Cryptowerk CEO Dirk Kanngiesser: On the road to solving blockchain’s ‘scalability trilemma’

James is editor in chief of TechForge Media, with a passion for how technologies influence business and several Mobile World Congress events under his belt. James has interviewed a variety of leading figures in his career, from former Mafia boss Michael Franzese, to Steve Wozniak, and Jean Michel Jarre. James can be found tweeting at @James_T_Bourne.

With all the hype around blockchain, sometimes it’s better to take a step back and rethink the core benefits of this emerging technology.

That’s the opinion of Dirk Kanngiesser (left), CEO of Cryptowerk, a San Mateo-based company which looks to provide software developers with the tools to seal data and digital assets using any or multiple blockchains.

One of the major problems the industry faces is scalability. Ethereum’s throughput, for instance, is capped now at 15 transactions per second (TPS). Commercialized applications require getting to one million TPS. Some are looking to emerging ‘Layer 2’ blockchain technology to achieve this. However, there is a major snag, known as the ‘scalability trilemma’, as Vitalik Buterin put it.

It is reminiscent of a well-known software development saying. You can have fast, good or cheap, the saying goes, but not all three. Similarly with blockchains, you can have security, speed or decentralisation, but not all three. Ripple and EOS, for instance, offer higher transaction speeds, but minimal resistance, going against the entire blockchain ethos.

For these reasons, right now current designs using blockchain for commercial purposes cannot support the industry’s increasing ambitions and throughput requirements. For Kanngiesser, there is lots of confusion and misperception in the market.

“When people discuss blockchain ‘scalability problems’, they are often actually discussing using blockchains for purposes for which they were not designed to operate at scale,” he says. “That’s why it’s important to use blockchain technologies only where they are appropriate – for example, combining them with existing applications and platforms to help ensure data integrity.”

But going forward, there are further risks – and as Kanngiesser explains, this plays in to Cryptowerk’s own vision. “How can you design your applications to be future-proof – in other words, able to take advantage of any improvements in the technology – without having to throw out all your existing blockchain-enabled work and start over again?” asks Kanngiesser. “This is one of the reasons we believe it is important to abstract your application from the underlying distributed ledger technology.”

Cryptowerk Seal is the company’s product which looks to change this. It is a blockchain as a service platform which generates an ‘incontrovertible seal’ for all kinds of digital assets. It is based on the conviction that only hashes (i.e., digital fingerprints) of data, and not actual data itself, should be anchored in the blockchain. In order to solve the throughput problem, the service platform aggregates up to a million hashes and bundles them in one “hash of hashes”, so only a single, small transaction is written to the blockchain. For each individual hash the customer receives a digital seal, the “Cryptowerk Seal”, as irrefutable proof that the hash is anchored in the blockchain. Once that process occurs, customers can later verify the integrity of their data by using the received Seal and a new hash of their original data to recreate the super hash immutably anchored in the blockchain(s). This can be done directly without Cryptowerk’s involvement.

It’s important to use blockchain technologies only where they are appropriate – for example combining them with existing applications and platforms to help ensure data integrity

Kanngiesser claims organisations can reach the magical one million TPS mark through its offering – even using public blockchains such as Bitcoin and Ethereum. One company already using the service is Ferrari Electronic. The German unified communications manufacturer is using Cryptowerk Seal to ensure any documents customers are scanning or sending will be sealed at the time of scanning.

Yet scalability isn’t the only problem the industry faces right now. Interoperability, portability and integration are also cited by Kanngiesser. Underlying them all, however, is trust. Some companies think they can avoid the scale issues of public blockchains by using private blockchains, but Kanngiesser thinks this is like an ostrich putting its head into the sand. “Enterprises are increasingly moving to private blockchains or other proprietary consensus algorithms to provide a sort of ‘Intranet 3.0’ without being aware of the security and other potential issues inherent in using private blockchains,” he says. “Using private blockchains without also sealing the data into public blockchains can result in compromises of trust and immutability.

“Utilising the benefits of public blockchains to verify the authenticity of digital assets in high-scale applications is the approach we recommend. In fact, we recommend writing to at least two at the same time”.

Kanngiesser is speaking at Blockchain Expo in Santa Clara on November 28-29 around data integrity with blockchains for enterprise applications. The talk will run through enterprise best practices and solving the scalability challenge, as well as Cryptowerk’s overall vision. “By creating a digital seal, every product, process and transaction can now be matched to its original for verification of integrity,” explains Kanngiesser. “Why is this so important? Because many cybersecurity experts believe that while hacking for data theft purposes will continue to be a problem, data tampering is the next real global cybersecurity threat.”

This fits in with the company’s roadmap for the coming year. “We are laser-focused on new ways of building trust into every product, process and transaction by looking more deeply into the many enterprise business processes that involve more securely storing and exchanging data,” adds Kanngiesser.

You can find out more about Cryptowerk here and register your place at the Blockchain Expo here.

Interested in hearing leading global brands discuss subjects like this in person? Find out more at the Blockchain Expo World Series, Global, Europe and North America.

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