Why Ethereum is the number-one blockchain platform for enterprises

In the 2021 iteration of HFS’ Enterprise Blockchain Services Top 10, we identified a change in the leading blockchain platform when Ethereum outranked Hyperledger Fabric for enterprise adoption. This reordering represents a pivot from private to public blockchains, which you can see in Exhibit 1.

We’ve previously outlined the difference between public and private blockchains when discussing the impact of zero-knowledge proofs on Ethereum – the leading public blockchain. To help us understand the rise of Ethereum and why enterprises are beginning to favor it over private blockchains, we connected with Dan Burnett, Executive Director at Enterprise Ethereum Alliance (EEA). EEA is a global group of blockchain leaders with the goal to drive wider adoption of Ethereum; membership includes Accenture, ConsenSys, and Wipro, so there’s nobody better to speak to about public blockchains.

Exhibit 1: Ethereum triumphed as enterprises’ blockchain platform of choice in 2021

Source: HFS Research, 2022

A buzz of hype still surrounds enterprise blockchain, and it must continue its quest to become a mainstream technology

In the early days of enterprise blockchain, which includes public and private blockchains, it was surrounded by unnecessary hype and promise, which is why HFS developed the “blockchain bullshit buster” in 2018. That’s not to say there haven’t been success stories. Savvy enterprises identified genuine business opportunities among the hype, and a small catalog of case studies emerged – particularly on popular private blockchains. However, it’s fair to say that enterprise blockchain never quite reached the mainstream, and a handful of naysayers remain. Dan Burnett explained from his perspective:

The Ethereum community is full of hobbyists. That’s great for innovation and moving quickly, but we need to get beyond that and reach the mainstream. We need to address the naysayers.

— Dan Burnett, Executive Director, Enterprise Ethereum Alliance

Dan Burnett further explained that converting these people must begin with education. For example, the blockchain market is surrounded by speculation about cryptocurrencies and NFTs, and many individuals struggle to differentiate this from enterprise blockchain deployments, meaning crypto cycles directly impact enterprise deployments. Dan Burnett added that much of the literature attempting to explain blockchain is either deeply technical or too high-level, adding to these troubles.

Providing naysayers with the right information in an understandable format will allow them to develop a deeper understanding of enterprise blockchain and the value it can drive for businesses, helping move it closer to the mainstream market.

Technology advancements are making public blockchains more appealing to organizations

Enterprise clients told us that they historically favored private blockchains due to challenges around privacy and performance with public blockchains. However, where investment goes, innovation typically follows, and enterprise blockchain is no different. Dan Burnett described a handful of technological innovations he believes played a key role in Ethereum becoming increasingly popular with enterprises:

• Zero-knowledge proofs (ZKPs): ZKPs address the privacy challenge by allowing organizations to encrypt their transactions while operating on a public blockchain. In fact, Dan Burnett described them as “allowing you to record that you know some information without handing over the information—like a password you never have to reveal.”
• Layer 2s: Layer 2s are designed and built directly on top of Ethereum to provide improved scalability and performance, all while inheriting the decentralized and secure characteristics of Ethereum. An organization could run a handful of transactions on the Layer2 blockchain; they will then be batched and stored as a single transaction on the Layer1 blockchain—Ethereum
• Sidechains: Sidechains are blockchain networks designed to function alongside a parent blockchain, in this case, Ethereum. Sidechains can leverage their own privacy and security protocols, a key differentiator compared to Layer2 blockchains, all while passing digital assets between themselves and the parent blockchain for immutability.

Ethereum is even tackling the environmental claims that have surrounded it since its inception

You’re likely already familiar with the dark environmental cloud that has followed Ethereum since its inception and the countless headlines explaining that the blockchain produces hundreds of kilograms of carbon dioxide per transaction. The high carbon footprint is caused by Ethereum’s current consensus algorithm: proof-of-work, which is required as the basis of trust. Dan Burnett describes proof-of-work as rolling dice—each node repeatedly rolls the dice aiming for a specific outcome, and whichever node finds the outcome first “wins,” and the transaction is stored on the blockchain. However, the constant dice rolling requires a high level of computing power, causing Ethereum’s high carbon footprint.

Recognizing this, the Ethereum ecosystem has invested heavily in research and analysis to develop a new approach to provide the randomness offered by proof-of-work. The outcome of this is proof-of-stake, a new consensus algorithm that removes the need for repeated dice rolls, instead asking nodes to contribute coins to the network with a validator chosen at random. Dan Burnett claims that this new approach will see a 99% reduction in energy use. The transition to proof-of-stake was completed last month. He added the caveat that Ethereum wouldn’t suddenly become free to operate, but the environmental issue would largely be resolved.

The Bottom Line: Continued investment by the Ethereum ecosystem is making the public blockchain more accessible than ever. Enterprises should take the public blockchain seriously.

Dan Burnett emphasized the need for case studies instead of use cases in the blockchain market—success stories providing a roadmap for wary enterprises rather than use cases promising unrealized value. He fondly spoke of Acre Africa, a firm leveraging Ethereum to provide parametric insurance for small holding farms in Africa that were previously unable to access insurance because the incumbent expensive and time-consuming processes made it unfeasible for carriers to service them. That was until they disrupted the process with a solution built on Ethereum.

Acre Africa is just one example of Ethereum in action, but there are many more. Enterprises must re-assess their appetite for public blockchains, as continued investment and innovation have helped remove the challenges they previously cited as adoption barriers. Any enterprise that continues to bury its head in the sand and ignore public blockchain’s risks being left behind as its peers benefit from public blockchain’s enhanced security and scalability.