Dr Luke Riley, our Head of Innovation, recently spoke on a panel hosted by the International Token Standardization Association (ITSA) on the big changes happening now within blockchain technology.

Blockchain technology is quickly evolving. New Layer 1s have been introduced to the marketplace. Furthermore, modernisation is occurring, with older architecture moving to different consensus models. It’s challenging to keep pace with these changes to understand how to choose or adapt the right distributed ledger network infrastructure.

On 31 August, we participated in a panel discussion about multi-chain technology, discussing topics including sidechains, Layer 2s and the Ethereum Merge. Dr Luke Riley joined Sagar Barvaliya at Blockrocket, Freddy Zwanzger at Blockdaemon and Tim Dierckxsens at Venly on the panel, moderated by Valentin Kalinov from ITSA.

Watch the webinar

The multi-chain future: sidechains, layer 2s and The Merge

Excerpts from Dr Luke Riley

On the scalability of public vs private blockchains, what are the specific challenges that enterprises face?

“For enterprises, the scalability of transactions is not the problem. One of the reasons to choose a permissioned blockchain is to obtain high throughput.

You don’t have high throughput on the public chains because of proof-of-work consensus protocols, where anyone can create a new block anytime. This can slow everything down.

The challenge for enterprises is to connect different DLTs (Distributed Ledger Technologies). There will always be several [blockchain] technologies around. For example, companies come to us saying they use Hyperledger Fabric and want to move tokens to Ethereum.

And occasionally, we see issues around privacy. Enterprises want to build a private solution on a permissioned blockchain; or they want to keep some data private but bridge other data to the public space. In this sense, scalability can impact private enterprises, too.”

What about interoperability and DLTs, and how that can work with legacy systems?

“Corporates want to connect to legacy databases as well. These customers will generally know one DLT technology but will be unfamiliar with others.

For background, you have several infrastructure choices when you connect an application to a blockchain. You can connect your App to a single node, which isn’t very scalable. Or you can connect to a second type of infrastructure, known as a node proxy, where you put an API in front of many nodes. This proxy will forward requests and respond with requests in the same way as a DLT node. But this solution is limited to only connecting to blockchain networks of the same technology type.

A few years ago, we decided instead to pursue a DLT gateway. This is where you have an API server connected to many different types of blockchains underneath. It [the gateway] performs the data translation from one blockchain to another and offers higher-level functions not present in the blockchain nodes.

We present this generic data model to users on a generic interaction model. Many of our users find this helpful, especially those who aren’t very familiar with blockchain technology.”

Ethereum has scaling solutions called rollups. Do you think that rollups will win the race of sidechain solutions?

“I think they’ll always be a space for rollups. The idea that you can withdraw all your assets on Layer 1 if the rollup fails is a very nice security functionality. But where they [the layers] are in the stack might change, because they are building a few different ecosystems around certain multi-chain technologies.

This is where Polkadot is now. Avalanche is also there now. And Ethereum will be multi-chain after the surge event following the September merge. In these multi-chain ecosystems, the main chain and other subs (or shard) chains connect to the main chain. The nodes of the main chain understand that there are many sub-chains there.

Currently, on rollups connected to a single-chain ecosystem like the current Ethereum, the main chain nodes are unaware of rollup chains being connected. So, you could argue that maybe it makes the ecosystem more fragmented.

It’s possible that when more multi-chain ecosystems develop and become more enriched, rollups might even move down a layer. In a couple of years, we might say that Layer 3 is where rollups are. We’ll see…”

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For enterprises, the scalability of transactions is not the problem. One of the reasons to choose a permissioned blockchain is to obtain high throughput.

Dr Luke Riley
Head of Innovation
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