Ethereum 2.0 is about to launch with the release of the [Beacon Chain](https://beaconscan.com/) in December 2020. This will be the first step toward a full migration **to a Proof-of-Stake (“PoS”) blockchain** that supports innovative features like sharding.

So, why would *anyone* look for alternatives? Well, Ethereum 2.0 will likely take years to be entirely implemented and carries inherent risks due to its experimental nature. Plus, other permissionless blockchains are already here, offering both a low-gas fee and faster transaction finality.

Don’t want to learn a new way to use blockchains? Good for you! Many blockchains are based on Ethereum, meaning you will get up to speed within a few minutes. This article introduces 6 alternative blockchains for you to use or consider before building your future decentralized application.

## Binance Smart Chain (BNB)

[Binance Smart Chain](https://www.binance.org/en/smartChain) (“BSC”) is a blockchain running alongside the existing Binance Chain (that is built with Cosmos' SDK).

Launched in September 2020, Binance Smart Chain is based on a code fork of Ethereum but features a Delegated Proof-of-Stake (“DPoS”) consensus mechanism with **21 validators** and a **3-second block time**. BNB is the native asset of the network, working like ETH on Ethereum.

Fast, it is supported by … (plot twist)… Binance, the world’s largest cryptocurrency exchange platform. BSC is a **stand-alone network** that can also be used to communicate with the original Binance Chain. Binance Smart Chain features distinct advantages like:

* [A familiar explorer ("BSCScan")](https://bscscan.com/) built by Etherscan teams, making it easy to use for existing Ethereum users.
* **Various pegged assets** (like BTC and LTC), allowing users to use popular cryptocurrencies onto the network.
* **Stablecoins** (e.g., BUSD, USDT, USDC), providing different alternatives for users to use them onto DeFi applications.

## Matic Network (MATIC)

[Matic Network](https://matic.network/) is a layer-2 scaling solution for [Ethereum](https://flyingblock.com/article/what-is-ethereum) with sidechains for off-chain computation. Supporting smart contracts, Matic’s security relies on an implementation of **Plasma** (“Minimum Viable Plasma”) alongside its network of **Proof-of-Stake (“PoS”) validators.**

Launched in May 2020, it has a **3-second block time** and features a trust-less solution for users to move ETH and other ERC-20 tokens from the Matic Network to Ethereum (and vice versa!).

MATIC is the network's native asset: it is used to pay gas and transaction fees on the Matic Network. Compared other EVM-compatible blockchains, Matic Network offers a set of unique differentiating features, such as:

* **Security provided by Ethereum’s mainnet.** While Matic Network is a layer-2 sidechain for Ethereum, its security is assured by public checkpoints periodically pushed to Ethereum blocks, offering protection if the network validators act maliciously.
* **Access to all existing tokens on Ethereum.** Ethereum has the largest number of tokens, both fungible and non-fungible. **All of these assets** can be transferred back and forth, thanks to Plasma and Matic’s own PoS cross-chain bridge.

## TomoChain (TOMO)

[TomoChain](https://tomochain.com/) is a stand-alone programmable blockchain built as a code fork of Ethereum.

Launched in December 2018, TomoChain is built on a consensus algorithm called **Proof of Stake Voting** (“PoSV”) that relies on a network of 150 elected validators (“masternodes”).

Its network has a **2-second block time**, and transactions must be done in TOMO, the protocol's native asset. TomoChain offers competitive advantages such as:

* **A private transaction mechanism** offering anonymity by hiding both receiver & sender addresses and the amount transacted.
* **Innovations at the product level,** including a fee-delegation mechanism for token transfers and a decentralized exchange protocol.
* **A one-stop shop** built by TomoChain teams, with end-user products like a block explorer and a mobile wallet.

## RSK Network (RSK/RBTC)

[RSK](https://www.rsk.co/) Network is a programmable sidechain built on the **Bitcoin blockchain and secured by merged mining.** As of November 2020, around half of the Bitcoin miners are mining RSK tokens.

Launched in January 2018, the network **features a 30-second block time** and its own virtual machine (“RSK Virtual Machine”). Fortunately, it is **compatible with all EVM opcodes,** making it possible for developers to write decentralized applications in Solidity and other high-level languages.

RSK Network requires a native asset identified by the ticker RBTC and is commonly called **Smart Bitcoin**. It is pegged 1:1 to BTC, such as 1 RBTC = 1 BTC. Similar to ethers in Ethereum, RBTC is used to pay for transaction fees and smart-contract execution. RBTC is created by sending BTC to a multi-signature address (in the Bitcoin mainnet blockchain) whose keys are held by the RSK Federation. RSK Network offers distinct advantages such as:

* **Security provided by Bitcoin’s miners.** Bitcoins’s blockchain has, by far, the largest number of proof of work committed to securing its network, making RSK relatively secure (instead of competing for the same miners).
* **Bitcoin (BTC) as the native asset.** Since bitcoin’s market cap represents **more than half the total industry’s capitalization**, RSK offers new possibilities for building a complete decentralized economy with an asset whose market cap is worth more than $300 billion.

## xDAI Chain (xDAI/STAKE)

Founded by a partnership between POA Network and MakerDAO, [xDAI Chain](https://www.xdaichain.com/) is a **Proof-of-Autonomy blockchain** (often called **the first stable chain)** and is EVM-compatible (supporting smart contract!s). It relies on a **two-token model** with (1) **xDAI** being used for transactions, payments & fees while (2) **STAKE** tokens being used to support the network’s consensus.

xDAIs are MakerDAO’s DAI stablecoins that work as the native asset of the network for users. DAI stablecoins can be transferred back and forth from Ethereum to xDAI Chain with [TokenBridge](https://docs.tokenbridge.net/xdai-bridge/about). Proof of Autonomy is a Proof-of-Authority (“PoA”) consensus where validators are managed by a DAO and elected by STAKE token-holders.

xDAI Chain features a **5-second block time** and meager **transaction fee**, with 500 transactions average a total cost of ~$ 0.01. It features competitive advantages, such as:

* **No price volatility** from the perspective of users. Users do not need to accept the price fluctuation of the asset used to transact in the network.
* **High-quality protocols** with platforms like [Perpetual Protocol](https://perp.fi/) (a 20x leverage trading service) and [Circles](https://joincircles.net/) (a basic income experiment), which have decided to launch on xDAI Chain.

## TRON (TRX)

[TRON](https://tron.network/) is a programmable blockchain launched in July 2018 by Justin Sun, following a $70-million Initial Coin Offering (“ICO”). While having its share of controversies and criticisms over the years, TRON has grown to become one of the most used distributed networks, per number of users.

TRON is a Proof-of-Stake (“PoS”) blockchain, featuring its own native asset called **TRX**. The network’s consensus is maintained by a set of **27 Super Representatives**, who both generate and validate blocks within a **3-second block time**.

Despite TRON sharing most of its source code from Ethereum, it features its own virtual machine called the **Tron Virtual Machine (“TVM”)** that is fully compatible with high-level languages like Solidity. TRON features a unique value proposition with elements, such as:

* [Over 1000 dApps](https://www.dapp.com/dapps/tron), focusing on gambling applications (e.g., WINk, 888Tron) and DEXs (e.g., PoloniDEX).
* More than **$2 billion worth of stablecoins,** primarily in USD Tether (“USDT”).
* A dedicated sidechain called the [SUN Network](https://tron.network/sunnetwork/).

## Final words

Ethereum may be seen as a mammoth, yet it is **stable, decentralized**, and has, by far, **the largest number of third-party applications, developers & unique users**.

These blockchains all offer greater speed and lower transaction speed, but there is **much more to that**. Most of these Ethereum competitors have also provided competitive features such as:

* Design innovation (e.g., TomoChain, xDAI Chain)
* Security enforced by the safest networks (e.g., Matic, RSK)
* Support by major companies in the space (e.g., BSC & Binance, TRON & Tether).

In short, **programmable blockchains are much more than just Ethereum, and as adoption continues, a larger set of networks is bound to co-exist in the future.**

Discover Ethereum's most promising competitors with EVM compatibility.

6 Alternatives to Ethereum That Are Compatible with the EVM

How can gamification on blockchains be used for charity? Read the in-depth case study.

Blockchain and Rabbids: The Gamification of Charity on Ethereum

Despite the hype, blockchains do **solve many real-world problems**, either through complete disruption of the existing status quo ("radical innovation") or through incremental changes. This article discusses 5 real-world problems that have **already been solved by blockchain technology**.

## Remittance and cross-border money transfers

Remittance activities involve the transfer of money by an individual working in one country to another country. For instance, a foreign worker in America wants to transfer money to the Philippines. Remittance is a colossal industry: the [World Bank estimated that in 2018 $689 billion](https://www.worldbank.org/en/news/press-release/2019/04/08/record-high-remittances-sent-globally-in-2018#:~:text=Global%20remittances%2C%20which%20include%20flows,from%20%24633%20billion%20in%202017.) were transferred for this sole purpose.

