Why private blockchains will go the way of the intranet

Back in the 90s, every company had its own internal “intranet”. And many, if not most still do today.

An intranet was like a closed off version of the internet, just for that company to use. Different teams have different pages and they update them with useful information.

The problem with intranets is they didn’t evolve. And the reason they didn’t evolve was exactly because they were walled off from the outside world.

Think back to how the internet was in the 90s. Here, this should jog your memory:

Yes, that’s what Apple’s website used to look like. When you look at it today, it’s comical.

But here’s the thing. Most intranets around today still look like that. While the internet evolved into a dynamic, responsive, intuitive creation, intranets stagnated.

A couple of years ago I worked for a leading investment management company based in Mayfair. Everything about it was almost intimidatingly professional. But not its “intranet”. No, that think looked and functioned like the above Apple website from the 90s.

This is what happens when you shut yourself off from the world. The world moves on and you do not.

The reason I’m bringing this up today is because of a panel discussion that took place at last week’s Paris Blockchain Week summit.

Public vs private blockchains explained

The session was called: How blockchain will change the IoT.

IoT stands for Internet of Things. And on stage there was:

Dominik Schiener, co-founder of IOTA

Henri Pihkala from Streamr

Gilles Fedak from iExec

Olivier Jaillon from La Parisienne Assurances

When the discussion turned to public vs private blockchains, Olivier Jaillon disclosed some very interesting information.

There has been a lot of discussion online about public vs private blockchain. They are basically like the difference between the internet and an intranet.

A private blockchain is owned, built, managed and secured by a company. A public blockchain is public, like the internet.

The idea of a public blockchain is that it maintains and secures itself. Well, to be more precise, its users do.

Its main benefit is that it is immutable and decentralised. No one party has control over it. And because of that, it is incredibly secure, and in theory almost unhackable.

Think bitcoin, Ethereum, Monero, Stellar Lumens, etc.

Private blockchains on the other hand are, by their nature, centralised. They have a single point of failure – the company that controls them.

An example of a private blockchain is what JP Morgan has set up for its JP Morgan coin. And likely what Facebook will do for Facebook Coin.

In these instances the company that set them up will have control over how they work. They will be able to freeze out users, reverse transactions, completely rewrite the rules as they like.

Many crypto experts argue that a private blockchain has no advantages over a traditional database. It is centralised and because of that it is not secure.

The general view of many commentators is that private blockchains will eventually go the way of the intranet.

Once major companies actually get their heads around what blockchain is and the benefits it provides, they will move over to public blockchains.

But it wasn’t until this talk that I’d heard that same sentiment uttered by a major industry player.

Tens of thousands of insurance policies already powered by blockchain

Olivier Jaillon owns La Parisienne Assurances, which is a big bespoke insurance firm in France.

He revealed that they already have tens of thousands of insurance policies that run through blockchain.

The way these insurance policies work is though seniors and other IoT devices that continually relay information and automatically pay out if say, a home is flooded.

They also have things like instant on-demand car insurance that starts when you turn the key in the ignition. You only pay insurance for the exact time you’re actually driving the car.

He said they were using this insurance product to insure Uber drivers using on-demand policies.

These are things I wrote about a couple of issues back in my monthly Crypto Wire newsletter on blockchain and the insurance industry.

I knew these developments were coming. But it’s interesting to hear there are big insurance companies already using blockchain and IoT in this way.

He said that these blockchain and IoT systems meant people could pay with microtransactions, which meant cheaper products for customers and cost savings for the insurer.

He stated that blockchain powered insurance was cutting their costs by a factor of 10.

What does this have to do with public vs private blockchain? Well, Jaillon also revealed they are currently using eight to nine million IoT devices to power these insurance products, and the number of devices is increasing exponentially every month.

Right now, he said they are using a private blockchain to power all this, but they have realised a private blockchain is not a long-term solution. It simply cannot handle the amount of data they need to process.

Remember, on a private blockchain a company either does all the computing itself, or it pays for other entities to do it for it. The bigger it gets, the more it costs. With a public blockchain, the network sustains itself. The costs are essentially zero.

He also realised a private blockchain was simply not secure enough to trust with this kind of data on a major scale. So they are currently searching for a public blockchain that can fit their needs.

I thought it was funny he was on a panel with the co-founder of IOTA, which is specifically designed to cope with these demands. I wonder if he had a conversation with Dominik Schiener after the panel discussion.

So, it seems the online commentators may be right. Major organisations are waking up to the fact that they need to be using public not private blockchains if they want any real benefits over a normal database.

And the great thing about public blockchains is anyone is free to invest in them and share in their success.

Do you think private blockchains will go the way of the intranet? Let me know: harry@southbankresearch.com.

Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Blockchain

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