Connecting traditional businesses with blockchain technology requires merging pBFT consensus algorithms and asynchronous models to ensure compliance, data privacy, and scalable enterprise solutions.

The following is a post from Christopher Louis Tsu, CTO of the Venom Foundation.

Connecting blockchain to traditional business is not a simple process. So-called non-crypto industries, especially finance, banking and insurance, are clearly disconnected, as each industry has a general way of operating that is not entirely suitable for current blockchain solutions.

Concerns abound in these areas about security, compliance, and cloud computing and how they can be applied to implementing on-chain technology. These are two disjointed worlds that can be brought together through fintech and blockchain innovation. But it’s not an easy process.

In fact, it is difficult to create a layer-one solution, i.e., a blockchain, that adheres to the principles of decentralization and transparency without sacrificing important aspects of data privacy and regulatory compliance.

Those working to build a blockchain-based future need to pay close attention to these latter features. Without the right data protocols, traditional finance executives are unlikely to adopt the technology, nor will the unrelated banking and insurance industries, and careful consideration must be given to avoid angering lawmakers.

A tempting solution for hungry innovators is to abandon basic cryptographic principles. In the process, they lose sight of what makes the technology so powerful and inherently scalable, but it doesn’t have to be this way.

Overcoming challenges

Tempering the hype around blockchain is important to creating sustainable, general, and relevant solutions for non-crypto industries that can actually be improved by the technology. Not all industries need blockchain; this article mentions finance and banking as potential leaders in adoption because these are examples where the applications make a lot of sense.

Improved security and efficiency is a compelling case for the financial sector, with the added benefits of more transparent governance, lower risk of fraud and counterparty risk. Insurance companies will look to smart contracts to streamline the claims process and enjoy stronger security. Meanwhile, clearing and settlement can be cheaper and faster using distributed ledgers. Large companies that handle large flows of money can obviously save a lot of money.

As always, implementation presents a challenge to innovators. But we can identify the main prerequisites for an adoptable blockchain network: it needs to provide complete data privacy and comply with legislation that has not even been written yet and the relevant existing legal structures. Enterprises will only use a solution that is absolutely compliant, and currently none of the major public blockchains meet these criteria. However, cleverly designed new solutions hold promise.

The key lies in the iterative advancements in technology witnessed over the past two decades. Blockchain can be run in the enterprise without compromise, but it needs to be configured in a novel way.

Of course, the choice of consensus algorithm is crucial. However, the steps taken to implement it into the blockchain and how the system is designed are equally important. The blockchain trilemma, as well as the prerequisites for enterprise blockchains mentioned above, cannot be satisfactorily solved without a cleverly designed system that cleverly leverages multiple technologies.

Consensus is an evolving area of ​​research related to blockchain; in the technology space, it’s no surprise that hundreds of layer-one solutions are preparing for the market, in some cases taking wildly different approaches.

One compelling technical solution lies in the Practical Byzantine Fault Tolerance (pBFT) consensus algorithm, a sustainability-led shift toward proof-of-work. However, pBFT alone can’t do the heavy lifting. If it could, companies would have already done it.

To unlock the vast potential of blockchain through pBFT, one might look to a technology that is still heavily used in Web2 and, if integrated correctly, could offer huge advantages to businesses that are not yet convinced by existing chains.

Merge two evolution cycles

pBFT is proven to be a highly simplified way to reach consensus in a distributed environment while maintaining bulletproof robustness, proven in a huge ecosystem: examples include the Cosmos blockchain based on Tendermint consensus, Hyperledger, etc. There is no doubt that static and dynamic sharding is one of the fastest ways to reach consensus in production, and pBFT does just that.

But what we don’t often see is pBFT implemented in an asynchronous model. This is the golden ticket to meeting traditional enterprise needs while maintaining absolute cryptographic security, while opening the door to decentralized applications.

pBFT has evolved as an energy-efficient way to execute smart contracts in a trustless, decentralized environment, while asynchronous models have evolved to be favored by traditional enterprise architects (such as Kafka and Akka) as a way to execute smart contracts in a clustered environment.

