Wednesday, March 29

How To Determine Whether You Need A Blockchain


Founder of akaChain.

How To Determine Whether You Need A Blockchain

In a recent forecast, Gartner pointed out that blockchain would create $3.1 trillion in business value by 2030. This bold forecast and the hype in ledger technology have caused the investment to dramatically spur in recent years despite the claim that blockchain is still in its infancy.

More than 10 years since the mining of the block on the bitcoin network, blockchain adoption is now experiencing a downtrend. The hype is over. Enterprises are getting cautious about deploying blockchain to their existing systems. Indeed, a 2019 CIO survey conducted by Gartner stated that only 11% of respondents have deployed or will deploy blockchain in the next 12 months.

The current state and the upcoming trends of blockchain emanate a rudimentary yet appealing question: Do you need ledger technology? If so, what type of blockchain will best suit the business need?

Do You Need A Blockchain?

The essentials of blockchain include a tamper-proof, distributed and consensus algorithm. Therefore, a business should ask these questions to determine whether it needs a blockchain:

  1. Should the data be consistent across the entities?
  2. Will the data remain unchanged once it is written?
  3. Are there many contributing entities?

If your answer to the very first question is no, skip the hassle of answering the two remaining questions; your business does not need a blockchain. Instead, the solutions for your problem vary. For instance, if the data is not necessarily consistent across the entities, an enterprise can consider the spreadsheets or the documents.

When the administrators and operators, at some point, must modify the written data, blockchain is not an appropriate choice because it does not allow any modification once the data enters the chain. In this case, the business should consider a database rather than ledger technology.

As for the third question, if an enterprise is the sole contributing entity or if there is no trust issue among many contributing entities, the data does not need to be distributed — and subsequently, blockchain seems unnecessary.

Choose The Right Distributed Ledger Technology For Your Enterprise

When the need for a blockchain is confirmed, another question stems from the buzzwords “permissioned blockchain” and “public blockchain.” Asking the right questions is crucial in choosing the right blockchain for your enterprise:

  1. Are the enhanced security and consensus of multiple witnesses compulsory?
  2. Which one of the following do you need to proceed with a transaction: a group of selective and trusted entities, or a group of public anonymous entities?

If the answer to the first question is no, your business should consider a different solution, such as workflow management or the sign-off process. For the second question, if your business needs a group of selective and trusted entities, you might want to consider a permissioned blockchain. On the other hand, if your business needs a group of public anonymous entities, you should have a public blockchain.

A Skeptical Look Into The Business Implication Of Blockchain

Despite all the hype and hope of investors, consulting firms and the enterprise world about blockchain, it’s not the savior for every issue. Indeed, according to the 2019 CIO survey by Gartner, the number of CIOs who have deployed or will deploy blockchain in the next 12 months is still extremely humble, raising many questions about the blockchain use cases that provide added value.

One of the most notable issues is scalability. A company’s scalability implies that the underlying business model offers the potential for economic growth within the company. Given the current design of blockchain, success in the quest for the scalable blockchain while maintaining a true decentralized distributed ledger that supports a colossal volume of nodes is not easy.

For instance, Ethereum or bitcoin, as the public blockchain platform using proof of work, requires that each node in the network proceed with each transaction, limiting the transaction process capability and throughput. While a permissioned blockchain has slightly better scalability, it moves toward the centralization, calling the need of a blockchain into question. Because of the scalability problem, applying blockchain to the sectors that require the transactions to proceed in a flash seems unpractical.

Although blockchain is praised as a general purpose technology, it is not the cure for every business problem. It is critical to know whether your enterprise needs a blockchain. Despite blockchain’s infancy, businesses across the globe still have many successful use cases in payment, traceability and identity management, suggesting that the potential of blockchain is still to be discovered. 

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Hoang-Giang Tran



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