Adi Ben-Ari on blockchain and zero-knowledge proof

Adi Ben-Ari is the founder and CEO of Applied Blockchain, a team of blockchain and zero-knowledge proof architects and developers based in London and Porto, and a Gartner’s Global Top 20 Blockchain Consulting Firm 2017 and 2018.

Please tell us about yourself and your background. How did you get into blockchain?

My background is in Computer Science and I have 20+ years of experience in telecom, financial services and insurance, as a solution integration architect, designer, developer and project manager. I worked for blue chip companies and, more recently, startups.

I’m a techie at heart, so when I first learned about blockchain, instead of buying Bitcoins, I fell in love with the technology as I thought it was very interesting. So I started building things, when really, I should have just bought those Bitcoins! To compensate for the lost opportunity, I’ve been working on building a business since.

Blockchain captured my imagination and at that time, the Ethereum platform had just been released (the network hadn’t been launched yet but the software was available), so I started exploring it in my free time… It was early, no one where I worked was interested in using the technology back then so I left to start my own company.

With my background, I saw blockchain as a new paradigm for how systems and companies would talk to each other, that really was the starting point.

I didn’t have any concrete product ideas at that time so I started looking for businesses interested in the technology and its applications. The first customers were banks and startups, and still today, half of our customers are startups, the other half are corporates.

What do you think is the main barrier to blockchain mainstream adoption?

The biggest barrier has been understanding its value, which I believe lays in having a secured history of activities between counterparts. When you have that, two parties can interact without the need of a third party. For instance, in the case of high value assets, you can use a blockchain as a registry, and it becomes a very efficient tool for managing business processes around those assets.

Eventually, when payments are on the blockchain, they can be tied to those business processes, users exchange the assets, making a super efficient blockchain nirvana for conducting businesses and transactions.

Real use cases of blockchain are still rare. Could you give us some great examples from Applied Blockchain?

Cygnetise is one of them. What I love about them, is that they didn’t try to boil the ocean: they picked something very simple that is a real problem in organisations (the management of authorised signatory lists), where blockchain is part of the solution as it significantly increases security in the process. They just didn’t try to make it complicated!

Some other great uses cases include APPII, a career verification platform using blockchain  to verify identities, backgrounds and career history, Nuggets, a blockchain application enabling payments and ID verification without sharing personal data, Baab, a platform leveraging blockchain and biometrics technology to provide peer-to-peer banking services to the global micro-economy.

On the corporate side, our work is focussed on supply chain and trading. In the case of supply chains, they usually involve lots of parties and paperwork, as well as movement of assets. Supply chains are seeing the most activity in terms of business and blockchain at the moment across industries.

In regards to trade finance and shipping, in both the energy space and supply chain, we work with companies like KLM, Shell, Toyota, Lloyd’s Register, and we see that the common trait among them is the high value product, that needs to be tracked and traced and traded and so on, where blockchain can play a very important role.

Shell has partnered with AB for their first product derivative trade on blockchain. Tell us more about it.

Our relationship with Shell started 2 years ago, when they invited us to a competition open to several blockchain companies: we all had to build the same solution, that was then evaluated by Shell. We won, and this brought us two things. The first one, a project that involved building a derivative trader platform for energy traders, which went live in November last year and was announced by the Shell CEO. The platform has been used by Shell traders here in London on a daily basis for entering and reconciling their trades. It’s a real live system at Shell.

Secondly, they invested in Applied Blockchain and became a stakeholder in the company. To this day, we’ve done more work with Shell than what I’ve just described and there will be more going forward.

Which direction do you see the blockchain architecture going for companies with B2B blockchain solutions vs B2C blockchain solutions?

At Applied Blockchain, we work mainly in the B2B space. What we’ve seen up until now, are all-singing, all-dancing platforms. JP Morgan’s Quorum, R3’s Corda, Hyperledger Fabric are some of the popular ones: they are custom enterprise blockchain stacks that are becoming more and more complex.

I think the trend will go the opposite way: instead of one complex solution trying to do everything, we’ll flip back to very simple blockchains, that can easily talk to each other.

Fundamentally, the complexity of these stacks is due to the fact they are trying to solve two problems, data privacy and scalability. Scalability will come with time, with much simpler blockchains. On the data privacy issue, there is a new technology that’s emerged, called zero-knowledge proof. Using this method, complex blockchains will no longer have to solve the privacy problem themselves as these proofs will be used to transfer data between parties, allowing for blockchains stack to become simpler.

Do you think a genuinely decentralised model (no central or third party in control of the software etc) can work long term where sensitive information is involved?

The biggest benefit of using blockchain is knowing that the history of something hasn’t changed, the group is in fact securing it and making sure that it hasn’t changed. This type of model is called decentralised, there’s no single party that can override that. As a general concept, there’s no reason why this wouldn’t work in the business world.

We’re seeing today the rise of consortia, for example, where there’s a party owned by the others that has some control of the IT. Technically, you still end up with different nodes, different copies of the blockchain, which are held and controlled by different parties, and that helps guard against defaulting history of the ledger. You can still obtain the same while having some level of centralised management functions and governance. That’s the balance we’ve seen playing out.

Data privacy will become a separate subject handled by zero-knowledge proof, so data itself won’t need to be on the blockchain. What will be on chain are these proofs, that don’t contain the data itself. Therefore, the risk of leaking data or sharing it with the wrong party almost disappears, or in case that happens, it could be managed much more easily.

So I think that’s how enterprises will start becoming more comfortable with blockchain technology. Because the technology will mean that they’re not sharing as much information as they would have to with blockchain today.

What does the future hold for Applied Blockchain?

We spent the last few months researching zero-knowledge proof and learning how it could be applied to the solutions we are building for our customers. We realised that most of what we do in the circles of smart contracts, is about storing data, recording assets and ownership and the rules around when these assets can move.

Instead of storing it in the blockchain’s smart contracts that can be seen by everyone to be validated, or encrypt it, but nobody can do anything with it apart from extracting it, we can use the proof to store only proof of the data on chain.

This way the data itself never goes on chain. And we can still run over logic on those proofs, that makes the blockchain completely safe in terms of data because this is never on chain but you still gain the group security because all of the parties can actually validate that everything is correct.

This is the direction the technology is taking, so we developed a product called K0 to implement this concept, it uses zero-knowledge proof to allow basic business logic around assets and movement of assets to happen using these proofs on existing blockchains.

We’ve done it using Ethereum and Fabric and we think this is the basic building block for all the applications we’ve been building. This provides a much more secure and private solution for the type of customers (enterprises) we work with.