Pause, Should Your Business Really Use Blockchain?
How to gauge if your business should apply Blockchain Technology
“This is like the next Uber, but for Watermelons!”
If you’ve not heard such a statement, then you’ve not gone for enough entrepreneurial meetups. Uber has become the go-to word for random first-time entrepreneurs to describe their most-of-the-time pretty useless ideas (and this is an understatement).
But over the recent years, the word uber has evolved into names of emerging technologies such as Blockchain, AI, Data Science, Machine Learning… Now, random entrepreneur wannabes, yap around Blockchain to woo investors into dunking huge loads of cash into their, once again, useless ideas, yet they understand nothing about these technologies.
“My name is… and I my idea is to create a Blockchain-based platform to link babysitters to mothers. We are like the next AirBnb, but for Babysitters!”
But, pause, should you really be using Blockchain? Away from the hype and the yapping around emerging technologies, how exactly do you know that Blockchain is applicable in a particular business/industry?
If you don’t know what is Blockchain yet, take this free short course on Blockchain Basics to get a detailed understanding of Blockchain and Bitcoin.
Blockchain is definitely valuable, but not for every industry or suggested application. After all, the cost of Blockchain decentralization is high and only makes sense if underlying benefits outweigh these costs. So, what is the formula to gauging the suitability of Blockchain for a particular industry/application?
- Do you need immutability for the proposed use case?
- Does an application involve multiple parties and is there already trust between them?
- Is transparency of transactional records needed for the proposed application?
The Blueprint to Determining the Suitability of Blockchain
Do you need immutability for the proposed use case?
Immutability is the inability to delete or alter records. Blockchains work best in use cases where transactional records should not be altered to maintain trust in the records/database. Example: In healthcare, it is recommended to have an immutable record of patients data since that gives a highly trusted medical history.
However, if you might need to delete transactional records then Blockchains are not for you. For instance, if the European data protection laws apply to your industry, then Blockchain is not recommended as an immutable ledger would infringe on the “right to be forgotten” policy.
Does an application involve multiple parties? Is there already trust between them?
Blockchain is best for transactional applications that involve multiple entities with competing interests. If an application involves only one entity, then there is no need to use a distributed ledger as there is already established trust within an organization. Also, if there is already trust between multiple parties, then Blockchain is an unnecessary step.
Supply chain management is the perfect example of an industry that involves multiple parties all transacting with competing interests. Different companies have to transact through contracts as goods move from raw material producers to the manufacturer, then consumers. All these companies have personal interests at heart and can easily manipulate transactional records or contractual agreements if not stored in a shared but tamper-proof ledger. In such a scenario, Blockchain is an ideal solution.
Transparency or no transparency?
Blockchain, after all, is a shared ledger that allows all network participants to access all transactional records at any given time. If your proposed use case does not require all participating parties to view all transactional records, even if these transactions are anonymous, then think of other solutions other than Blockchain.
A good example is Voting/Elections, at the end of the day we all want to see all voting transactions while maintaining the anonymity of the voters. This sort of transparency is what makes Blockchains ideal, and the fact that these transparent records cannot be altered makes the Blockchain adoption argument even better.
Conclusion
Those are the three main questions to ask yourself before thinking of adopting Blockchain technology in your industry or business. Despite all that, you might want to also gauge the performance requirements of your proposed use case and whether they are compatible with Blockchains. Keep in mind, Blockchains are still not scalable, thus, even if you deem it fit after answering these questions, performance limitations (particularly number of transactions handled in a minute/second) could hinder its application.
Nevertheless, one thing is for sure, when you hear a random wannabe drop the word Blockchain before an application then ends with “We are like the Uber, but for …”, you have the perfect blueprint to call out the bluff. Blockchains are valuable and extremely disruptive but we should set aside the hype from the real solutions!
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Originally published at https://chaptrglobal.com.
