Today the Linux Foundation Decentralized Trust (formerly Hyperledger) announced a raft of new initiatives. CREDEBL becomes its sixth decentralized identity project. Plus, it is adding Kaleido-founded Paladin as a blockchain privacy lab, one of four newly launched labs.
Hyperledger Iroha has now reached version 2. The Soramitsu founded blockchain is best known as underpinning Cambodia’s successful Bakong payment platform. It is also currently being used in central bank digital currency (CBDC) trials in Papua New Guinea and the Solomon Islands.
Self sovereign identity solution CREDEBL was already an open source project and was contributed by AYANWORKS. CREDEBL integrates aspects of several existing LF Decentralized Trust initiatives: Trust over IP, Hyperledger Indy and Hyperledger Aries. Indy and Aries were amongst the first open source decentralized identity solutions. CREDEBL also incorporates contributions from the Decentralized Identity Foundation (DIF).
The solution is being used at in national identity projects in Bhutan and Papua New Guinea.
Meanwhile, two challenges frequently mentioned in the enterprise space are interoperability and privacy. While there are various solutions to interoperability, including several that are part of the Linux Foundation, the reality is blockchain shines when there are fewer, bigger blockchains. So blockchain proliferation is really the challenge.
The Ethereum privacy challenge
Turning to privacy, permissioned DLT solutions such as Fabric, Corda and Canton were designed from the start with privacy in mind. While they each work in different ways, by default only users with appropriate permissions can see data. The data is segregated. On the other hand, Ethereum was designed for complete transparency.
Many enterprises are keen to use a permissioned version of Ethereum because it’s seen as a path to public blockchain. But privacy is a challenge.
Tessera was an early Ethereum (Quorum/Besu) privacy solution that supported private transactions, where only a hash was stored on the blockchain and just the permitted parties could view the transaction data. In late 2024 LF Decentralized Trust deprecated Tessera because it was no longer sufficiently performant.
Large scale enterprise projects that want to use Ethereum-based chains have a dilemma – use Tessera or something else. So far this is an area that’s not considered resolved, although there are a number of contender solutions. The Banco Central do Brasil has delayed its DREX CBDC launch to spend more time on the topic. We’ve spoken to other large enterprise projects that expect to be able to leverage a solution in a year or so, given the many teams working in this area.
Paladin as one of the privacy options
Hence, Paladin, the new lab initiative contributed by Kaleido, is one of the potential Tessera replacements, but Kaleido considers it as having additional enhancements beyond performance. One facet is privacy preserving tokens, which can either be controlled by the token issuer or use zero knowledge proof (ZKP) cryptography. These ZKP tokens are referred to as Zeto tokens for which there’s a separate Kaleido initiated Lab.
Apart from private tokens, there’s also a need for confidential workflows and hence private smart contracts only available to a privacy group. These are just two of the components that go into the privacy framework which is considered as pluggable, in order to support ongoing innovation.
One of the challenges in the financial world is getting regulators on board. Banking regulators already have reservations about permissionless blockchains, although many can be addressed relatively easily. Regulators have raised various issues about Zero Knowledge Proofs, including it being novel and lacking battle testing during cryptographic ‘events’. In a recent report, the BIS concluded that “These technologies, though theoretically sound, face real-world challenges such as high computational demands and complex implementation requirements.”
