When we sit down inside of EY and discuss what the biggest risks are to the future of the blockchain industry, one topic that comes up again and again is the high rate at which key blockchains are forking and the possibility that future forks will split apart large blockchains with critical mass.
This is important because we do not believe that private blockchains will scale effectively beyond highly specific use cases into a general-purpose platform for digital contracting between enterprises. That job, if any system is to take it, will belong to public blockchains.
The more companies and users there are on a single network, the more likely it is you can transact with your key business partners over a common infrastructure.
But, if public blockchains splinter into many different camps, one of their key advantages over networks of private blockchains will disappear.
Right now, however, forking a public blockchain is as easy as copy and paste, and it happens all the time as a means to “resolve” (I’m using that word in a very limited way) governance disputes.
This option won’t be viable for much longer, however, as real-world assets represented by digital tokens start popping up on public blockchains. Links between those assets – be they real estate, diamonds, gold or U.S. dollars in escrow accounts – and the blockchain tokens will only be valid on the primary network.
If they don’t already, the purchase agreements for these tokens and assets will need to be quite specific about what constitutes the “primary” or “original” blockchain on which the token is located, and external firms involved in attestation and audit will have to agree to and link up those plans.
The role of external firms will be particularly important going ahead. As blockchains are more and more linked to ownership of real-world assets, verifying the link to those assets is going to be important to investor confidence.
It will still be possible to fork blockchains, but the chances that users will come to alternative paths is declining by the day. Those users will be closely tied to their investment assets, which if they represent off-chain items, will have one and only one valid public blockchain representation.
As a result, it will become more and more important for the major public blockchains to develop robust governance models that are able to manage change and incorporate the views of stakeholders. It is also important for users to understand that as blockchains mature, they are likely to become much less dynamic and change less frequently.
It’s no accident that trustworthy institutions tend to evolve slowly and prize stability.