Consensus algorithms can be constructed to unlock blockchain for businesses

The following is a guest post by Venom Foundation CTO Christopher Louis Tsu.

Connecting blockchain to traditional businesses is not a simple process. So-called non-crypto industries, especially finance, banking and insurance, are markedly disconnected because each has a general modus operandi that does not fit well with today’s blockchain solutions.

Concerns in these fields abound over security, compliance and cloud computing and how this fits into the implementation of on-chain technology. Here are two disjointed worlds, which can be brought together through fintech and blockchain innovations. But this is not a simple process.

The truth is that it is difficult to create a layer one solution, a blockchain, that adheres to the principles of decentralization and transparency without sacrificing the important aspects of data protection and compliance.

Those working to build the blockchain-based future must pay close attention to these latter features. In the absence of proper data protocols, traditional financial managers are unlikely to adopt the technology – and neither will the tangentially related banking and insurance industries – while careful consideration needs to be taken to avoid irking regulators.

The tempting solution for hungry innovators is to abandon basic crypto principles. In the process, they would lose sight of what makes the technology so robust and inherently scalable. But it doesn’t have to be that way.

Overcome the challenges

Moderating the hype around blockchain is important to create sustainable, versatile and relevant solutions for the non-crypto industry that can actually be enhanced by the technology. Not all sectors need blockchain; this article mentions finance and banking as potential leaders of adoption, because these are examples where applications make a lot of sense.

Increased security and efficiency is a compelling case for the financial sector with the added benefit of more transparent governance, lower risk of fraud and reduction of counterparty risk. Insurance companies will look to smart contracts to streamline claims processes and enjoy stronger security. Meanwhile, clearance and settlement can be much cheaper and faster using distributed ledgers. Obviously huge amounts of money can be saved by large companies handling huge amounts of capital flow.

As always, implementation presents challenges for innovators. But we can establish the most important prerequisites for a workable blockchain network: it must offer complete data protection and be consistent with legislation that has not even been written and relevant existing legal structures. Businesses will only work with an infallibly compliant solution, and not a single major public blockchain currently meets these standards. However, the agile development of new solutions promises a lot.

The key lies in the iterative advances in technology that we have seen over the past two decades. A blockchain can work in the enterprise without compromise, but it needs to be configured in a new way.

The choice of consensus algorithm is of course of decisive importance. Yet the steps taken to implement this in a blockchain and how the system is constructed are just as prominent. The blockchain trilemma, and the aforementioned prerequisites for an enterprise blockchain, cannot be satisfactorily resolved without a smartly designed system that makes smart use of multiple technologies.

Consensus is an ever-growing field of research related to blockchain; It is no surprise in technical circles that hundreds of layer one solutions are being prepared for the market, in some cases with very different approaches.

A compelling technical solution lies in the Practical Byzantine Fault Tolerance (pBFT) consensus algorithm, a sustainability-led shift from Proof of Work. Nevertheless, the heavy lifting cannot be done by pBFT alone. If it could, companies would have already done it.

To unlock the enormous potential of a blockchain with pBFT, one can look to a technology still widely used in Web2 that, when properly integrated, offers enormous benefits to businesses not yet convinced by existing chains.

Merge two evolutionary cycles

pBFT proves to be a very streamlined method for achieving consensus in a distributed environment while maintaining bulletproof robustness, which can be demonstrated in huge ecosystems: examples include Cosmos Blockchains on Tendermint consensus, Hyperledger and many others. There is no doubt that static and dynamic sharding are among the fastest approaches to consensus in production, which pBFT does.

But what we haven’t seen often is pBFT implemented with an asynchronous model. This is the golden ticket to both satisfy traditional business needs and retains iron-clad crypto-security, while leaving the door open to decentralized applications.

pBFT has evolved as an energy-efficient way of smart contract execution in a trustless decentralized environment, at the same time the asynchronous model has grown to be preferred by traditional enterprise architects, such as Kafka and Akka, as an efficient way to parallelize execution in a clustered environment.

