Written by: Mara Schmiedt, Solutions Consultant at ConsenSys

According to research from Credit Suisse, the average lifespan of an S&P 500 company is now less than 20 years compared to the 60-year average company tenure in the 1950s. A root cause of the problem: disruptive technology.

Failure to anticipate and capitalize on the opportunities offered by emerging technologies is one of the main threats to the longevity of large enterprises. Therefore, in order to survive, enterprises must adopt an open and agile approach to emerging technologies that enables their incorporation into new and evolving business models.

In the context of blockchain technology, enterprises have very different needs from the individual user on public peer-to-peer networks. Enterprises must be able to manage high volumes of sensitive data, while ensuring safety and compliance in line with regulatory requirements. Permissioning, privacy, performance, and finality are thus paramount to the operational and transactional needs of high-performance enterprise.

So, how can Ethereum be put to effective use in the enterprise, with these specific needs in mind?

What is Ethereum?

Ethereum launched in 2015 as a much more scalable and extensible version of the Bitcoin payment system’s underlying blockchain technology. The Ethereum blockchain’s decentralized architecture—multiple distributed nodes simultaneously running the software that creates an immutable ledger —provides a network that is secure and operates without intermediaries.

The power of the Ethereum blockchain is in its unique programmability. Agreements are embedded in the code so that transactions automatically execute, and these digital agreements (or “smart contracts”) can have limitless formats, conditions, and even call on other contracts.

This makes Ethereum useful not just for payment settlement, but for arbitrating transactional events across financial services, trade finance, supply chains, government registries, real estate, law, and many other sectors.

11 Benefits of Enterprise Ethereum

Enterprise Ethereum is designed to be low-cost, open, flexible, and offers the following qualities either natively or through protocols built on top of the foundational blockchain layer:

Data Coordination – Ethereum’s decentralized architecture better allocates information and trust so that network participants do not have to rely on a central entity to manage the system or mediate transactions.

Rapid Deployment – Via an all-in-one SaaS platform, enterprises can easily deploy and manage private blockchain networks instead of coding a blockchain implementation from scratch.

Permissioned networks – Using Ethereum, enterprises are able to form consortium networks (private blockchains), in which privileged nodes can function as gatekeepers or regulators. The platform allows granular contextual access, meaning that only authorized individuals and applications can access data. This ensures that the level and type of data accessed is appropriate to the role responsibility of the employee.

Network size – The mainnet proves that an Ethereum network can work with hundreds of nodes and millions of users. Most enterprise blockchain competitors are only running networks of less than 10 nodes and have no reference case for a vast and viable network.

Private transactions – Enterprises can achieve granularity of privacy in Ethereum by forming private consortia with private transaction layers. Enterprises using Ethereum can utilize parameters to allow participants to exchange private transactions.

Scalability and performance – With Proof of Authority consensus and custom block time and gas limit, consortium networks built on Ethereum can outperform the public mainnet and scale up to hundreds of transactions per second or more, depending on network configuration.

Finality – A blockchain’s consensus algorithm secures confidence that the record of transactions remains ordered and tamper-proof. Ethereum offers customizable consensus mechanisms, including Raft and Istanbul Byzantine Fault Tolerance for different enterprise network scenarios, ensuring immediate transaction finality.

Incentive layer – Ethereum’s cryptoeconomic layers allow business networks to develop mechanisms that both punish nefarious activity and create rewards around activities such as verification and availability.

Tokenization – Businesses can tokenize any asset on Ethereum that has been registered in a digital format. This opens the door for new business and incentive models, such as the fractional division of traditionally illiquid assets like real estate or equity in private markets. Subsequent solutions thereby enable a broader prospective investor base to access a variety of assets with far greater liquidity and lower capital requirements.

Standards – Ethereum has multiple open source standards—including protocols around token design, human-readable names, decentralized storage, and decentralized messaging—that keep the ecosystem from splitting apart. For enterprises, the Enterprise Ethereum Alliance’s (EEA) Client Specification 1.0 defines the architectural components for compliant enterprise blockchain implementations.

Interoperability and open source – Businesses operating on Ethereum are not locked into the IT environment of a single vendor. Amazon Web Services customers, for example, can operate private networks using a blockchain SaaS platform.

In the near future, the long-term value of enterprise Ethereum will be realized through interoperability with the public mainnet, which offers global reach, extreme resilience, and high levels of integrity. Rather than replicating the infrastructure of a public chain in miniature, enterprise solutions will maintain customizable privacy over transactions while enabling data storage built on a shared, secure, and future-proofed IT infrastructure.