Enterprise

Decentralized computing is coming. The killer app for the enterprise is still missing.

While early efforts to bring blockchain technology to business tech have been comedy gold, enterprise startups are refining those ideas in hopes of moving beyond the cloud.

The blockchain hasn't quite connected with the needs of the enterprise yet.

The blockchain hasn't quite connected with the needs of the enterprise yet.

The blockchain has been one of the most reliable running jokes in enterprise tech over the last few years. Aging tech vendors and thirsty entrepreneurs alike have struggled to justify their enthusiasm for the technology behind the cryptocurrency explosion and why it makes sense for boring back-office applications, often to amusing effect.

"2017 is the year that will make or break the case for viable enterprise adoption of blockchain, one of the newest and potentially groundbreaking transformative technologies," IDC wrote in a white paper that year describing IBM's ambitions in this area. If that were true, then this space is truly broken; very few companies in 2021 are using blockchain applications anywhere near the scale at which they've adopted other recent advances in enterprise tech like containers or robotic process automation.

"Sometimes the hype gets ahead of reality," said Ben Golub, CEO of Storj, a startup working on distributed storage technology. "I think that's especially true when people conflate enterprise and blockchain with Bitcoin."

Still, a small but growing number of enterprise tech companies think a more decentralized internet is inevitable. Microsoft CEO Satya Nadella recently predicted that our current cloud-computing system is at a moment of "peak centralization." Some argue that blockchain technology should be the vehicle for that shift.

A radical decentralization movement known as Web3, or the next evolution of the social-media apps and dynamic web pages that arrived with Web 2.0 15 years ago, calls for the internet to reduce its reliance on central points of failure. Such a distributed system, advocates say, promises to improve reliability at prices that big cloud providers — who invest billions each quarter to maintain their networks — can't match.

Some are thinking smaller. There are a lot of companies that are still sharing sensitive data with customers on spreadsheets and even paper. Large companies with lots of smaller suppliers often struggle to keep track of accounting and inventory information, and blockchain-based projects like Hyperledger think they could be a better alternative.

But it's clear that backers of enterprise blockchain projects are still looking for their killer application, the breakthrough that turns heads and really illustrates why developers should try something new.

"I think what we're starting to see is that people are beginning to realize that decentralization is a lot bigger than blockchain, and blockchain itself is a lot bigger than just cryptocurrency," Golub said. "A lot of the same rules that we see with any kind of disruptive technology apply here too; if you want to replace existing technologies you have to be radically better in a few key areas, but certainly be at least on par in areas like security and performance, and economics and ease of use."

A lot of energy for an unclear gain

Blockchain technologies work by creating a shared record of an interaction that none of the parties involved manage or store. In cryptocurrency, powerful, energy-guzzling servers around the world compete to solve cryptographic equations that verify the integrity of a transaction between buyers and sellers, with a token awarded to the victors. A permanent, public record of that transaction is then added to a "block," which is part of a "chain" of similar transactions.

Most experiments with enterprise blockchains won't involve public blockchains like Bitcoin or other cryptocurrencies. Public blockchains were designed to create a trusted transactional system between two anonymous parties that have no reason to trust each other, whereas in most enterprise business relationships you know exactly who you're dealing with.

But enterprise business relationships do struggle with finding consensus on everything from inventory levels to sustainability goals to regulatory compliance. One of the newer buzzwords in enterprise tech is the quest for "a single source of truth" across business systems, which is harder than it might sound in a world of siloed databases and business software applications.

"I think the trouble is that it's just very hard to get people to switch off of the way they've been doing things, even if they acknowledge that they're really suboptimal," said Kieran James-Lubin, president and CEO of BlockApps, which helps companies interested in blockchain apps get started. "And so where you have to look is where the pain is quite large."

BlockApps is seeing demand from companies that want to set up decentralized record-keeping systems for environmental sustainability goals. It also just signed a partnership with AWS where cloud customers can use its Strato blockchain record-keeping system to track agricultural products from seeds in the ground to grocery store shelves, looping in farmers and distributors.

The natural question at this point almost asks itself: What exactly does using blockchain technology offer these industries that they can't get from a shared database? James-Lubin compared it to the problems faced by banks back in the day when the only record of a financial transaction was a paper stock certificate, which did not scale along with an increase in trading volume.

Those banks created semi-independent clearinghouses to keep track of those transactions. The banks own that clearinghouse, but it serves as the single source of truth for the banking system and is not managed by any one for-profit bank.

"You have a situation where it's not quite a public network; there's permissioning, and you want to know who everyone is. But once that that bar has been achieved, there still is a trust issue that they could only solve either by setting up a company that breaks a tie — a clearinghouse — or with a blockchain," James-Lubin said.

Fewer points of failure

Companies like Storj and Filebase are borrowing the decentralized ideas popularized by the blockchain in hopes of changing how one of the most fundamental tasks in computing — storage — is used, managed and secured.

Think of Storj as a version of the SETI@home project, where space enthusiasts agreed to lend researchers a small portion of their computer's processing resources to search for extraterrestrial life. Files uploaded to Storj are encrypted, broken down into 80 different pieces and then scattered across portions of hard drives that home users or data center operators can rent to Storj.

When a Storj user needs their file, the company's software reassembles the file from those different pieces. And it only needs 29 of those pieces to reassemble the full file, which means almost two-thirds of the system can fail before the file is lost. Very few conventional storage services can tolerate that degree of failure.

Filebase allows its customers to work with decentralized storage networks like Storj, Sia and Skynet in their apps through an API that is compatible with AWS's S3 object-storage service. Customers who have already written applications for S3 can store data with Filebase without having to rewrite that part of their application.