Before the invention of blockchain, remittance was constrained to banks and other money transmission operators (e.g., Western Union), operating with large margins. For instance, according to the World Bank, banks were charging their customers an **average fee of 11% for remittance activities in 2019**.

Blockchain technology allows individuals to transfer assets, such as stablecoins and other virtual currencies, from one party to another, irrespective of their location or income level. On average, a single transfer between two individuals is estimated to **cost less than $0.15 on the Ethereum public blockchain** and is **not a function** of the total amount transferred. In addition to the apparent cost benefits, speed has also been a significant improvement factor. A transaction on Ethereum (and other similar networks) often **takes** **less than a few minutes to be considered final**.

However, constraints and risks remain, such as the ability to (1) spend the asset locally (2) sell the received asset to the domestic/preferred currency. Yet, ambitious projects like Libra could contribute to improvement regarding both of these aspects.

## Immutable data record and ownership management

Thanks to its characteristic of immutability, blockchain technology allows individuals to store any piece of data forever in a distributed ledger. Furthermore, non-fungible token standards (e.g., "NFT") enables the **enforcement of ownership of any digital assets**.

Besides, the concept of immutability has substantial implications in regards to property rights and other applications. For instance, [Ethereum Name Services ("ENS")](https://ens.domains/) are domain names used to register an address on the [Ethereum blockchain](https://www.flyingblock.com/article/what-is-ethereum) through a human-readable equivalent (e.g., "diamonds.eth"). This kind of protocol allows users to record information on the blockchain, leveraging the impossibility to modify it at a later stage without the domain name owner's approval. In comparison, there have been cases where traditional internet domain names ("DNS") were re-assigned without the authorization of individuals in a process often controlled by a single entity.

However, **immutability is not a synonym of truth**: the quality of any data point stored in a distributed ledger only remains as good as its source's reputation. Simply stating, a wrong entry into a blockchain remains wrong. Hence, the quality of the party appending new information into the ledger remains a critical component in a similar vein to other databases.

## Global fundraising and charity

Initial Coin Offerings ("ICO"), which have been mostly conducted on the [Ethereum blockchain](https://www.flyingblock.com/article/what-is-ethereum) , have enabled companies and projects to raise funds worth billions of dollars through token sales.

ICOs have radically **changed how companies can raise capital across borders** and **how fast it was possible to do so**, further reducing the delay between an idea and the implementation of a business solution.

Similarly, charity organizations have started to incorporate blockchain payments to foster faster money flows and the distribution of revenue in the event of a crisis. For instance, UNICEF recently launched its [Cryptocurrency Fund](https://www.unicef.org/press-releases/unicef-launches-cryptocurrency-fund), accepting payment in ether and bitcoin.

However, despite a definite improvement in how money can be re-distributed, ICOs and other processes attempting to raise money have also built a lot of concerns regarding regulations (e.g., do some ICO consist of unregistered security offerings?). As a result, this led to the growth of sophisticated scams by malicious individuals. Since transactions on blockchains are immutable, some of these **scams stripped away millions of dollars worth of cryptocurrencies**.

## Transparent voting system and distributed governance

Governance and transparent voting systems are other real-world problems that blockchains solve. While applications for voting remains a niche segment, there have been on-chain experiments of platforms that have incorporated a thorough **voting system for distributed governance**.

For instance, platforms like [Compound](https://compound.finance/) and [MakerDAO](https://makerdao.com/en/), two of the most significant DeFi projects, have pivoted to **community-driven governance**. Anyone can write a proposal submitted for an on-chain voting process. Both protocols have their dedicated tokens unlocking voting power, based on the respective share of the total supply they own.

While some of these applications pioneers in establishing transparent voting mechanisms, several challenges remain to solve regarding how to protect voters' identity and how to prevent the creation of vote-buying markets.

## Supply chain management

Blockchain technology can also be used for supply chain and other operational management processes. In supply chain management, some of the existing problems are the lack of transparency, lack of trust between parties, and different information recording standards.

Most of these find roots in use by each party in the supply chain of their distinct data management system; it results in each company *de facto* owning their own version of the actual supply chain.

These problems often lead to multiple errors that translate into high costs and lead to lasting reputational damages and safety risks from the perspective of customers. For instance, supply chain scandals in the food industry have negatively impacted several brand images from consumers.

Existing companies experimenting with blockchains include:

* **Maersk**, the world's largest container ship company, with IBM for a solution for cross-border transactions between multiple parties (with Hyperledger Fabric).
* **BHP Billiton**, one of the largest mining firms, to record movements of rock and fluid samples from its vendors (using BlockApps' STRATO), providing real-time data for all stakeholders, internally and externally.

For them, blockchains can **synchronize information among multiple parties along the supply chain**. For example, parties can record each product's origin, the tracking status, and other relevant information, which are available for any party involved in the supply chain process.

Blockchains beyond the hype: there are real-world problems that have (already) been solved by blockchain technology.

5 Real-World Problems Already Solved by Blockchains

## Description

The Baseline Protocol is an open-source initiative, built on the public Ethereum blockchain, that attempts *“to deliver secure and private business processes at low cost”*.

Built by Ernst & Young (EY) and ConsenSys, it was launched in March 2020 as part of the [Ethereum OASIS project](https://github.com/ethereum-oasis) and supported by an initial pool of 14 companies, including Microsoft and other participants of the Ethereum Enterprise Alliance.

The Baseline Protocol finds its foundation on Ethereum: its mission is to become *“the common frame of reference between systems”* by **leveraging the Ethereum public blockchain as a settlement layer**. This protocol wishes to include normal corporate systems of record, any kind of database, state machine, and potentially include other blockchains (or distributed ledgers).

Despite its nascency, Baseline Protocol has already featured an initial proof of concept for supply chain applications, allowing participants to participate in a transparent product procurement process. Its demo protocol, named Radish34, attempts to solve the issue of knowledge privacy in public blockchains through the **use of atomic compartmentalization**.

## What problems does Baseline solve?

EY and ConsenSys concluded that proprietary systems for businesses often lead to severe issues in how data is shared from one system to the other. Consequently, hundreds of millions of dollars are reportedly being spent on ERPs, CRMs, and other internal systems that are designed to record proprietary information of all kinds.

Furthermore, this “lack of synchronization” between systems is estimated to cause a lot of disruptions in how businesses operate. This leads to clear consequences ranging from direct costs to regulatory actions, and data information leakage.

As a consequence, the teams behind the Baseline Protocol believe in establishing a “common frame of reference” (i.e., the Baseline Protocol), with **Ethereum serving as its foundation layer**.

## Core components of the Baseline Protocol

The Baseline Protocol acts as the standardized library of components allowing multiple Middleware to build their proprietary applications, yet making them fully interoperable. The protocol leverages the use of Ethereum (referred to as “Mainnet”) without the need to reveal sensitive data to a public network.

### Mainnet: Ethereum as a foundation layer

Ethereum (“Mainnet”) acts as the foundation layer of the Baseline Protocol. According to its documentation, it serves as the “public good” for enterprises to build data management solutions thanks to Ethereum’s perceived properties of decentralization and censorship-resistance.

In short, Mainnet is considered as the state machine equivalent of the Internet. Within the Baseline protocol, [Ethereum](https://flyingblock.com/article/what-is-ethereum) serves the purpose of being the Mainnet candidate of choice.

### Middleware: proprietary software solutions

In the Baseline Protocol, Middleware are interpreted as systems of record that are maintained by legal entities that wish to establish a common frame of reference to run business process integration across them.

For instance, let’s assume two suppliers need to work together on sharing their inventories: Alice is an Apple Retailer and is the sole supplier of Apple products for Bob, an electronic retailer. Bob wants to notify in real-time that its supply of MacBook Pro runs low, and need to order new computers. However, he does not wish to share information about his entire inventory. Typically, Alice and Bob would run different systems together with alternative proprietary software solutions. A protocol like Baseline would contribute to connecting both Middleware, fostering the use of Ethereum, owing to the baselining of their respective ERPs.

### A standardized library of components and procedures

The Baseline Protocol consists of a **library of components and procedures** that aim to become the standard in multiple industries by maintaining both record consistency and workflow integrity through the use of a permissionless blockchain (i.e., Ethereum, also referred to as “Mainnet”).

By doing so, the Baseline Protocol still allows the separation of multiple systems of records between parties, yet, leveraging the decentralization and distributed properties of Ethereum.

## How does atomic compartmentalization work?

In general, two transacting parties (in this case, businesses) need not have access to all information from other parties. Precisely, one party does not need to know any information or process it has no stake in.

Conversely, the use of public permissionless networks like Ethereum is typically seen as fully transparent to third parties. Anyone can analyze the blockchain and obtain valuable information about a single account pattern, as best illustrated by the growth of various on-chain analytics companies. In short, no business would be keen to share information about its internal processes to the public. For instance, employees' payrolls would typically not be data that are desirable to be shared where anyone can freely consult the figures.

