Uber might just have beaten Facebook’s record with a $50 billion evaluation, but now an open source project wants to break the ridesharing firm’s hub and spoke business model, using a software platform that doesn’t use any centralized computers at all.
Ethereum, a platform for decentralized applications, isn’t going after Uber specifically, but it wants to create a world in which ‘middleman’ companies like that are no longer necessary. It uses technology similar to bitcoin’s to run software applications that connect people with each other directly, and its founders are hoping that CIOs will use it to adopt an entirely new kind of enterprise application.
Bitcoin turned traditional finance models upside down by replacing the banks’ model of centralized control with a decentralized one. Thousands of participants in the bitcoin network transact with each other using a distributed file called the blockchain. This provides complete transparency about all transactions in the network without any need for a central arbiter.
Ethereum wants to do the same for enterprise applications, and has built its own platform, separate to bitcoin, to make it happen. The community behind it isn’t a company in the traditional sense. Rather, it’s a non-profit organization that raised over $18m in funds last year by creating and selling its own currency – known as the Ether – which will be used on the Ethereum network.
The Ethereum Foundation released the first version of the framework at the end of July. Described by its developers as “the world’s first zero-infrastructure platform”, it is a peer-to-peer application framework, allowing applications to run on any connected device with its framework installed.
The devices are the only place where it runs, as Ethereum is not designed to run on one central server connecting all devices. In effect, it replaces the hub-and-spoke model of traditional online applications with a mesh-style system. In that network, devices communicate with each other to make their transactions, and every device knows what is happening in the network.
This model represents a seachange in the way that applications work, say Ethereum’s developers, arguing that traditional models have emphasized a closed-book approach in which only a central application operator can see and control what is happening.
This will have far-reaching consequences for the emerging ‘sharing economy’ business model, in which companies like Uber and AirBnB act as central hubs for user transactions, skimming a fee off the top, said George Hallam, business and partnership director for the fledgling organization.
“Ethereum will allow for services that have previously been provided by centralized entities (such as Uber and AirBnB) to run as decentralized protocols,” he said.
As an example, he envisages an Ethereum-powered equivalent to AirBnB. An Ethereum app would run on an NFC-enabled phone, and connect with Internet of things-enabled door handles, themselves plugged into the Ethereum block chain. The apartment owner and the customer would arrange a booking directly across the Ethereum network, and the door would grant access to the owner of the phone when they reached the apartment.
An application like this would use a ‘smart contract’, which is an agreement between the two parties, encoded by the application on the Ethereum network. The ‘smart’ part is the execution; the network would refer to the contract when the customer reached the apartment to ensure that they still had access under the agreement, enabling it to open the door.
“These will operate with very little overhead, and as a consequence provide much cheaper services to users and great wages to contractors by cutting out the middleman,” said Hallam.
This sounds plausible for technology startups, but what uses it for CIOs and established companies? The transparency and immutability of the network are key, said Hallam.
“The current and all previous states of data and code added to the Ethereum blockchain is viewable at all times, which is very useful if you require high levels of redundancy,” he said. The promise, according to the Foundation, is zero downtime.
“Finally, Ethereum’s smart contracts allow for trust to be had where previously one would require a trusted intermediary,” he said. “Interactions between on trusted entities can occur with certainty based on the logic added into smart contracts.” This could enable companies to create their own B2B marketplaces, for example, without the use of the middleman.
The version of Ethereum launched at the end of last month is known as Frontier, and is a first, developer-focused release providing a commandline interface. It is an open source project.
Several decentralized apps are already being piloted atop the Ethereum platform. These include Adept, a joint protocol between Samsung and IBM, designed to let IoT devices negotiate relationships and contracts with each other. Another, Provenance, is a supply chain monitoring system designed to bring transparency to manufacturing and distribution processes.