The blockchain serves as an incentive layer for those who want to lend out storage capacity to these decentralized networks; Storj rewards data hosts with its own tokens based on the Ethereum blockchain. Businesses looking for storage capacity pay in U.S. dollars for these services, which promise redundancy levels similar to big cloud providers at a fraction of the cost and effort required to enable that resiliency across cloud regions.

An often overlooked component of cloud pricing is the fees customers pay to transfer data between cloud regions or out to the public internet. It's certainly possible to set up redundant storage across cloud regions, but you'll pay your cloud provider to transfer that data between regions, whereas that's the whole point of decentralized storage networks.

"Web3 is essentially a world where distributed users, and really machines, are able to interact and host data without relying on a centralized entity," said Joshua Noble, co-founder and CEO of Filebase, which just raised a $2 million seed round.

Not ready for web time

It's safe to say that the average enterprise is not ready for Web3. There are still loads of businesses that are just getting started with cloud computing, and the people in charge of information technology for the world's largest companies tend to move conservatively when it comes to new technologies.

And there's a bigger problem with the enterprise blockchain, beyond the usual fear of change. Many of these enterprise blockchains rely on the "proof of work" mining standard that cryptocurrencies use to guarantee the integrity of the record, where servers around the world run flat-out using often-dirty energy sources to settle transactions, at a heavy environmental cost.

But that unsustainable system is about to change.

Ethereum is moving to a "proof of stake" standard, which discourages computing battle royales in favor of a system where only existing Ethereum holders can be chosen to create new blocks or verify blocks others have created. This means having the biggest network or the most powerful computers doesn't guarantee you any sort of reward for the work required to verify a transaction, and that the verification algorithms can run on simpler hardware.

Proof of stake isn't nearly as "battle-tested" as proof of work, according to the Ethereum Foundation, but that might be just fine for a private blockchain system that enterprise apps are likely to use.

"Proof of work is super expensive and environmentally unfriendly," said James-Lubin. "For us, we're often marketing sustainability, so we can't be telling people 'Oh yeah, and you've got to throw 70 computers at this.'"

It's far too early to predict whether efforts like Web3 and enterprise blockchain will evolve into the next big architectural breakthrough in the history of the internet. But as we've seen with the rise of edge computing, industrial IoT and ever-more powerful mobile devices, we appear to be in the early days of a pivot toward decentralization.

"Web3 is either going to be very successful, wildly successful, and have an ultimate long-standing impact on the data center, or it's not," said Zac Cohen, Filebase's co-founder and chief operating officer. "From our perspective, it really is an all-or-nothing thing."

Workplace

The tools that make you pay for not getting stuff done

Some tools let you put your money on the line for productivity. Should you bite?

Commitment contracts are popular in a niche corner of the internet, and the tools have built up loyal followings of people who find the extra motivation effective.

Photoillustration: Anna Shvets/Pexels; Protocol

Danny Reeves, CEO and co-founder of Beeminder, is used to defending his product.

“When people first hear about it, they’re kind of appalled,” Reeves said. “Making money off of people’s failure is how they view it.”

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Sponsored Content

Foursquare data story: leveraging location data for site selection

We take a closer look at points of interest and foot traffic patterns to demonstrate how location data can be leveraged to inform better site selecti­on strategies.

Imagine: You’re the leader of a real estate team at a restaurant brand looking to open a new location in Manhattan. You have two options you’re evaluating: one site in SoHo, and another site in the Flatiron neighborhood. Which do you choose?

Keep Reading Show less

Elon Musk has bots on his mind.

Photo: Christian Marquardt/Getty Images

Elon Musk says he needs proof that less than 5% of Twitter's users are bots — or the deal isn't going ahead.

Keep Reading Show less
Jamie Condliffe

Jamie Condliffe ( @jme_c) is the executive editor at Protocol, based in London. Prior to joining Protocol in 2019, he worked on the business desk at The New York Times, where he edited the DealBook newsletter and wrote Bits, the weekly tech newsletter. He has previously worked at MIT Technology Review, Gizmodo, and New Scientist, and has held lectureships at the University of Oxford and Imperial College London. He also holds a doctorate in engineering from the University of Oxford.

Policy

Nobody will help Big Tech prevent online terrorism but itself

There’s no will in Congress or the C-suites of social media giants for a new approach, but smaller platforms would have room to step up — if they decided to.

Timothy Kujawski of Buffalo lights candles at a makeshift memorial as people gather at the scene of a mass shooting at Tops Friendly Market at Jefferson Avenue and Riley Street on Sunday, May 15, 2022 in Buffalo, NY. The fatal shooting of 10 people at a grocery store in a historically Black neighborhood of Buffalo by a young white gunman is being investigated as a hate crime and an act of racially motivated violent extremism, according to federal officials.

Photo: Kent Nishimura / Los Angeles Times via Getty Images

The shooting in Buffalo, New York, that killed 10 people over the weekend has put the spotlight back on social media companies. Some of the attack was livestreamed, beginning on Amazon-owned Twitch, and the alleged shooter appears to have written about how his racist motivations arose from misinformation on smaller or fringe sites including 4chan.

In response, policymakers are directing their anger at tech platforms, with New York Governor Kathy Hochul calling for the companies to be “more vigilant in monitoring” and for “a legal responsibility to ensure that such hate cannot populate these sites.”

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

We're answering all your questions about the crypto crash.

Photo: Chris Liverani/Unsplash

People started talking about another crypto winter in January, when falling prices had wiped out $1 trillion in value from November’s peak. Prices rallied back in March, restoring some of the losses. Then crypto fell hard again, with bitcoin down more than 60% from its all-time high and other cryptocurrencies harder hit. The market’s message was clear: Crypto winter was no longer coming. It’s here.

If you’ve got questions about the crypto crash, the Protocol Fintech team has answers.

Keep Reading Show less
Latest Stories
Bulletins