Today at London’s Blockchain Expo, Jeremy Millar, board member of the Enterprise Ethereum Alliance (EEA), made a convincing case for the importance of standards. Some see standards as following innovation, but he argued they are critical to creating the network effect amongst enterprises. He also acknowledged they could be tedious.
Safeguarding network effects
Millar highlighted the accelerating rate of adoption of new technologies, with the relative slowness of internet adoption. Arguably it took 20 years for the internet to become almost ubiquitous. It took only 3-4 years for smartphones to gain critical mass.
In the case of word processing, for example, Word, the financial benefit of the network effect went to Microsoft. Whereas in the case of blockchain, with crypto economics the profit goes to early adopters. This accelerates adoption and the network effect further.
The Binance crypto exchange is an example of the acceleration that financial incentives create, though it wasn’t one of Millar’s examples. Hong Kong-based and Sequoia-backed, Binance is currently ranked number one in volumes by Coinmarketcap. The startup reached the top spot within just five months of launch and turns over more than $2bn a day. A significant factor was financial incentives offered to users.
Millar said: “So while it is early days, it’s extremely important that we start thinking about standards: how to create interoperability and how industry groups come together to develop interchange formats. Because that is a key enabler to accelerate technology adoption and it’s not helpful if none of this stuff works together. It will totally destroy the network effect utility of these systems.”
The interoperability theme is one that R3 has started to talk about more.
Apart from the network effects, standards are needed when pitching technologies to clients. Many RFPs require compliance with particular standards, for example, ACORD in insurance. Going forward blockchain applications will need to be compliant with blockchain standards.
The standards, in turn, enable the creation of tools. And those tools can be certified as being compliant. Additionally, it allows the platforms to attain a level of robustness required by enterprises.
Who benefits from standards
Given Ethereum’s ethos of empowering individuals, Millar was careful to emphasize that the EEA’s standards will not just help large incumbent firms. They will aid significant crypto startups and socially driven causes such as the need to be able to share health data securely.
“I want my medical records stored and in cryptographically synchronized globally accessible the database,” Millar said. “So there are many use cases that require privacy and permissioning and those features today are really getting through more in the Enterprise Market than in the public blockchain.
The intention is once these privacy features are established to push them back into the public blockchain.
The EEA caters for startups as well as larger companies by basing the fees on company size.
Business and tech standards
The organization has a series of committees based on industry.
But they also have technology-based committees. Millar emphasized the need to cater for a tech team from outside the crypto circles who expect to see standard tech stack diagrams, which is not something you see in the Ethereum yellow paper.
Understanding the stack helps when organizations want to integrate or want to adapt some aspects of Ethereum. A common one is to change the consensus mechanism for a permissioned blockchain. Technical clarity is essential because some companies want to run a part of the system in an internal trusted environment. And usually, the most important element is the ability to have both private data and private transactions.
Millar said to expect an announcement about standards shortly.
One of the important takeaways from Millar’s talk was that they won’t be ceding ground to R3 or Hyperledger Fabric any time soon. They have a clear roadmap that’s appealing for enterprises.