In contrast to stateful communication, asynchronous stateless communication is commonly used by all traditional clustered databases, all distributed queues, and even many application caches. Stateless is much less resource intensive because the system does not need to keep track of session details and multiple links, and the asynchronous model itself ensures that transaction throughput can remain high because nodes do not need to wait for other nodes to receive their messages.

In a stateless system, there is no need to store any information, respond, track, or resend requests in the absence of a response. Think of this protocol as a highly simplified engine that eliminates bandwidth-consuming processes as much as possible.

Now, when we talk about parallelized execution, we can usually understand it as dynamic and static sharding - which is the most popular approach, especially in the blockchain environment. Splitting and storing data sets across multiple databases and adding more machines can effectively store large amounts of data to scale to manage increasing data flows and rapid traffic growth.

The combination of pBFT and the asynchronous model shows the hallmarks of a structure to create a blockchain that can get things done quickly, at scale, and meet the high demands of lawmakers and business leaders.

The emerging role of pBFT in the enterprise

pBFT is a consensus algorithm designed in the 1990s to address issues in many available Byzantine fault tolerance solutions. Now it seems tailor-made for blockchain applications in non-crypto businesses, those involving consortia of enterprise organizations, as each organization can be represented by a node on the network — each of these nodes is programmed as an endpoint with a cluster of instances and a load balancer node behind it.

This means that computing power can be massively scaled without compromising fast response times. High levels of security are ensured without sacrificing extremely cost-effective communication overhead.

Since a supermajority is required to confirm a transaction, the system is set up to work even if a validator crashes or maliciously broadcasts incorrect information. The key function of the node here is based on verification. Every network user must verify their identity so that the system can pass KYC smoothly.

pBFT is essentially designed to ensure strong data consistency, with no danger of data loss when multiple nodes go offline or hardware failures occur.

However, data can be protected and kept private without compromising the transparency of transactions to those who are allowed access; any node that does not have the user's private key cannot forge its own identity or the signature of a message. The system is inherently reliable because the cost of attempting such a forgery is astronomical.

Additionally, pBFT allows distributed systems to reach consensus even when multiple nodes attempt to disrupt the system. Due to the built-in use of cryptographic algorithms such as signing, signature verification, and hashing, each node performs computations with verifiability, security, and peace.

The green light from legislators is justified as upcoming regulations can be considered, especially regarding the possibility of fraud and money laundering. At the same time, traditional businesses will need their operations to remain compliant without dealing with appropriate data protection - which is necessary in the EU GDPR but is preferable for many jurisdictions, businesses and customers - and without losing data privacy.

Anti-Money Laundering (AML), standard banking transactions, and clearing and settlement, once possible on blockchain without drawbacks or legal issues, could lead to a wave of adoption in the finance and banking industry as a better solution than what is already being used.

In terms of economic logic, a strong case for the asynchronous model here lies in parallelization. While major blockchains struggle with scaling to handle large amounts of traffic, there is a built-in sharding protocol that can multiply the limit without increasing costs.

Possible approaches

Common logic dictates that companies will adopt blockchains with reliably high network speeds and low transaction fees. Cost is indeed secondary compared to the imperatives related to compliance and data protection, but it forms a critical hinge upon which widespread adoption can be achieved. pBFT, combined with an asynchronous model, promises low fees, high speed and reliability, and data redundancy (if implemented).

Using an asynchronous model enhances network security because a limited number of nodes can exhibit unpredictable or arbitrary behavior without compromising the security of the system. pBFT tolerates Byzantine failures in asynchronous networks and uses a view change protocol to guarantee liveness - meaning that clients will eventually receive a correct reply to their requests. This works very well in asynchronous environments such as the Internet.

Using pBFT ensures that network attacks are extremely unlikely. Believing that the delay in reaching consensus will not be indefinite, the asynchronous stateless model can create a blockchain that serves both the traditional world and the crypto world.

Enterprise needs have not changed broadly. Therefore, innovators must provide blockchains that meet these needs, and achieving this goal will open the door to adoption.