Yet, the use of a single frame of reference is required for two parties to maintain consistency and continuity with other state machines.

Atomic compartmentalization refers to a proposed property that must be achieved by the Baseline Protocol to make it viable for businesses to implement solutions on it.

Atomic compartmentalization is defined as:

> a Workflow that can restrict access and awareness to a specific set of parties down to a single step or record.

Meanwhile, a Workflow relates to:

> a series of steps that constitute a coherent business process between a set of counter-parties.

To achieve atomic compartmentalization, the Baseline Protocol relies on a set of steps, including the **breaking of tasks in a workflow in discrete events.**

## Should I use the Baseline Protocol?

Baseline Protocol relies on the idea that through the establishment of a *“common frame of reference”*, enterprises could save hundreds of $ millions of unnecessary costs thanks to synergies through the use of a **unique standard for recording and sharing data**.

Worth noting, this solution differs from the usual dichotomy between permissioned and permissionless networks, and the rigid concept of private vs. public networks. Instead, it directly targets enterprise systems vendors, and other cloud providers by emphasizing the nature of [Ethereum](https://flyingblock.com/article/what-is-ethereum) as the **state machine equivalent of the Internet**.

Currently, Baseline's development approach finds its roots in its supply chain example that is being generalized into a set of libraries, forming the core Baseline Protocol, which would apply to a wider range of industries.

However, it remains to be seen whether the protocol would find its niche owing to its nascency, being **still in development while the documentation is being written** as of now.

With the support of Microsoft, it is very likely that popular solutions like Microsoft Azure, its cloud computing service, may experiment with the use of Baseline Protocol, leading to sustained interest in the protocol from other parties.

Built by Ernst & Young (EY) and ConsenSys, Baseline Protocol is an enterprise solution built on the public Ethereum network.

What is Baseline Protocol?

## Description

Quorum is an open-source permissioned blockchain platform, built as a fork of the public version of Ethereum ("go-ethereum"). It was launched in 2017 by J.P. Morgan and has been actively developed since then.

Built by J.P. Morgan, one of the largest financial institutions in the world (and early member of the Ethereum Enterprise Alliance), its mission is to **foster the adoption of blockchain technology in a "seamless" process by providing a complete white-label solution**, featuring a dedicated full-service support service.

Quorum relies on the support of the vast [Ethereum community](https://flyingblock.com/article/what-is-ethereum) for the core infrastructure, yet, by added enhancements to cater to distinct enterprise needs. For instance, it allows the **implementation of privacy features**, and features a permissioned infrastructure, offering clients the opportunity to choose and implement one amongst several Proof-of-Authority ("PoA") algorithms.

Despite its nascency, it has received broad interest from many enterprises, with the most notable being Microsoft and ConsenSys. Since its launch, Quorum has not only been tested by multiple financial institutions (e.g., MUFG) but also a more extensive range of enterprises, notably including Starbucks, Shell, and BP.

## What problems does Quorum attempt to solve?

Quorum attempts to **solve the privacy issue of Ethereum** to make it usable for enterprise solutions while fostering the existing development resources from Ethereum, the world's largest programmable blockchain by market capitalization.

Quorum initially focused on use cases within the financial industry before expanding to a broader set of industries (like supply chain management). Yet, for instance, Quorum can tackle problems with payment and settlement of business operations, which are often a succession of bilateral transfers that sometimes result in information loss.

To do so, it relies on the use of additional cryptographic techniques to prevent all except those parties to the transaction from seeing sensitive data. These changes apply at the protocol scope, through the **introduction of private transactions**. At the nature of the network, Quorum is permissioned for nodes participating in the consensus.

## Core components of Quorum

### Privacy features and private smart contracts

Similar to Ethereum, Quorum is a fully EVM-compatible distributed ledger and supports smart contracts to create all sorts of programmable applications and related units of value.

To cater to business needs, Quorum supports privacy features to allow hidden transactions, including transfers and smart contracts. Built as a "consortium chain", Quorum expands the Ethereum Transaction Model to account for additional privacy parameters for transactions.

In Quorum, a dichotomy between public and private status is established at the transaction level:

* **Public transactions** are defined as similar to regular Ethereum transactions. Any node can read them, including the payload and other information, from them.
* **Private transactions** allow parties to hide the content of the transactions from the rest of the network, through the use of a dedicated parameter to include the **list of public addresses that can see the payload**.

To support this distinction of privacy status, Quorum **requires the use of a privacy manager**.

### Privacy managers

Quorum supports the choice amongst two privacy managers for participants to exchange with private transactions: Tessera (in development) and Constellation (its reference but being deprecated).

Tessara is built as a stateless Java system and is used to encrypt/decrypt and distribute private transactions for Quorum. Constellation is a self-managing, peer-to-peer system, built as a Haskell library.

Both systems allow nodes to:

* Host and generate sets of public/private key pairs
* Discover other nodes
* Provide public API for other nodes to transact with them (for public transactions)
* Provide private API
* A TLS authentication system
* Connect to databases (e.g., JDBC for Tessara) and other backend storage solutions
* Support IP whitelists

### Proof-of-Authority ("PoA") consensus algorithms

Unlike Ethereum, Quorum relies on a Proof-of-Authority algorithm.

Quorum supports the choice of three algorithms:

1. **Raft-based** – A consensus model for faster block times, transaction finality, and on-demand block creation.
2. **Istanbul BFT** (Byzantine Fault Tolerance) – A PBFT-inspired consensus algorithm with immediate transaction finality.
3. **Clique POA Consensus** – A default POA consensus algorithm supported natively with the go-ethereum library.

| Consensus | Description | Fault tolerance | Forkable |
| --------- | ----------- | --------------- | -------- |
| Raft | Leader/Follower process: nodes follow the block leader. Only mint blocks if at least 1 transaction in a block. Fast block times. Best if no concern about any malicious behavior from parties. | Raft can tolerate up to 2f +1 nodes with f: number of faulty nodes. | Not possible |
| Istanbul BFT | Leaderless: multiple rounds of voting by the set of validators to arrive at a mutual agreement. Empty blocks can be produced. Best if there is any threat of malicious behavior from other parties. | Istanbul BFT can tolerate up to 2f +1 nodes with f: number of faulty nodes. | Not possible |
| Clique POA | Signers ("approved accounts") validate transactions and blocks. Signers take turns to create the next block. Empty blocks can be produced. Best if there is any concern about malicious behavior from a party (however, it may lead to forks) | Clique POA can tolerate up to 2f + 1 nodes with f: number of faulty nodes. | Possible |

Regardless of the selected consensus, each of them is designed to support multiple permissioning models, with different features.

### A permissioning system

Quorum also offers the choice of two permissioning systems:

* **Basic Network Permissioning Model** – At each node level, a whitelist of nodes is defined to control who can connect to it.
* **Enhanced Network Permissioning Model** – It features a smart-contract permissioning model and allows the definition of organizations being defined part of the network, with sub-organizations.

In the Enhanced Network Model, each of the organizations features accounts (similar to EOA in Ethereum), nodes (a network node), and roles (a dedicated job for each party). This model is defined in a library of smart contracts written in Solidity.

## Should I use Quorum?

Quorum is a **one-stop infrastructure**, built on a fork of Ethereum source code, allowing it to integrate updates and feedback from the Ethereum open-source developer community. With only minimal changes to the core source code of Ethereum (e.g., the separation between public and private transactions does not conflict with it), any **future upgrade on the Ethereum open-source code will continue to be added to Quorum**.

Unlike competitors, Quorum is designed as a stand-alone solution, built for use cases mostly within an enterprise. As a result, its use as a white-label solution does not cater to the interoperability of processes across companies.

Quorum is built on solid foundations, supported by J.P. Morgan, one of the largest financial institutions with strong roots in technological advancement, and Microsoft, a leading multinational technology company. While J.P. Morgan's ability to pioneer new technology and foster development in the financial industry is well known, it is once again illustrated by one of the Quorum's initial pilots: J.P. Morgan's Interbank Information Network (IIN). As of July 2020, over 400 institutions worldwide supported this project.

However, J.P. Morgan is currently in discussion with ConsenSys on **whether to spin-off Quorum from its operations**, either by establishing a joint venture or setting up an open-source foundation. Hence, it remains to be seen what the **long-term implications** of such a strategic choice on its competitive positioning are.

Built by JP Morgan & supported by Microsoft, Quorum is a permissioned version of Ethereum for enterprise needs.

What is Quorum?

Consensus algorithms have somehow gained a mystic appearance in the industry. This article attempts to demystify the main differences between them by first defining consensus algorithm before diving into the primary mechanisms, briefly describing alternative implementations.

After that, differences and similarities between consensus mechanisms are drawn out to allow you to identify what fits your business needs.

## What is a consensus algorithm?

In blockchain and other distributed ledgers, the consensus can be defined as:

> in a distributed network, the consensus mechanism is how machines and validators agree in how to process and organize transactions.

