Emerging Technologies: Cloud Vendors Fight for Private Blockchain Dominance

The blockchain technology market is generally believed to be about $2 billion in 2019 and growing at an annual rate in excess of 50%—with projections for the market to exceed $10 billion by the end of 2025. Almost all of that new spending will be cloud-oriented; very few organizations consider running their own blockchain hardware.

Therefore, it’s not surprising to see cloud vendors actively promoting blockchain solutions. In May, Microsoft and Amazon both announced public releases of their managed blockchain services. Oracle is also very vocal about its blockchain services.

Blockchain technology adds two key innovations to traditional database technology:

  • A consensus mechanism that allows transactions to be validated without the need of a central authority
  • An immutable history in which cryptographically prevents tampering or deletion of data

Blockchain adoption revolves around a few key cases:

  • Cryptocurrencies such as Bitcoin and Ethereum are, of course, at the core of blockchain architecture. However, few enterprises or governments seriously contemplate creating a crypto currency.
  • Inter-business use cases (B2B) are a natural fit for blockchain. Blockchain allows businesses to collaborate without a central trusted arbiter and is particularly useful in supply chain applications, where multiple businesses collaborate on supplying parts and components to a manufacturer, for instance.
  • There are many use cases internal to enterprises or at the core of consumer-facing applications: legal document management, intellectual property, security, and access control, for example.
  • Government and regulatory organizations are also attracted to the blockchain as a way of producing definitive proof of IP or documentation.

Some of these use cases are more oriented toward what are called “permissioned” blockchains in which participation is by invitation only. B2B use cases are particularly suited to permissioned blockchains.

Other use cases are more suited to public blockchain solutions. As an example, public record and intellectual property systems are best kept on a public blockchain, which is less susceptible to collusion or tampering.

The cloud vendors are generally concentrating more on the permissioned use cases in the anticipation that supply chain and other B2B use cases will see rapid take-up.

Hyperledger Fabric is the most pervasive technology within permissioned blockchain development. Hyperledger Fabric is an open source framework that maintains a distributed ledger and smart contract language; it’s roughly equivalent in functionality to Ethereum.

It is also possible to deploy your own Ethereum network in Microsoft Azure, which will then act as an Ethereum API-compatible permissioned blockchain. AWS is expected to support Ethereum in its managed blockchain solution later this year.

There are many scenarios in which blockchain is used essentially as a database. For instance, when a blockchain is used to store intellectual property or public records, the blockchain consensus mechanism is less important than the immutability and traceability of blockchain transactions.

Unfortunately, the use of blockchain as a database creates a lot of drawbacks. In particular, the performance of the blockchain cannot approach the performance of a traditional database. Furthermore, developing blockchain applications involves unfamiliar APIs and many pitfalls. For this reason, Gartner thinks that the majority of blockchain projects will fail.

Amazon had this dilemma in mind when designing its blockchain services. In addition to a traditional managed blockchain service it also announced a “blockchain database”—QLDB—which is expected to be available later this year. QLDB marries the blockchain characteristics of immutability and cryptographic verifiability with database features such as a SQL query language. There are a few other attempts to bridge the gap between blockchain and database technology, such as BigChainDB, Fluree, and ProvenDB (disclosure: I am the CTO of the ProvenDB project).

There is no real doubt that the future of blockchain application development lies in the cloud. With annual blockchain expenditure expected to exceed $10 billion within a few years, it’s not surprising that the major cloud vendors are lining up with their blockchain services.