Do I need a blockchain for my business project?

In my last post I discussed the difference between public and permissioned blockchains. Today I will go a bit further and discuss the question, whether you need a blockchain at all. Definitely, blockchain is a mega trend. And many blockchain initiatives should ask themselves, if they really need a blockchain to solve their problem. To be not disappointed at the end of your blockchain project, you better ask the question whether a blockchain has benefits for you or if you can solve the problem by using much simpler traditional technology.

There are a lot of diagrams and guides available, helping you to decide whether to use blockchain or not. Because most of them are very technical, I tried to create a high level overview for business decision makers. Feel free to use this guide as decision support or to challenge your blockchain enthusiasts.

The first question sounds maybe a bit funny. “Do you really have a business problem?” But this question is critical due to the current hype. Nobody would initiate a project simply because he want to make something with a database or a web server, but it’s often exactly that with blockchain. There are many initiatives in the kind of “let’s see what blockchain can do to improve our business” And in my opinion, this approach is completely wrong. So focus on a problem first and if there is no. Enjoy it and have some drinks.

If you belong to the regrettable majority who nevertheless has problems, then ask yourself, whether you would be able to solve the problem easily without blockchain. If it’s like that, you should focus to the classic approach first. A well-established, centralized technology is probably easier to realize and maybe cheaper (blockchain developers costs a lot). A bit challenging but critical is the word “easily”. Of course, any problem can be solved in many ways but you shall go on considering blockchain as long as traditional approaches didn’t work well, were difficult to realize or to roll out.

The next three points are about the kind of business you want to make together. Do you want to exchange data between the partners and comes this data from several parties? Data and the kind of manipulating and exchanging data is a good indicator for continuing the blockchain approach. If only one party generates and modifies data, you may not need a blockchain. If several parties do this, go on considering blockchain.

The following topics are trust related. Do all parties have the same interest? Then there is a highly trustful relationship between them. You can put the data in a database controlled by on party and rely on your common interest. If not there is sometimes the alternative to rely on a central intermediary. The best known central intermediaries are marketplaces. So if you fully trust the marketplace and you do not have problems providing your business data to the marketplace, use it. Otherwise you are at a point now where blockchain seems to be a really good solution for you and your business.

The last step is to decide between public and permissioned blockchain solution.

One very important question is regarding your business model. Are all the required participants already known? Please think twice about this question. Often companies force their partners or customers to use their platform without a compelling reason. Just because there is no technical alternative to a customer or partner “portal”. So if you want to provide a service and you have to orchestrate several parties to provide that service, think about public blockchain and use the possibility to expand your business and cooperation base.

If all partners an already known definitely, you have the choice between permissioned and public chains. The difference between both kinds of blockchain was explained in my last post. Now there are two important questions left. Does your business model require to control the access for business partners? I’m sure everybody will answer yes now. But think twice again. Control access doesn’t mean access to concrete data sets, they shall always be only accessible in a secure way, independent which solution you build. What is meant here is the possibility to participate in the communication. If you know all your partners and if it’s required that new partners can only participate after technical onboarding, then a permissioned chain is the appropriate solution for you. Otherwise you have to decide whether performance or immutability is more important for you. Due to the less complex consensus algorithms, permissioned chains are mostly more performant but for the same reason there is a higher risk for manipulation by an untrustworthy business partner.

With contractus we support both public and permissioned solutions and find the right one together with our customers and partners based on the same questions. So at the end, I hope my explanation will help you a bit by choosing the right solution for your project. And feel free to contact me for further questions.