Consensus algorithms are among the core elements in how a network processes transactions while keeping all participants synchronized in the network’s data.

Since the launch of Bitcoin in 2009, the **number of consensus algorithms has exponentially increased, serving the needs of thousands of blockchains**.

Yet, amidst this growing complexity, there are three core families of mechanisms: Proof of Work (computing-based), Proof of Stake (incentive-driven), and Proof of Authority (identity-based)

## What are the main consensus algorithms?

There are three leading families of consensus algorithms that can be used for distributed ledgers: Proof of Work ("PoW"), Proof of Stake ("PoS"), and Proof of Authority ("PoA").

### Proof of Work ("PoW")

In Proof-of-Work blockchains, validators are miners who need to solve a computational problem to organize and produce a block. The world’s first blockchain, Bitcoin, relies on Proof of Work. For instance, Bitcoin transactions are organized and validated through a process named “mining".

By definition, PoW blockchains allow anyone to compete for validating transactions on the network. Since there is a monetary cost to confirm transactions (due to the computation problem leading to electricity costs), misbehavior is discouraged and extremely costly.

There is a wide range of mining algorithms such as SHA-256d (Bitcoin, Bitcoin Cash), Script (Litecoin), RandomX (Monero), Equihash (ZCash), or ETHhash (Ethereum).

Proof-of-Work consensus has its significant share of criticisms, notably due to its high environmental cost, high costs, miner concentration, and other vector attacks (e.g., Sibyl attack, 51% attack low mining participation). These have led to the **fast** **expansion of alternative consensus algorithms** such as Proof of Stake and Proof of Authority.

### Proof of Stake ("PoS")

Unlike Bitcoin, Proof-of-Stake ("PoS") blockchains rely on the concept of masternodes. In this case, masternodes are the network validators of the ledgers and serve the same function as miners in Bitcoin: masternodes validate and organize transactions in blocks. To do so, each of them is required to lock a significant amount of cryptocurrencies (e.g., ATOM) as a **monetary commitment to avoid bad behavior**.

In the event of wrong operations (or apparent misconduct), committed funds would be slashed with usually different penalties for each specific event. For instance, a masternode being offline typically is likely to receive a financial penalty lower than an attempt to re-organize a network.

In Proof-of-Stake networks, masternodes are rewarded by collecting transaction fees on the network. Furthermore, while a standard node allows third parties to monitor and verify transactions independently, masternodes are nodes that also validate incoming transactions (and collect network fees to do so).

There are a wide variety of PoS implementations, such as Delegated Byzantine Fault Tolerance ("DBFT"), Delegated Proof of Stake ("DPoS"), and Proof of Stake Voting ("PoSV"). For instance, some of these allow users to vote for masternode in a democratic process called **vote delegation** and to collect some of the network fees by doing so.

Popular networks like Cosmos use PoS-based implementations for consensus finding. However, the most anticipated public network is perhaps Ethereum, which is expected to transition to a Proof-of-Stake consensus algorithm by the end of 2020.

### Proof of Authority ("PoA")

With the use of Proof of Authority ("PoA"), validators have their identity verified, resulting in an incentive to behave to prevent any reputational loss and other real-world legal actions well.

For instance, a company acting as a validator on a PoA network that would purposely be censoring transactions from a competitor would likely **face legal actions and reputational damage**.

The use of Proof of Authority was proposed in 2017 by Joseph Lubin, one of [Ethereum](https://flyingblock.com/article/what-is-ethereum)’s co-founders who co-founded ConsenSys. PoA is currently used in multiple Ethereum testnets and even in public and private blockchains.

There are a variety of implementations for Proof of Authority for distributed ledgers. The most notable applications are Clique POA, Raft, IBFT, and PBFT.

### Hybrid consensus mechanisms ("PoW/PoS")

Some consensus mechanisms are also referred to as “hybrid" as they combine elements from both Proof of Stake and Proof of Work. Usually, they rely on both masternodes and miners for finding consensus on the network.

For instance, Dash is a popular public permissionless network with a focus on user privacy. Dash relies on a pool of miners (i.e., PoW) and a system of masternodes (i.e., PoS). Masternodes are used to validate specific transactions and in charge of the network governance while miners also receive fees for organizing blocks and verifying timestamps.

### Other consensus mechanisms

#### Proof of Elapsed Time ("PoET")

Proof of Elapsed Time is designed as an alternative to Proof of Work through the use of a lottery system. Each participant is assigned a waiting time and a number. If selected, the validator becomes the next block producer.

The main network relying on PoET is Hyperledger Sawtooth.

#### Proof of Burn ("PoB")

Proof of Burn relies on a mechanism that let validators send funds to a non-spendable address to prove their work. There are multiple implementations of this mechanism, but it is considered an alternative of Proof of Work: the required computing resource cost is replaced by a “burn transaction" leading to a financial loss from the perspective of block validators.

#### Auxiliary PoW ("AuxPoW")

Auxiliary PoW is a mechanism allowing users to rely on the existing computing power for Proof-of-Work blockchain used for consensus and to redirect this power to other blockchains referred to as child blockchain in a process called merged mining. For instance, Dogecoin is a cryptocurrency designed a joke on the Internet that has got extremely popular. It is currently merged-mined with Litecoin as their miners can also decide to mine Dogecoin with no associated cost (and collect additional rewards!).

Due to their use of the same computing resources between some cryptocurrencies, merged mining **prevents competition between two blockchains for the same pool of miners**.

## Differences and similarities between consensus algorithms

|  | Proof of Work | Proof of Stake | Proof of Authority |
| --- | ------------- | -------------- | ------------------ |
| Energy consumption | High | Medium to low | Low |
| Trust | Trustless | Trustless | Trust-based |
| Transaction costs | Yes | Yes | No |
| Validator requirements | Hardware (e.g., ASIC, GPU) (+ nodes) | Software (+ nodes) | Software (+ nodes) |
| Validator incentives | Block subsidy rewards + transaction fees | Transaction fees + staking rewards | Reputation alignement (+ potential transaction fees) |
| Costs to operate the network | High | Low | Low |
| Permission for validators | Permissionless | Permissionless (Permissioned can be an option) | Permissioned |
| Private/Public? | Public | Public or Private | Public or Private |
| Examples of consensus finding algorithms | SHA-256d, Script, RandomX | DPoS, DBFT, PoSV | Raft, IBFT, Clique POA, PBFT |
| Examples of projects | Bitcoin, Litecoin, Monero | Algorand, Cosmos | Quorum |

## What consensus algorithm is right for me?

When it comes to choosing a consensus algorithm, it is fair to say **that no size fits all**. In general, the choice of a consensus algorithm depends on your **preferences and your set of requirements, scope, and range of use cases**.

Several questions need to be answered to decide what consensus mechanism to select:

* Will your scope of use cases be enterprise-restricted or part of a consortium?
* What type of data will be shared on the network?
* Will your data need encryption?

Finally, the choice of a consensus algorithm **works in tandem with deciding the distributed ledger solution that fits your needs**.

Proof of Work, Proof of Stake, and Proof of Authority are the most popular consensus algorithms. Discover them.

A Guide to Consensus Algorithms

## Description

Ethereum is a public permissionless blockchain created by Vitalik Buterin in 2013, with the Ethereum whitepaper’s release. Designed to become the "World Computer", Ethereum’s first block was mined in 2015.

Unlike Bitcoin, Ethereum has been designed to develop decentralized and distributed applications and was the first blockchain to support smart contracts. To write code, developers use Solidity, a high-level programming language designed for Ethereum. These are compiled onto the Ethereum Virtual Machine ("EVM") to the bytecode level, comprised of OPcodes.

Each operation on the network costs **gas fees paid in ether** ("ETH"), the native currency of Ethereum. For instance, transfer of assets, interaction with, and deployment of smart contracts cost gas fees.

## What problems does Ethereum attempt to solve?

Ethereum finds its roots from the prior launch of Bitcoin, which has introduced the blockchain to the world. Despite the possibility of adding smart contracts on Bitcoin, its range of applications remained restricted (use of Script’s [OPcodes](https://en.bitcoin.it/wiki/Script#Opcodes)) and not directly incorporated into the network logic.

Ethereum introduces a different model called the account model and features complete support of smart contracts dedicated to building applications for business. As a result, Ethereum increased Bitcoin’s scope from being a "programmable currency" to a "programmable network" that remains **both decentralized and distributed globally**.

Currently a Proof-of-Work ("PoW") blockchain, Ethereum is expected to migrate to a Proof-of-Stake ("PoS") consensus mechanism in late 2020, through the launch of ETH 2.0.

## Core components of Ethereum

### Consensus finding and permissionless

Ethereum is a blockchain operated by a network of nodes globally distributed. Anyone can run a node to monitor the network activity and broadcast transactions onto the network: this is why Ethereum is defined as a **public permissionless blockchain**. Similarly, there are no restrictions to create an account (defined as an external owned address or EOA), as any individual can create as many addresses by generating different private keys.

