Anyone that has followed blockchain technology’s development over the last decade will have heard the analogy that is made between it and the early stages of the internet.
“Right now, blockchain is like dial-up internet” is the sort of thing that many commentators have said and the basic premise of this statement is it’s a revolutionary technology that is still in its early days of development. Certainly, there are comparisons to be made. Firstly, both systems are essentially based on networks, with the internet’s network now spanning the world and everything we do, while blockchain networks (which are, of course, slightly different) currently used by a fraction of the global population.
There’s an interesting thought experiment for anyone who wants to think of what blockchain might look like were it to be used on a global scale. Furthermore, could such a system be thought of as “a single, global, permissioned blockchain”?
This is a concept I came across recently while investigating a new blockchain-based operating system called L3COS. In describing and defining what a permissioned blockchain is, L3COS poses this question as part of a suggestion that such a solution could put an end to all other blockchain. What’s so interesting about this idea is the parallels that are already being drawn between blockchain’s development and the growth of the internet.
Essentially, the ‘early stages of the internet’ argument for blockchain goes that while the internet, or the World Wide Web more specifically, is essentially a global communication network, an internet 2.0 based on blockchain would be a global finance network. For existing cryptocurrency enthusiasts, this vision is built on Bitcoin and other public blockchain. However, the L3COS proposal seems to suggest this path is not a realistic one. Instead, it says that permissioned blockchain must play a key role if the technology is to be used on a global scale.
Before looking at this in more detail, it’s worth briefly describing the key differences between permissioned and permissionless blockchain. A permissionless blockchain, or public blockchain as it is more commonly known, is one that anyone can join and take part in. The most well-known examples are Bitcoin and Ethereum, which are often chosen by users for their lack of regulation by a central authority.
Permissioned blockchains on the other hand are not open to unauthorized users, with a main authority deciding who can join the blockchain, as well as managing the rules and relationships between participants. L3COS is such a system, with a permissioned ledger that is regulated but still distributed and decentralized in its underlying architecture.
It claims that the system is designed to be used as the foundation for Central Bank Digital Currencies (CBDC), which are getting a lot of attention right now from countries around the world. For example, L3COS has proposed a CBDC structure to the Bank of England that would involve commercial banks exchanging British Pounds with the central bank in exchange for CBDC tokens, which could be widely accepted for operations and settlement. If sovereign states around the world implement similar systems for their CBDC initiatives, this would become a single, global, permissioned blockchain.
It’s certainly a big idea and one that has some big obstacles in the way of it becoming reality. In fairness to L3COS though, this is something they acknowledge, saying that it is definitely a possibility but only if governments around the world agree to use it. It also claims that the system is ready for this to happen because it has a node running for each country.
Whether it does, we will just have to wait and see. What is certainly true is that the trend for CBDC is growing around the world at a rapid pace. There’s no doubt that these initiatives will involve blockchain technology in a way that could change it forever and spur global adoption. Maybe even becoming a single, global, permissioned blockchain.