark of the 2017 market boom and continued to reverberate in the subsequent cryptocurrency bear market. Entrepreneurs and institutions from every corner of every industry tried to shoehorn blockchains into use cases for everything from pharmaceuticals to bananas.
“Just slap a blockchain on it,” the idea went, and thus some of the world’s unnecessary enterprise blockchain applications were born.
Several years later, people are figuring out that you don’t need a blockchain for, well, most things really. In the fallout of 2017’s explosive market environment, blockchain incubator ConsenSys laid off more than half its staff, State Street bank fired 100 developers to basically shutter its distributed ledger arm, and Ripple recently closed shop on its storage platform Omni.
As the dominoes of distributed ledgers and enterprise blockchains continue to topple, it may seem surprising, then, that one of the oldest Bitcoin companies is digging deeper into a blockchain for businesses. But that’s precisely what Bitfury is doing — and it’s adding Bitcoin to the mix.
Exonum Meets Bitcoin
Bitfury was founded in 2011 and made its name developing bitcoin mining hardware and software. Its business has since branched out, and it’s laid down roots in the questionably fertile ground of enterprise blockchain platforms with Exonum.
Launched in 2017, Exonum is an open-source solution for building permissioned blockchain applications. The project has over 5,000 commits from 46 developers on GitHub and is presented as a tool to “[power] distributed ledgers in virtually any problem domain, including FinTech, GovTech, and LegalTech,” according to its project documentation.
This version of Exonum is entirely open-source, but its latest iteration, Exonum Enterprise, is a blockchain as a service. Unlike its prototype, which is self-deployed, the Exonum Enterprise offering includes setup and DevOps support along with other tools for Bitfury’s clients. It’s also anchored to the Bitcoin blockchain.
The idea here is to increase transparency. Enterprise blockchains like Exonum are permissioned (private) while Bitcoin’s blockchain is public (permissionless). Blockchains, for Bitcoin’s use case, anyway, are meant to be decentralized, (basically) immutable and completely transparent because these design features make it both auditable and secure to ensure against fraud. Private blockchains, on the other hand, offer none of these guarantees because they are centralized.
Something like Exonum Enterprise, then, is trying to mediate between the permissioned nature of a private chain and the permissionless nature of a public chain. By anchoring data on the Bitcoin blockchain (i.e., submitting data to the network periodically to reflect the state of the private network), Bitfury wants to give clients the control of a private network while simultaneously giving them the assurances and transparency of a public one.
This is why it opted toward Bitcoin as an anchor, because it is the most robust of the public blockchain batch.
“We chose to use the Bitcoin blockchain because it is the most secure blockchain by several metrics, but notably that the cost to attack and rewrite the Ethereum blockchain is about 10 times less than the cost to attack/rewrite the Bitcoin blockchain,” Exonum head Gleb Palienko told Bitcoin Magazine.
How Exonum Enterprise Works
The Exonum Enterprise blockchain promises speeds of up to 5,000 transactions per second through its proprietary Byzantine-fault-tolerance-based consensus mechanism. This speed varies based on node capacity, however; for instance, a low-end node that creates a block every 60 seconds costs $1,250, while one that adds a block every second costs $5,000, according to Forbes. The nodes are hosted on the cloud for clients, rather than supported via in-house hardware.
How many nodes a business might need depends entirely on what the blockchain will be used for and how many entities will operate it, though Bitfury recommends at least four for “basic scenarios.”
Data from these Exonum Enterprise nodes can be relayed to the Bitcoin blockchain on a variable basis. This process, which is automated, involves publishing the root hash of any Exonum Enterprise block’s Merkle tree to the Bitcoin blockchain. Put another way, Exonum Enterprise etches a references to the Exonum Enterprise blockchain’s data into the Bitcoin blockchain without revealing the underlying data itself; from here, those with eyes on this particular blockchain can reference Bitcoin’s ledger to see if the hash matches the Merkle root on their private blockchain. Bitfury charges $10 for every transaction sent to the Bitcoin network, according to Forbes.
“This allows Exonum Enterprise clients to verify their blockchain and get a cryptographic proof of the data’s existence and authenticity,” Palienko said. “Anchoring to the Bitcoin blockchain ensures that users cannot rewrite data on the public blockchain without detection, and can assure customers/investors/regulators that companies are not engaging in ‘double bookkeeping.’”
The veritability of each proof, though, is contingent on how often an organization decides to publish hashes onto Bitcoin. They can choose to do so every block, every hour, every day, every week, every month or never at all. For the hybrid model to truly unlock the benefits of its Bitcoin overlayer, Bitfury recommends a daily anchoring at minimum.
But under this model, the more often the Exonum Enterprise blockchain anchors to Bitcoin, the better. If, for example, a company only verified the state of its private chain on Bitcoin once a week, you would have no way of verifying that the ledger wasn’t tampered with between each weekly entry. A daily entry would offer increased auditability, while an hourly one would offer more assurances still.
Who’s Using Exonum Enterprise?
Bitfury told Forbes that 35 organizations are currently leveraging Exonum Enterprise in its open-source form. Palienko told us that they are in the process of “onboarding new Exonum Enterprise clients” at the moment.
And what industries may benefit from the solution? When asked for examples of Exonum real-world use cases, Palienko referenced the software’s use by the Ukranian government for its state-run auctioning platform, SETAM. Since it has been deployed, Exonum Enterprise has underpinned 4,000 auctions for a total $24.5 million in sales, according to Bitfury. Other use cases listed on the Exonum website include asset, identity and supply chain management.
Many Bitcoiners would no doubt be skeptical of Exonum Enterprise, given its enterprise blockchain roots. The option to anchor data to Bitcoin might pique their interest in the project somewhat, but they may still call the actual utility of a private blockchain into question.
Even so, Palienko and the rest of the Bitfury team believe that the volume of interest they’ve received from different organizations speaks for the utility of the platform. As the blockchain-as-a-service narrative continues to unfurl and search for successful use cases, perhaps Bitfury has struck a happy medium with private control and public guarantees — if those who use Exonum opt to publish data more often than not, that is.
“We have seen growing interest from businesses for blockchain solutions — the immutability, transparency and decentralization a private blockchain can provide even just within an organization is immensely appealing from a business standpoint,” Palienko said. “Additionally, enterprise blockchains with anchoring can provide the same level of security as public blockchains while also being more flexible and controllable for internal operations.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