As of now, Ethereum’s consensus is based on a Proof-of-Work mechanism ("**ETHhash**") but is expected to transition to Proof of Stake, with the launch of ETH 2.0.

### Account model

Ethereum relies on the account model, which contrasts with the UTXO model from Bitcoin. In the account model, a global state stores the list of accounts, including **balances, code, and internal storage**.

In Ethereum, there are two types of accounts: **Externally Owned Accounts ("EOA") and Contract Accounts**. Each transaction becomes valid only if the sending account has enough balance. If so, the sending account is debited, and the receiver’s account gets credited with the value.

If the receiving account is not an EOA, its code runs, which can change the internal storage. Also, the code may even create additional messages to other accounts, leading to the additional transfer of balances across accounts.

### Smart contracts and the Ethereum Virtual Machine ("EVM")

Ethereum is a programmable blockchain that supports smart contracts.

Ethereum is **Turing-complete**: any type of computation is accepted but remains bounded by gas fees. In computation, a system is said to be Turing-complete if it can perform any logical step of a computational function. However, to prevent endless faulty executions (e.g., infinite loop), Ethereum introduces gas fees.
Users specify the maximum amount of gas to pay for a transaction. This puts a limit at the execution time since all operations cost money and prevent congestion on the Ethereum network. If there is not enough gas, it will return an error ("out of gas"), and the state will be reverted.

Contracts are written in higher-level languages (e.g., Solidity, Vyper) and then compiled to low-level EVM bytecode.

The Ethereum Virtual Machine (”EVM”) is the virtual stack embedded with all Ethereum nodes. Each of these nodes agrees to execute bytecode instructions similarly. Since any node can run the code, the Ethereum Virtual Machine is deterministic, with transaction outcomes being certified.

Once a transaction is sent, validators must verify that the transaction is valid, that there were enough funds to pay for the transaction execution, and that there was no exception during the execution. If any of these conditions are not met, the state is reverted (but fees are not returned to the party initiating the transaction).

## Should I use Ethereum?

Ethereum has continuously run for more than five years and has become the leading network for third-party developers to deploy and implement decentralized applications and other utility tokens. Its most popular segments include decentralized financial applications, stablecoins, initial coin offerings ("ICO"), and collectible items ("NFT").

Any enterprise interested in exploring blockchain technology should first start with Ethereum to understand how to deploy contracts and the implications of smart contract immutability. Since multiple enterprise-built blockchains are forked from Ethereum (e.g., Quorum, Hyperledger Besu), Ethereum’s set of contracts is completely re-usable onto these networks.

The full transition to ETH 2.0 will take many years but make Ethereum more scalable thanks to the use of sharding and other scalability & privacy features. However, concerns remain on **how composability will occur due to the use of shard chains**, which break the state of Ethereum into multiple parts.

In short, as illustrated by the recent release of the [Baseline Protocol](https://flyingblock.com/article/what-is-baseline-protocol) on the Ethereum public mainnet, Ethereum is here to stay, serving as the core layer and base implementation for the majority of public, private, permissioned, and permissionless applications.

Ethereum is a permissionless blockchain supporting smart contracts and widely used for decentralized applications.

What is Ethereum?

There are many misconceptions between the meaning of a public network and a private network. These include whether everyone always sees transactions in an open network or whether a permissionless system is a synonym of a private blockchain.

This article defines both public and private blockchains and focuses on the several differences with permissionless and permissioned networks. Besides, the differences and similarities between public and private systems are analyzed to define what type of blockchains makes the most sense to cater to your needs.

## What is a public blockchain?

> A public blockchain is a network that allows users to operate full nodes on its network, without any restriction, nor requirement such as KYC.

In public blockchains, third parties can join the network and synchronize nodes to obtain the entire set of transactions from the network, without any pre-required approval. Bitcoin and Ethereum allow anyone in the world to run a full node on Bitcoin and synchronize the entire blockchain history.

In a public blockchain, while full nodes are not used to organize and validate transactions in a block (" mining"), they are useful to broadcast transactions to other nodes. Hence, the higher the number of full nodes, the more secure a distributed network becomes. In addition, running a full node also contributes to the decentralized property of a public blockchain.

### Differences between permissionless and public

Typically, most **public blockchains are permissionless**. Any individual can attempt to become a validator without any restriction except software and hardware (for PoW blockchains) and balance requirements (for PoS blockchains).

However, differences lie like their network, i.e., at the protocol level. A public network always allows anyone to access the complete history of the blockchain since its inception. Still, it does not necessarily enable individuals to become participants in consensus without having their identity verified (permissionless vs. permissioned environment).

## What is a private blockchain?

> A private blockchain is a network that does not allow users to operate full nodes on its network.

While an approved entity operating nodes on a private blockchain could display real-time activity on its network to third parties, no individual is allowed to run a node to synchronize in real-time the transactions from a private blockchain. This prevents third parties to validate independently the accuracy of the information running on the network.

An example could be a private blockchain serving to settle payments across clients from two financial institutions. Let's assume Alice (bank X) transacts to Bob (bank Y) to transfer 250 USD. Alice can rely on the figures provided by her bank about her account to make sure the transfer to Bob has been completed.

### Differences between permissioned and private

A permissioned system relates to who has the "right" to operate the network, i.e., whether only certified/approved parties can attempt to become a validator.

While most permissioned blockchains are private, some exceptions exist. For instance, the POA Network allows users to run a full node. Yet, it is a permissioned network running a Proof-of-Authority (" PoA") consensus algorithm, where each network validator is a certified notary in the US.

### Differences between privacy and private blockchains

Some blockchains are public, yet with built-in privacy features. Designed as alternatives of Bitcoin for its function of being a "means of payment", these cryptocurrencies are referred to as privacy coins. The most notable of them are Monero ("XMR"), ZCoin ("XZC"), and ZCash ("ZEC").

Anyone can operate a node on the networks and participate in the consensus (e.g., "PoW", "PoS") for privacy coins. Their respective architecture is constructed so that third parties can't decrypt the relationship between the sender and the receiver, and information about balances for each participant.

Similarly, multiple layers exist for public blockchains to provide privacy. For instance, [Tornado Cash](https://tornado.cash/) on Ethereum allows users to break the links between addresses, and CoinJoin also allows obfuscating the transactions on the Bitcoin blockchain.

However, **a private blockchain, despite requiring participant identities to be verified, can also offer privacy.** For instance, Quorum is a permissioned network built as a fork of the Ethereum source code that features a **privacy manager and on-chain private transactions**. This allows breaking the links between the sender and the receiver from the perspective of third parties and encrypt the transaction output (e.g., additional sensitive information added to the transaction).

## Similarities and differences between public and private blockchains

In this section, we broke down differences & similarities between permissionless and permissioned blockchains in regards to ten different points.

* consensus mechanisms
* decentralization
* the distributed property
* scalability
* energy consumption
* smart contracts
* network governance
* whether a token is required
* whether the network is permissioned or permissionless
* whether privacy features can be implemented onto the ledger

|  | Public | Private |
| --- | ------ | ------- |
| Consensus | Proof of Work (”PoW”)/Proof of Stake (”PoS”)/Proof of Authority (”PoA”) | Proof of Authority (”PoA”) |
| Decentralization? | High to low | Low |
| Distributed? | High to low | Low |
| Scalable and fast | Fast to slow | Fast |
| Energy consumption | High (”PoW”) to low (”PoS”) | Low |
| Smart contracts | Possible | Possible |
| Network governance | On-chain/distributed or with central operators | Central operators only |
| Needs a token? | Yes | No |
| Permission attributes? | Permissionless or Permissioned | Permissioned |
| Privacy features | Possible | Possible |

## Should I use a private blockchain?

Blockchains were originally **meant to be public and fully transparent for everyone**, as illustrated by Bitcoin and Ethereum. However, privacy requirements have led to the growth of enterprise-focused distributed ledger solutions that were fully private. Initially, the primary rationale was that no enterprise would want to store sensitive information on a public network where anyone could access it.

However, in practical terms, private blockchains have a limited scope. For instance, any distributed ledger with at least two enterprises would require at least some privacy, leading to **privacy requirements at the transaction level**.

As an extension, private blockchains are always permissioned networks (while the reverse is not true) and allow higher transaction output while being often more scalable than permissionless networks.

For any enterprise use-case that would involve any other party that cannot be trusted, the use of privacy managers and confidential layers remain a central aspect that needs to be implemented (e.g., [Quorum's privacy manager](https://flyingblock.com/article/what-is-quorum)).

Recently, the growth of hybrid networks, the use of second-layer solutions on public permissionless systems, and other corporate solutions like the [Baseline Protocol](https://flyingblock.com/article/what-is-baseline-protocol), seems to indicate an underlying **trend toward leveraging the core properties of open networks** (e.g., distributed & decentralized) as the base layer to create more specific applications on top of it.

Private blockchains prevent non identified parties to monitor the network. Find their differences with public blockchains.