Asynchronous stateless communication, as opposed to stateful, is typically used by all traditional clustered databases, all distributed queues, and even many app caches. Stateless is far less resource intensive because the system does not need to track session details and multiple links, and the asynchronous model itself ensures that transaction throughput can remain high as nodes do not need to wait for other nodes to receive their messages.

In a stateless system, no information needs to be stored, nor is there any need to respond, track or resend requests in the absence of a response. Think of this protocol as a highly streamlined engine that eliminates bandwidth-hogging processes wherever possible.

Now when we talk about parallelization of execution, we can often take this to mean dynamic and static slicing – that’s the most popular method, especially within a blockchain context. Sharing and storing a dataset across multiple databases and adding multiple machines allows huge amounts of data to be efficiently stored to scale to handle ever-increasing data streams and rapid traffic growth.

A combination of pBFT and the asynchronous model shows a structure’s markings to create a blockchain that gets the job done quickly, at scale, and to the high demands of lawmakers and business leaders.

The new role of pBFT in Enterprise

pBFT is a consensus algorithm designed in the 1990s to solve problems in many available Byzantine fault tolerance solutions. Now it seems tailor-made for non-crypto enterprise blockchain applications, suitable for those involving a consortium of enterprise organizations because each organization can represent a node on the network – with each of those nodes programmed to have clusters of instances and load balancers behind them. node’s endpoint.

This means that computing power can be massively scaled without compromising a fast response time. High levels of security are ensured without sacrificing an incredibly cost-effective communication overhead.

With a significant majority required to confirm transactions, the system is set up to work even in situations where validators crash or maliciously broadcast incorrect information. And the crucial function of nodes here is subject to verification. Each network user must verify their identity so that such a system passes KYC with flying colours.

pBFT is essentially designed to ensure robust data consistency without the risk of data loss in the event multiple nodes go offline or hardware failure occurs.

Nevertheless, data can be protected and kept private without compromising the transparency of transactions of those who have access; any node without the user’s private key cannot forge its identity or the message’s signature. The system is inherently reliable because the cost of attempting such a forgery is astronomical.

Moreover, pBFT allows a distributed system to achieve consensus despite an event where multiple nodes act to subvert the system. Each node performs calculations for verifiability, security and peace due to the built-in use of cryptographic algorithms such as signature, signature verification and hash.

A green light from lawmakers is plausible because impending regulations can be considered, especially when it comes to the potential for fraud and money laundering. Traditional businesses, meanwhile, will need their business to remain compliant without giving up proper data protection – necessary in the EU with GDPR, but further desirable for many jurisdictions, businesses and customers – and without loss of privacy.

Anti Money Laundering (AML), standard banking transactions and clearing and settlement, once made possible on a blockchain without drawbacks or legal issues, could lead to a wave of adoption in finance and banking as a much better solution than those already in use.

And in terms of economic logic, a strong case for the asynchronous model is here wrapped up in the parallelization aspect. While large blockchains struggle with the issue of scaling to handle high traffic volumes, here lies a built-in sharding protocol that exponentially increases the limit without increasing costs.

A viable path to adoption

Common logic dictates that companies will adopt a blockchain with a reliable high network speed and low transaction fees. Cost comes second to compliance and data protection imperatives, but it is a crucial hinge on which widespread use can occur. pBFT combined with an asynchronous model promises low fees, high speed and reliability, and data redundancy if implemented.

Using an asynchronous model strengthens network security as a limited number of nodes can behave unpredictably or arbitrarily without compromising the security of the system. pBFT tolerates Byzantine errors in an asynchronous network and uses the view-change protocol to guarantee lifetime – meaning that the client finally receives the correct responses to its requests. This works exceptionally well in an asynchronous environment like the Internet.

With pBFT ensures that a network attack is highly unlikely. With the confidence that delays to consensus will not be indefinite, an asynchronous stateless model can create a blockchain that serves both the traditional and crypto worlds.

The business requirements do not change to any great extent. Therefore, innovators must deliver a blockchain that meets these requirements. Achieving this would open the gates for adoption.