Six core requirements you should consider in choosing a Blockchain technology
In my last article I gave a simple guidance to decide, whether you should consider Blockchain technology for implementing your business strategy. If you can say ‘yes’ to Blockchain after reading it, you now have the challenge to find the right technology .
Over the last months, Blockchain and Distributed Ledger Technologies (DLT) gain more and more attention in the enterprise markets. And together with increasing acceptance, the battle for technological domination is also being fought out more visibly. Pushed by the current blockchain hype, all representatives of blockchain solutions try to occupy the market as fast as possible.
In fact, finding the ultimate right technology is not important either. Today, the first task is to look for an appropriate technology to implement the first (pilot-)projects. The main goal is to take the first steps with Blockchain and gaining initial experience. Think about what cases and processes you have - search for the right technology and get started. And please if you think about the right technology, focus on what the technology offers today and not only on promises of the future.
If you are faced with the task of starting a blockchain project, you already have a whole range of technologies to choose from.
First of all, you should be sure that Blockchain is a suitable means of meeting your challenges. I have already provided help on this in one of my past blog posts.
From the mentioned application scenarios listed there we can derive a set of requirements for the technology.
Requirements for enterprise ready blockchains
The digitization of real world assets
- Is it possible to implement the tokenization of physical goods?
- Does the system offer sufficient data security and data privacy aspects?
The digitization of processes and transactions between independent companies
- Does the system support decentralized data storage with sufficient performance?
- Does the system offer smart contracts, i.e. the execution of decentralized applications?
The provision of immutable transaction and asset records
- Is the immutability of the data ensured?
- Is the data stored permanently?
For all that are not so familiar with Blockchain concepts, I try to explain the technology criteria’s with a few words.
Tokenization is one of the most important things you have to understand when talking about Blockchain. And most of us associate with Tokens things like speculative coins, ICOs and such things but tokens are much more than this. Tokens allows you to create digital representations for goods, services or rights. They can be fungible or non-fungible depending on the good or the service behind. Tokens can give you access to information about the product they represent, grant you some specific usage rights or represent the ownership of goods. These mechanisms are highly relevant for all digitization of real world goods use cases, because this allows trust and values to be exchanged between different parties without the need for a central intermediary.
Data security and privacy are very important requirements, especially for business use. There are two main issues with Blockchain. The first is that it must be possible to grant specific data access rights to individual users or roles. That’s very important because in a public chain like Bitcoin, all data within an block is readable by everyone. The second issue is compliance with data privacy regulation. Especially in Europe we do have a very tough data privacy regulation (General Data Protection Regulation). So we are faced with issues like for instance that there is a right to be forgotten within the GDPR or the requirement to have a data processing agreement with the data provider, which could be a big challenge in a decentralized system.
Decentralized data storage is a very core requirement of a distributed system. It must be possible to manage transactions and data storage in an efficient way. Sure, if decentralized data storage is your only requirement, there would be better solutions than Blockchain that solve that problem but obviously, the capability to manage data in a decentralized, distributed way is a fundamental requirement.
Smart Contracts are the most interesting part of Blockchain systems. While a standard contract defines only the terms of a business relationship, a Smart Contract is able to define also the conditions under which the contract is executed. A Smart Contract is a set of fixed rules, defined as a software program, executed on the Blockchain. Examples you can define with a Smart Contract are: The definition of criteria’s under which a payment is made, the definition of quality criteria’s and the rules if these are not observed. Because such coded and tamper-proof executed rules can eliminate a central authority, Smart Contracts play an important role in automating cross-company collaboration.
Immutability is the property most associated with Blockchain. Immutability is the foundational requirement for exchanging value in a digital way. This requirement is not solvable with traditional internet technology because all digital data can be easily copied and changed. If two accounts exchange information for instance by mail, there is a copy of this mail in everyone’s mailbox. Same is for data, exchanged between two or more systems. The only way to solve that problem without Blockchain is relying on a central intermediary which holds the correct version of the data. Based on the Consensus mechanism, Blockchain is able to solve that problem by technology.
Permanent availability of data is the last core requirement of Blockchain solutions. The ledger never forgets anything — which could be a problem in aspects of GDPR compliance, it’s an essential feature of blockchain technology. Especially when Blockchain is used to represent real contracts and their data, immutability and permanent availability are essential requirements especially from a legal and regulatory point of view.
This six areas are the core requirements you should consider when selecting an appropriate Blockchain technology. There is a seventh requirement which is not really a core functionality of blockchain but very important from my personal point of view. This additional requirement is the integrability of physical devices. Due to the importance of sharing or data economy will increase over the next years, there is a huge need for solutions to trustfully exchange data and value directly between devices. That’s why, even if it isn’t a blockchain core-requirement think it’s worth to look at mechanisms, how a connectivity to devices can be solved with the respective technology. It should be possible to integrate the smallest possible devices in a way which is trustful and safe against attacks (like the man in the middle attack).
If you are faced with the task of starting a blockchain project, you already have a whole range of technologies to choose from. When we have such discussions, it’s almost always about Ethereum, Hyperledger and IOTA. In one of my next articles, I use the criteria set out today to compare these three technologies.