Public vs. Private Blockchains

While Bitcoin and Ethereum are both permissionless networks, they are also public blockchains where anyone can operate a node to synchronize the entire history of their ledgers. Yet, permissioned networks can also be public, which has commonly led to confusion from everyone in the space.

This article defines both permissionless and permissioned blockchains and focuses on their differences and similarities. Finally, this article concludes with a brief summary regarding what permissioning features may make the most sense to cater to your needs.

## What is a permissionless network?

> A permissionless network is a network where any party can participate in the consensus process without any requirement to validate their identity from a central authority.

Blockchains like [Ethereum](https://flyingblock.com/article/what-is-ethereum), Bitcoin, or Cosmos are permissionless networks and allow any party to operate a node without any restriction, besides hardware, software, (and sometimes balance) requirements.

For instance, an individual has been able to mine Bitcoin since the launch of the network. Yet, it has become extremely competitive to mine Bitcoin owing to the centralization benefits (economics of scale with ASIC machines). However, many other cryptocurrencies can still be mined by a GPU/CPU (e.g., Monero, DigiByte). These cryptocurrencies all operate on a permissionless network.

## What is a permissioned network?

> A permissioned network is a network where only pre-selected parties can validate transactions and perform other operations.

Permissioned networks do not allow a non-certified/pre-approved individual to act as a validator.
To prevent so, a dedicated layer is built in to allow specific actions to be performed only by identifiable participants.

Only a pre-selected set of operators is to be eligible for the validation of transactions and in charge of maintaining the consensus of the distributed network. However, in permissioned networks, standard nodes may (or may not) be operated. In contrast, anyone can start mining or apply to become a validator in permissionless networks, without any KYC requirement.

In this regard, permissioned networks mostly rely on **Proof-of-Authority ("PoA") consensus mechanism**.

For instance, a permissioned network could be a network of financial institutions where each company relies on the blockchain to settle derivatives transactions. In this scenario, the network would be private, with an additional privacy feature to omit transactions from all chain members. If the blockchain was comprised of hundred financial institutions, on-chain information would require encryption not to be readable by every institution. For instance, volumes of transactions between one buy-side entity and a broker are information that are not meant to be shared.

In the context of permissionless networks, the operation of a full node often differs from the validation of transactions. Typically, a network can be public, where anyone can decide to independently verify the transactions without the opportunity to validate pending and future operations. For more details, please visit our page underlying the differences between private and public blockchains.

## Similarities and differences between permissioned and permissionless networks

In this section, we broke down differences & similarities between permissionless and permissioned blockchains in regards to ten different points.

* consensus mechanisms
* decentralization
* the distributed property
* scalability
* energy consumption
* smart contracts
* network governance
* whether a token is required
* whether the network is public or private
* whether privacy features can be implemented onto the ledger

The results are summarized in the below table.

|  | Permissionless | Permissioned |
| --- | -------------- | ------------ |
| Consensus | Proof of Work (”PoW”)Proof of Stake (”PoS”) | Proof of Authority (”PoA”)Proof of Stake (”PoS”) |
| Decentralization? | As high as the number of the validators and their respective power on the network | Low |
| Distributed? | High | Usually low, only amongst the distributed nodes |
| Scalable and fast | Low to medium | Fast |
| Energy consumption | High (”PoW”) to low (”PoS”) | Low |
| Smart contracts | Possible | Possible |
| Network governance | On-chain/distributed | Central operators |
| Needs a token? | Yes | Usually no but possible. |
| Private? | No by default | It depends on whether third-party nodes can still be operated. |
| Privacy features | Possible | Possible |

The following table illustrates some permissioned networks and permissionless networks.

|  | Permissionless | Permissioned |
| --- | -------------- | ------------ |
| Public | Ethereum, Bitcoin | POA Network, Chiliz |
| Private | - | Hyperledger Fabric, Quorum, Corda |

For a thorough explanation about the difference between public and private blockchains, [please visit our dedicated page](https://flyingblock.com/article/public-vs-private-blockchains).

## Should I use a permissioned or a permissionless blockchain?

The debate between permissioned and permissionless for business use cases has been long-standing in the blockchain industry since the release of [Hyperledger](https://flyingblock.com/article/what-is-hyperledger) and Corda in 2015. Part of it relies on the general misconception that private networks are synonyms of permissioned ones.

In general, permissioned blockchains have allowed higher transaction outputs per second (so-called "TPS"), making it more scalable than permissionless networks for business needs. However, this greater scalability came with a tradeoff: it resulted in lower distribution and decentralization of the network, which sometimes defeats the purpose of using a blockchain in the first place.

Yet, the growing popularity of **second-layer networks is likely to challenge the status quo**. Since everyone has well acknowledged the lower transaction output of permissionless programmable blockchains, second layers have built on the first layer's decentralization/distributed properties (e.g., Ethereum, Bitcoin) while providing greater flexibility in the output built on top of a distributed network.

Unfortunately, the debate between permissioned and permissionless network is not likely to end anytime soon. However, permissionless networks (like [Ethereum](https://flyingblock.com/article/what-is-ethereum)) could serve as the general base layer, where a growing range of permissioned networks and other second layers would be built on it, each serving different use cases. This has been illustrated by the launch of the Baseline Protocol, built on Ethereum.

To conclude, in regards to business use-cases, the choice of the permissioning property of a network must always be considered in tandem with **a thorough understanding of the differences between private and public systems**.

Permissioned networks restrict the set of  validators of a blockchain to a set of identifiable parties. Find the differences with Bitcoin and Ethereum.

Permissioned vs. Permissionless Networks

## Raising capital with Initial Coin Offerings (ICO)

One of the most popular use cases of [Ethereum](https://flyingblock.com/article/what-is-ethereum) has been to raise capital. Initial Coin Offerings, commonly referred to as ICOs, have allowed projects to raise money by selling newly issued tokens against ETH (or other tokens like stablecoins).

Projects like Cardano, Tezos, or EOS have conducted some of the world’s largest ICOs, with each worth $ hundreds of millions.

Despite concerns about whether some of the ICOs could be considered unregistered security sales by regulators, the ability of any team to raise capital directly from investors has been a significant use case of Ethereum, which has even led to an ICO bubble in mid-2017.

## The issuance of utility tokens

The launch of the [ERC-20 token standard](https://github.com/ethereum/EIPs/blob/master/EIPS/eip-20.md) in November 2015 has unleashed new opportunities for anyone to virtually issue a token that is interoperable with other third-party applications on the network.

Some tokens were created to represent units of values from real-world assets (e.g., stablecoin), others were used for unique niche use-cases (e.g., governance utility tokens, app discounts), and some exist simply for fun & other testing purposes.

One of the first utility tokens was created by [Augur](https://www.augur.net/), whose team conducted an ICO in 2015 for its utility token ("REP"). This token is used within the Augur prediction market platform for several unique functions such as incentives for reporting the validity of a real-world event.

## The growth of the stablecoin industry

Stablecoins are utility tokens whose value is backed by collateral and pegged to a fixed unit. There are two primary types of stablecoins: **collateralized stablecoins** like USD Tether ("USDT") and USD Coin ("USDC") and **crypto-backed stablecoins** like DAI (from MakerDAO). These assets can be used to trade on exchanges, for individuals to pay for transactions, and for parties to transfer capital worldwide at a meager cost.

Collateralized stablecoins are backed by fiat that is stored in bank accounts in the real-world. For instance, USDC is pegged 1:1 with the US dollar, and funds are held in a bank account that is audited by a third party.

Crypto-backed stablecoins are backed by assets that are overcollateralized to the peg, often with a set of complex mechanisms to prevent the collateral from dropping below the face value of the supply.

**Collateralized stablecoins dominate the stablecoin industry** (more than 97% of the total stablecoin industry), and Ethereum is the leading platform for stablecoin, with more than **$10 billion worth of stablecoins** issued as of June 2020.

## Decentralized Finance (DeFi) for everyone

Decentralized Finance, referred to as DeFi, is a growing use case of Ethereum, relying on principles of decentralization and self-custody of assets. DeFi is built on the promise that (1) any individual should be granted access to essential financial services (2) that code is the law, (3) composability allows platforms to integrate each other, and (4) users should own their funds.

The leading DeFi platforms are **MakerDAO**, the crypto-backed stablecoin issuer, **Compound**, an algorithmic money market protocol, and **Aave Protocol**, another decentralized lending service (with both over-collateralized and under-collateralized services).

Despite some recent incidents leading to dramatic loss of funds (mostly due to smart contract issues), DeFi has been growing and has become a billion-dollar industry within its first year. New applications have been increasingly being developed, such as trustless exchanges for derivatives and automatic asset management solutions.

## Non-custodial decentralized exchange (DEX) platforms

Ethereum has allowed developers to create non-custodial decentralized exchanges on the platform. These platforms, commonly called DEX, allow users not to give their assets the custody to a tier (e.g., Coinbase, Binance), while offering trading services. Through a complex set of smart contracts, these platforms allow users to trade without any intermediary.

