What is Baseline Protocol?
Updated: Aug 11, 2020
If one wants to use blockchain for storing business process data, several questions/concerns crop up.
1. How will privacy be maintained? In a public blockchain, all data can be viewed by anyone. If confidential information is stored on-chain then it is within the grasp of competitors, regulators, suppliers, etc who can use AI technology to glean strategically sensitive data.
2. Doesn’t blockchain have a known scalability problem? If when storing simple ledger transactions like “3 bitcoin were transferred from A to B”, bitcoin blockchain can process a maximum of 7 transactions per second, then how will any blockchain store business processes which are a lot more data-heavy? The Baseline Protocol, a joint development by E&Y, Microsoft, and Consensys tackles the above problems by enabling enterprises to conduct complex and confidential business on the Ethereum Blockchain without storing sensitive information on-chain that can be accessed by unauthorized parties.
It, therefore, allays the privacy risk concerns of CTOs (Chief Technology Officers) by keeping private information private. The data remains in the high-security traditional systems of the firms themselves. Baseline Protocol makes it possible to keep information on transactions, communication between parties, and logic of smart contracts private but verifiable using Zero-Knowledge Proof (ZNP). Every firm has its own system of storing information. Their information system needs to be able to communicate with information systems of suppliers, distributors, government, etc. Baseline Protocol is like a bridge between different information systems. If firm ERP/CRM systems are Baseline compliant, firms can synchronize activities using Ethereum as middleware without giving outsiders access to their information. Baseline Protocol ensures that the data can be verified and data in separate ERP systems is correct and consistent.
Supply Chain is an ideal use case for blockchain
Supply chain is well suited for blockchain as it involves several parties needing to cooperate with each other. However, there is a problem of compartmentalization i.e. parties involved need to be able to keep sensitive information private from other parties even if they’re cooperating to produce the final product. For Example, let’s assume that A, B, C...... X, Y, Z are all parties in a Supply chain that produces widgets. Party A should not be privy to information like what prices are being quoted by Party D or what are the details of the outsourcing relationship between Party G and Party Y. In other words, the protocol should be able to coordinate the efforts of all parties involved without itself knowing sensitive information about business activities or relationships. Baseline protocol seeks to use the Ethereum blockchain to execute a procurement project where parties are only privy to information relevant for coordination. If Party D supplies a part to Party F then information of this transaction is not stored on the mainnet. Party D and Party F maintain their records in their own systems. The mainnet only verifies that the data stored in the 2 systems is consistent with each other. Let's take another example where Baseline Protocol helps. Assume that a supplier is using its competitor to ship its product. The shipper has a clause to give a 10% discount in case of late delivery. If the shipper knows that it is shipping a product of its competition then it can use the information (volumes, peak season, market it is shipping to) to benefit itself. Maybe it can even delay delivery at a sensitive time. By using a public mainnet, it will be possible to keep from the shipper information about what is in the package and who the supplier is.
Why is a public blockchain like Ethereum preferred over a private blockchain? Enterprises that have been brave enough to use blockchain in the past have mainly used private, permissioned blockchains thinking they’re safer. However, there are 2 issues with private blockchains:
1. it can be argued that private blockchains only give the illusion of security. Safety comes from the fact that access is granted only to approved partners but the blockchain itself is more hackable than a public blockchain. A private blockchain is as secure as the security of the weakest partner.
2. With several private blockchains running simultaneously, interoperability will be an issue. It might be better to adopt a single blockchain platform like Ethereum (just like there is only one internet).