Home Blockchain Princeton University Startup, Offchain Labs, Raises $3.7M To Enable Enterprise Blockchain Adoption – Forbes

Princeton University Startup, Offchain Labs, Raises $3.7M To Enable Enterprise Blockchain Adoption – Forbes

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A startup spun out of research from Princeton University is helping facilitate blockchain adoption for enterprises. Offchain Labs is providing the connective tissue between blockchain and businesses with a unique smart contract scaling and privacy layer called Arbitrum.

Scalability, privacy, compatibility with Ethereum and a strong trust guarantee are all features that blockchain developers need in order to support enterprise blockchain adoption, Ed Felten, Professor of Computer Science at Princeton and former Deputy Chief Technology Officer (CTO) to the White House, told me. With Arbitrum, we have invented a protocol that sits on top of any blockchain, with the ability to execute code and transactions off-chain through either sidechains or state channels. With increased privacy and scalability, as well as much lower costs to run a contract, Arbitrum adds immense value to developers and enterprises. We believe it can create a new wave of quality, blockchain-based applications and services.”

Felten, along with a team of academics and PhD technologists, including Steven Goldfeder and Harry Kalodner, are responsible for leading the development of Arbitrum. Today, Offchain Labs announced it has raised a $3.7 million USD Seed Round led by Pantera Capital. The funding will be used to grow the team of developers to build Arbitrum.

At Pantera, one of the biggest problems we see in the blockchain industry is that dApps face scalability challenges. The team behind Offchain Labs has developed a novel solution to this issue with Arbitrum, and we’re enthusiastic about this platform’s potential to help dApps really take off. The unique properties of Arbitrum allow it to serve as a great Layer 2 scalability solution,” said Joey Krug, co-chief investment officer at Pantera Capital.

Who Needs Private Blockchains?

Offchain Labs is close to releasing its prototype, which will greatly lower the barrier to entry of businesses seeking all the advantages of public blockchains, without the disadvantages that hold back adoption today.

Last year, 95% of companies across different industries were investing in blockchain tech projects. It was also projected that over $2.1 billion USD was spent by enterprises on blockchain research and development. However, aside from some early pilots, and limited adoption of select consortium blockchains, many enterprises are not yet convinced to move their system architectures onto a decentralized network. In turn, private blockchain utilization has been on the rise. According to a 2018 Deloitte Global Blockchain survey, 44% of companies surveyed are focusing activities on private blockchain.

This is because enterprises often require confidentiality of information and value sharing, as well as privacy in how deals, interactions, partners and agreements can be viewed. The public nature of blockchain is often not ideal for businesses since transactions can be seen by any owner of that blockchain network.

Moreover, the throughput of blockchain is low and transaction verifications are highly congested. Ethereum, for example, operates at just 15 transactions per second. And while Ethereum was the first blockchain to support Turing-complete stateful smart contracts, critics point out that it suffers from limits on scalability and privacy.

“Ethereum requires every miner to emulate every step of execution of every contract, which is expensive and severely limits scalability. It also requires the code and data of every contract to be public, absent some type of privacy overlay feature, which would impose costs of its own,” explained Felten.

Offchain Labs is addressing these shortcomings with Arbitrum, which serves as an enhancement layer for blockchains. Using a mechanism design to incentivize parties to agree off-chain how a virtual machine would act, Arbitrum streamlines the execution of smart contracts. This ensures that miners only need to verify digital signatures, rather than every part of the contract to confirm a virtual machine’s actions.

Arbitrum also greatly increases speed of transactions, as well as limits the public exposure of contracts and information by providing an “AnyTrust” guarantee. Through the AnyTrust consensus mechanism, Arbitrum will guarantee correct behavior for each transaction, even if only one of a contract’s validators is acting honestly.

When a smart contract is launched and a set of validators have been designated, Arbitrum provides an AnyTrust guarantee, which greatly reduces the cost of smart contracts. As long as one of those validators is behaving honestly, then correct execution of a smart contract is guaranteed. This contrasts with other systems that try to gain scalability through a majority voting system among validators. In these settings it becomes a complicated calculation on knowing who to trust. With any trust guarantee, if you are a validator yourself, you will know a contract will execute as expected,” said Felten.

This is particularly important for enterprise applications within the finance sector, which is a key industry for Offchain Labs. The company will also target the gaming industry and consortium blockchains for initial use cases of Arbitrum.

There is a common pattern in finance and industries with commodities, where you have a set of parties that want to set up a private market with rules that they jointly write and operate in to trade and transact with one another. Companies want this to be efficient, while ensuring privacy in the sense that only the participants within their sector get to see what is happening inside that rival market. We think the any trust guarantee is especially valuable in this space since it allows correct execution of smart contracts in a consensus agnostic manner. We’ve been talking to potential partners and will have good partnerships to announce down the road.”

Additionally, Arbitrum adds value to developers since it is interoperable with Ethereum. Developers can easily move any service, dApp, or token from Ethereum to Arbitrum, and gain significant privacy and scalability advantages.

When thinking about product design, we wanted to make it as easy as possible for Ethereum developers to gain a better experience without having to change their process. If you are developing a contract for Ethereum, you can move it on to Arbitrum, making smart contracts less expensive, scalable and ensuring better privacy by having any trust guarantee among validators. So far we’ve been talking to potential partners and will have good partnerships to announce down the road,” said Felten.  

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