There has been drastic improvement in how decentralized exchanges operate. Initially built with a matching engine at a block level, first-generation exchanges faced multiple issues such as front-running and high transaction fees.

Since then, two new categories of exchanges have emerged:

* **Automatic Market Making (”AMM”) exchanges** such as Kyber Network, SushiSwap, Uniswap.
* **Layer-2 and other protocol-based exchanges** such as the 0x Protocol, Deversifi, and Loopring (a zkRollup protocol).

## Standardization of non-fungible tokens and other collectibles

Like utility tokens, the growing interest in the tokenization of assets has led developers to create a native standardized method to issue Non Fungible Tokens (”NFT”), also referred to as collectibles. The primary standards on Ethereum are ERC-721 and ERC-1155.

NFT’s first commercial implementation was **CryptoKitties**, a simple blockchain game that allowed users to purchase, collect, breed, and sell virtual cats. This game became such a success in 2017 that it led to the congestion of the Ethereum blockchain.

Similar to utility tokens, Ethereum-based collectibles can be traded on centralized and decentralized exchanges like SpiderDEX. Amidst the spike in the price of CryptoKitties in late 2017, one unique CryptoKitty was sold for more than $150,000.

## Implementation of Decentralized Autonomous Organizations (DAO)

The concept of decentralized autonomous organizations (”DAO”) existed before Ethereum. A DAO refers to an organization built on a set of rules and encoded in a computer program that is (1) transparent, (2) controlled by shareholders, and (3) not influenced by any outside party.

The first and most controversial attempt of a DAO was **The DAO**: a “stateless fund” that was built in mid-2016, collecting more than 11 million ETH (approximately $50 million in 2016).

Despite the failure of The DAO due to a smart contract error (leading to funds being stolen), **DAOs have since regained both interest and popularity**. Developer best practices have also considerably improved and third-party code audits are now widely accepted.

Initiatives like [Aragon](https://aragon.org/) and other projects are popular nowadays and attempt to build a framework for DAOs to operate and govern a range of activities on the blockchain and in the real world.

## Creation of censorship-free prediction markets

Predictions markets have existed for long before the creation of Ethereum. However, [Ethereum](https://flyingblock.com/article/what-is-ethereum) properties such as **decentralization and censorship-resistance** have led to the creation of multiple prediction market platforms.

The most notables are [Gnosis](https://gnosis.io/) and [Augur](https://www.augur.net/), where anyone can create a market for any event. Through an incentive-based system to report real-world outcomes, these platforms allow the creation of a free market for individuals to bet and hedge on future events (e.g., "who will win the World Cup?").

Despite some issues due to the nascency of Ethereum, prediction markets have garnered interest from media, mostly due to some of the infamous markets on unethical outcomes, raising exciting debates about whether platforms should practice some sort of self-censorship.

## Transparent casinos and gambling services

Since Ethereum allows a wide variety of decentralized applications, blockchain-based casinos have been developed on Ethereum. For instance, platforms like [dice2.win](http://dice2.win) offer betting services for users on the outcome of dice.

Thanks to smart contracts for their probabilistic logic, casinos on blockchains often offer **greater transparency** on the probabilities for each outcome.

With the growth of other competing programmable blockchains for retail use-cases, casinos have increasingly become popular on networks like Tron or EOS. In contrast, Ethereum developers have pivoted away from gambling applications.

## Immutable data and identity record systems

Ethereum has also been used for multiple applications and services to record information. For instance, [Peepeth](https://peepeth.com/welcome) is a Twitter-like system built on Ethereum, featuring signature authentification for users to post short messages that are shared on its platform (and immutable!).

Another example is the [Ethereum Name Service (ENS)](https://ens.domains/), a human-readable lookup system, to register/transfer domain names linking to Ethereum addresses, which is by design difficult to read and to remember for humans.

Recently, the [ERC-725 standard](https://erc725alliance.org/) is a proposal for a blockchain-based identity system, composed of proxy smart contracts. It pushes users to own and manage their identity instead of letting third parties (i.e., "centralized organizations") handle the ownership of their identity.

Ethereum has been innovating in multiple different fields like raising capital, decentralized finance, and prediction markets.

10 Ways Ethereum is Innovating 

Since its creation in 2015 by the Linux Foundation, solutions from Hyperledger have been criticized for its permissioned nature, which marked a drastic shift from the approach of public blockchains like Bitcoin and Ethereum. This article describes Hyperledger and the primary problem it aims at solving. It also introduces the wide range of solutions and libraries under the Hyperledger umbrella (e.g., Fabric, Besu) to determine whether Hyperledger's tools can fit your needs.

## Description

Hyperledger is a suite of open-source blockchain solutions, including multiple frameworks and tools, established by the Linux Foundation in 2015.Hyperledger is supported by companies, notably IBM, Intel, Accenture, Airbus, and some Japanese enterprises (e.g., Hitachi, NEC, Fujitsu).According to its charter, Hyperledger’s mission is to establish an open-source distributed ledger framework. It features a complete code base, serving business and enterprise needs, whereby users build and operate multiple *“applications, platforms, and hardware systems to support business transactions”*. Furthermore, the teams from Hyperledger aim to bolster the growth of a technical open-source community, working with companies in the ecosystem dedicated to growing the use of distributed ledgers for business applications.

## What problems do Hyperledger attempt to solve?

Hyperledger finds roots in the Linux Foundation’s acknowledgment that blockchains are capable of improving data transparency and solving existing trust issues, yet, these were hindered by political views owing to the status of an underlying cryptocurrency (e.g., "ETH", "BTC").Hence, Hyperledger’s mission focuses on the development of an umbrella of multiple open-source solutions, including stand-alone products, libraries, and other tools to foster the use of blockchain technology across a wide variety of businesses.

**Figure 1 - Hyperledger range of solutions, libraries, and other tools**![Hyperledger suite](https://d2d6lp6mpeu2e4.cloudfront.net/articles/1596360166136.png)
*Source: Flying Block, Hyperledger. *Hyperledger is comprised of multiple distributed ledger solutions, toolkits, and libraries.**

## **A look at Hyperledger’s distributed ledger solutions**

**Unlike protocols like Baseline, the whole suite of open-source solutions from Hyperledger rely mostly on permissioned networks, with participant identities clearly stated, yet, with some exceptions. Hyperledger is developing six open-source blockchain solutions:* **Fabric** - the most popular solution from Hyperledger. Fabric is a stand-alone distributed ledger enterprise solution built around the concepts of modularity and flexibility to cater for a wide range of use cases.* **Besu** - an Ethereum client, targeting enterprises, for use cases including public and private permissioned networks.

* **Sawtooth**  — A distributed ledger with an architecture purposely separating the core system from the application domain. Each set of smart contracts operate independently from the core system architecture, allowing flexibility for unique business needs.
* **Burrow**  — A single-binary blockchain distribution with a focus on simplicity, speed, and developer ergonomics, supporting multiple virtual machines (e.g., EVM, WASM).
* **Indy**  — A complete library with tools and various components that allow the management of identities on blockchains, across multiple applications. While fully interoperable with other blockchains, it is also usable as a stand-alone solution to power a permissioned identity management network.
* **Iroha**  — With a focus on Internet of Things (“IoT”) use cases, Iroha is a distributed ledger with a focus on simplicity and easiness to integrate into IoT projects.

### Summary of Hyperledger’s set of blockchain architecture

| Product | Description | Smart contract | Use cases | Consensus | Nature |
|--|--|--|--|--|--|
| Fabric | A stand-alone permissioned DLT for enterprises. | Go, Java | Whitelabel enterprise solutions | Flexible | Private/Permissioned |
| Besu | A Java-based permissioned version of Ethereum, with added privacy options | Solidity, DAML (EVM) | Whitelabel enterprise solutions | PoW, PoA (IBFT/Clique) | Public or Private/Permissioned |
| Sawtooth | A distributed ledger separating the core architecture and smart contracts | Python, JavaScript, Go, C++, Java,"Rust Solidity" (with Sawtooth-EVM) | General public | PoET, PoA (RAFT/PBFT) | Public or Private/Permissioned or Permissionless |
| Burrow (Incubation) | A single-binary permissioned EVM-compatible blockchain | Solidity (EVM) Experimental languages (WASM) | Lightweight product supporting EVM-compatibility with Tendermint. | PoET, PoA(RAFT/PBFT) | Public or Private/Permissioned or Permissionless |
| Indy | A library for identity management, featuring the use of zero-knowledge proof. | - | Identity management solution that can be referenced by smart contracts in blockchains. Can also be implemented as a stand-alone solution. |
| Iroha | A permissioned distributed ledger for IoT projects | C++ | Lightweight network built for Internet of Things and other mobile applications. | YAC (Yet Another Consensus) - a distinct vote-based consensus mechanism | Private/Permissioned |

## Other libraries and tools from Hyperledger

Besides the above range of distributed ledger solutions, Hyperledger also features a set of libraries and tools.

