Newsletter - September 2023
Dear Partners and Friends, welcome back to the third edition of our research series on key concepts and developments in Web3.
While much of what is written today about innovation in blockchain relates to permissionless blockchains such as Bitcoin, Ethereum and others, some of the largest corporates in the world have in fact been powerfully employing blockchain technology over the last few years in permissioned environments. Today, numerous industries are streamlining dated, inefficient processes using private (rather than public) blockchains where the creator/owner of the blockchain can impose specific limitations on who can view or modify the data and how the chain can be used.
Blockchain design entails a well-known “trilemma” of trade-offs between decentralization, scalability and security. Private (or permissioned) blockchains, in essence, significantly reduce decentralization in order to optimize for scalability and security.
The Blockchain 'Trilemma’
However, the enhanced security of private chains typically comes at the expense of composability, which is the ability for anyone in the ecosystem to leverage token and smart contract standards to build on top of any other protocol. At Animoca Capital, we fundamentally believe that the disruptive promise of blockchain technology lies in the power of composability, enabled by open source code. Composability enables the compounding of innovation through building out synergistic ecosystems and entirely new business models on permissionless blockchains.
As real-world industrial applications – spanning logistics to supply chain provenance to claims processing – expand on private blockchains, we also anticipate for many applications that current private chains will ultimately serve as a “bridge” (i.e. Web2.5) to future public chain contexts where the full power of composability can be harnessed.
In the first section we look at the differences between private, permissioned blockchains against open, permissionless networks, highlighting the benefits of greater security with the drawback of losing composability to drive innovation. In the second section, we delve into tangible examples across multiple industries where projects are already driving efficiency gains. Finally, we provide a brief overview of two prominent chains deployed by major corporates to contrast how the industry may bifurcate as it evolves.
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