I started to ponder this question after I read this thought piece by Zurab Ashvil, the Founder of L3COS, on ABC Money. In it, Ashvil outlines why he thinks existing decentralised blockchains have failed and how a permissioned, decentralised and regulated blockchain is needed if the technology is going to be used to power digital economies.
Most people in crypto and blockchain will dismiss this idea out of hand and I must admit it isn’t an idea that has ever struck me as the answer to the problems the industry faces. At the same time though, there’s no doubt that blockchain technology has huge potential but hasn’t been adopted en masse. Furthermore, Ashvil’s assertion that the public and permissioned blockchains used today have failed to prove popular enough is certainly a valid one.
Which brings me back to my original question – is permissioned, decentralised and regulated blockchain the future of this technology?
First of all, it’s worth looking at the arguments for and against the existing blockchain solutions that exist. On the one hand, there are public blockchain, like Ethereum, and on the other there are permissioned blockchain, like IBM Blockchain.
Anyone who has been around long enough will know that blockchain began in the public sphere. Bitcoin was released as a peer-to-peer electronic cash system and Ethereum was developed afterwards as a public blockchain for decentralized applications. These public blockchain are certainly driving innovation, as the massive increase in DeFi use cases has shown. However, the reality is that these are still niche interests within tech and finance.
When it comes to permissioned blockchain, you see some headline grabbing stories, such as how Maersk has collaborated with IBM on the Tradelens platform. But these stories are isolated and sporadic rather than a gathering snowball of use cases that you would expect if this approach was going to win through.
So, to the future. Ashvil argues that the decentralised elements of blockchain technology are the important bits that must be kept because they mean that huge amounts of bureaucracy can be cut from economies as they digitise. The problem he wants to solve is the anonymity of entities interacting in a public blockchain, which he describes as follows:
“This is such a fundamental error because it doesn’t reflect human nature or the societal structures we all recognise. People want to know who they are dealing with so they can be trusted to operate fairly and honestly.”
L3COS claims to solve this problem through the implementation of 195 super nodes, under the control of sovereign states, at the top of a triple layer consensus system. These nodes exchange information with each other via Proof of Government consensus, with the system already achieving over 1.5 million transactions per second. It certainly sounds impressive and, according to Ashvil, the L3COS system provides the regulated infrastructure that can power Central Bank Digital Currencies (CBDC), another hot topic in blockchain right now.
Of course, the big question as to whether the permissioned, decentralised and regulated blockchain they propose will achieve all this revolves around whether it can gain traction in a way that previous blockchains have not.
The involvement of governments will be key and might be tricky considering how many states have cracked down on cryptocurrencies in the past. At the same time though, it is wrong to conflate blockchain technology with cryptocurrencies and some nations are already using blockchain in their digital services for citizens. Furthermore, L3COS is designed to allow all existing decentralised applications to transfer from other blockchain networks, which could help it to gain momentum.
All of these things, plus many other factors, will play a role in deciding whether blockchain has a permissioned, decentralised and regulated future and we’ll have to wait and see what occurs. Predicting which technologies will or won’t succeed is always difficult but the fact that so many states are now looking at blockchain for their CBDC must suggest that government involvement will play a role in the technology’s evolution.