### Hyperledger libraries

As of writing, there are five core libraries from Hyperledger:

* **Aries** - A shared, reusable, and interoperable toolkit that is designed for digital credentials. Aries focuses on solutions to create, transfer, and store credentials.
* **Grid**  — A standardized set of implementations for supply chain use-cases, which cover data types, data models, and smart-contract business logic.
* **Quilt** — An implementation of the Interledger protocol in Java, i.e., an open protocol suite for sending payments across different ledgers.
* **Transact**  — A standard interface for smart contract execution that is separate from the distributed ledger implementation (introducing the concept of “smart contract engines”).
* **Ursa**  — A shared cryptographic library for Hyperledger and non-Hyperledger ledgers. It implements mechanisms to avoid duplicating other cryptographic work and subsequently increase security in blockchain processes.

### Hyperledger tools

As of writing, there are five primary tools from Hyperledger:

* **Avalon** — An implementation tool of the [Trusted Compute Specifications](https://entethalliance.org/enterprise-ethereum-alliance-releases-dff-chain-trusted-compute-specification-1-0/) published by the Enterprise Ethereum Alliance.
* **Cactus**  — An integration tool designed to allow individuals to incorporate different blockchains into their respective business processes.
* **Caliper** — A benchmark tool dedicated to blockchain performance analysis. It allows individuals to measure the performance of a specific blockchain implementation based on a subset of defined use cases.
* **Cello** — An on-demand “as-a-service” ("AAS") deployment model for any blockchain aimed at reducing all the effort required for creating, managing, and terminating blockchains.
* **Explorer**  — This offers tools for users to view, query, and monitor blocks, transactions, and data, along with other information such as metrics about transactions or the network itself.

## Should I use Hyperledger?

As of today, Hyperledger is the largest umbrella of open-source blockchain solutions tailored to enterprise use cases. With more than a dozen products, including libraries, tools, and other white-label blockchains, the Hyperledger suite attempts to cater to a large number of use cases in multiple real-world industries such as supply chain, real estate, and financial services. Furthermore, large companies have been implementing solutions for it, mostly on Fabric. Notably, IBM, the technology giant, solely relies on Hyperledger solutions for its blockchain range of activities. However, there might be multiple drawbacks due to this diversity of offerings. Amongst them, some are:

* **Unequal development stages between products** — While products like Fabric are fully enterprise-ready, others are still in relatively nascent stages, with smaller communities, and several pending (unresolved) issues according to our analysis of their GitHub public repositories. Similarly, code coverage varies greatly amongst solutions.
* **“Winner takes all”** — Since the Hyperledger suite of products is large, developers would likely prefer to focus on a subset of products, due to network effects. In comparison, competing products like Quorum or Corda have a single product that bolsters a development community.
* **High learning curves** — All products are native implementations, leading to learning curves for third-party developers in the blockchain industry. The main exception is Hyperledger Besu that is forked from the Ethereum Java source code, which has, unfortunately, been deprecated. In comparison, a solution like Quorum is built as a fork of “go-ethereum”, making it easy to incorporate future improvement from Ethereum’s public source code. As Hyperledger’s foundation rejects the “one size fits all” idea, most of your needs likely have a solution in the Hyperledger suite.

Hyperledger is a complete suite of permissioned blockchain solutions allowing businesses to create distributed applications. 

What is Hyperledger?

The Ethereum Enterprise Alliance (“EEA”) is a non-profit organization founded in 2015 to foster the use of [Ethereum](https://www.flyingblock.com/article/what-is-ethereum) in enterprises and other large organizations. This article describes the EEA’s mission, the members, the Enterprise Ethereum Stack, and how this organization interacts and contributes to the development of Ethereum.

## Description and mission

The Ethereum Enterprise Alliance (“EEA”) is a non-profit organization comprised of members from multiple industries. Its objective is to *“drive the use of Ethereum blockchain technology as an open-standard to empower all enterprises”*.

According to its charter, any party can apply to join the alliance, but applications require processing and membership fees.

By establishing a standardized Ethereum stack for companies, the EEA’s goal is to help enterprises and organizations create real-world solutions based on customized versions of Ethereum.

With hundreds of thousands of contributors, the Ethereum Enterprise Alliance is headquartered in the US (Massachusetts) and has representative offices worldwide (Beijing, Tokyo, and Paris).

## Members of the Ethereum Enterprise Alliance

EEA’s members comprise some leading companies in their respective market segments (e.g., banking, trading, software) and a range of startups and other non-profit organizations.

For instance, J.P. Morgan is an active member ([Quorum](https://www.flyingblock.com/article/what-is-quorum)), side by side with companies like Microsoft, the Linux Foundation ([Hyperledger](https://www.flyingblock.com/article/what-is-hyperledger)), the Blockchain Research Institute, and Consensys.

For the full list of its members, [please visit this page](https://entethalliance.org/eea-members/).

There are various membership classes available:

* **Class A** - the board of the EEA
* **Class B** - the general membership level, appropriate for all organizations
* **Class C** - legal practitioners and legal firms
* **Class D** - non-profit organizations, including Government and Regulatory Agencies, NGOs, and Academic Institutions.

Regardless of their respective classes, members can participate in (1) special interest groups (“SIGs”) and (2) working groups (“EEA Technical Specification Working Group”).

Special interest groups are dedicated to solving problems in their respective industry. Members are required to share their requirements and dedicated use cases to the EEA Technical Specification Working Group.

Some of the EEA’s special interest groups include Financial Services, Real Estate, and Supply Chain.

Conversely, working groups focus on technological advancement related to “open, standards-based-specifications”. These working groups attempt to increase the acceptance and deployment of Ethereum-based solutions for the world. They incorporate elements from the discussions from SIGs.

## A look at the Enterprise Ethereum Architecture Stack

To achieve its mission, the Ethereum Enterprise Alliance has established a precise set of requirements to comply with customized versions of Ethereum, including the creation of a single stack for permissioned architecture.

![Ethereum Enterprise Architecture Stack](https://d2d6lp6mpeu2e4.cloudfront.net/articles/1608887274607.png)
The Enterprise Ethereum Architecture Stack is comprised of five core sections:

* **Application,** including decentralized protocols, network explorer, identity services, smart contract tools, and any other standard forming the application layer's core stack.
* **Tooling** like credential management (e.g., wallets and private key services).
* **Enterprise 3P’s:** (1) **Privacy** by adding off-chain computation and private transactions, (2) **Performance** by adding off-chain trusted computation service, and (3) **Permissioning** features such as client whitelisting and permission checks.
* **Core blockchain**, composed of storage, execution, and consensus features. This adds elements like distinct on-chain private states (as discussed in our article about Quorum).
* **Network**, i.e., the network protocol that inherits from the public Ethereum's specification.

## What is the difference between Ethereum mainnet and permissioned Ethereum?

While multiple implementations of Ethereum (as a protocol) exist, there will ever be **only one public Ethereum mainnet**. The main strength of Ethereum as a public permissionless blockchain is the interoperability for all applications. It is often said that a decentralized blockchain works similarly to how protocols built on the Internet can connect.

However, permissioned Ethereum versions offer greater and easier control for corporations to build applications that serve their business needs.

As of now, the main examples of popular permissioned Ethereum solutions include [Quorum](https://www.flyingblock.com/article/what-is-quorum) (JP Morgan/Consensys), Hyperledger Besu (Linux Foundation), and Hyperledger Burrow (Linux Foundation).

## Final words

When most people think of [Ethereum](https://www.flyingblock.com/article/what-is-ethereum), they conceive of it as its mainnet (i.e., the public permissionless blockchain). However, Ethereum can also refer to its protocol and the underlying architecture defined in the [Yellow Paper](https://ethereum.github.io/yellowpaper/paper.pdf?) written by Dr. Gavin Wood.

With blockchains offering a range of benefits, corporations have been looking for ways to improve their business efficiency without compromising security or privacy. Private and permissioned networks have traditionally been considered one of the main solutions to use blockchains for daily business needs. Thus, the Ethereum Enterprise Alliance has grown to serve as the focal group for these corporations to discuss how to incorporate blockchains into their organizations.

However, the Ethereum Enterprise Association is not the only non-profit organization working to make [Ethereum](https://www.flyingblock.com/article/what-is-ethereum) used by corporations. For instance, the [Ethereum OASIS Open Project](https://github.com/ethereum-oasis/oasis-open-project) is an OASIS Open Project aimed at developing open, easy-to-use standards, built on high-quality documentations, and offering comprehensive test suites that would facilitate new features and other enhancements to the Ethereum mainnet protocol; Ethereum OASIS have enabled protocols like EY’s [Baseline](https://www.flyingblock.com/article/what-is-baseline-protocol) or Nightfall to emerge as corporation solutions built on the public Ethereum mainnet.

Blockchain Use Cases For Real World Applications

What is the Ethereum Enterprise Alliance?

Discover the Ethereum Enterprise Alliance's missions and how it promotes the adoption of Ethereum to corporations.