Contributed by Swee Siong Lee
In my various engagements with businesses and professionals, particularly in forums discussing the use cases for blockchain, I am frequently asked a few questions:
- Why would I need blockchain in my business?
- What would represent good use cases for using blockchain?
Before I answer these questions, I wish to address a common comment I hear from blockchain cynics that blockchain is a solution looking for a problem, and have dismissed it as not rooted in the real world. I fundamentally have an issue with that comment because where new game-changing technologies are involved, people generally do not know enough about it to see immediate application in their worlds. Here I would like to draw a distinction between evolutionary innovation and revolutionary innovation.
In evolutionary innovation, new technologies are typically improvements to existing technologies applied to solving existing problems. It is therefore easy and intuitive to understand their advantages and apply them to immediate use cases. Examples of this are aplenty in the automotive industry (e.g. Toyota’s Kaizen production method to make car production more efficient) and in the smart devices industry (e.g. a better iPhone, a bigger iPad, a smaller iPhone strapped to my wrist).
In revolutionary innovation, it will take deliberate effort to first understand the technology, identify the fundamental attributes in real world problems addressable by the solution, and then designing how the technology can be applied to solve the problem. Examples of this are the steam engine, electricity and the internet.
Blockchain, or more broadly Distributed Ledger Technology (DLT) is a revolutionary innovation for which its true potential is not fully uncovered yet. However, it is still at its nascent stages of development, representing huge promise but also shortcomings. We are already seeing that it is quickly moving into an evolutionary innovation phase where there are numerous new protocols and solutions being developed to address the shortcomings of the technology. True that there is a huge amount of hype and “castles in the sky” propositions. However, it is too early to throw the baby out with the bath water.
With that out of the way, let’s get back to the questions.
Why would I need blockchain in my business? What would represent good use cases for using blockchain?
An overarching condition is the Absence of Trust between stakeholders in the business ecosystem. This can relate to proof of identity, record keeping/ provenance tracking, agreements and documentation, data confidentiality and ownership.
The following key attributes which when present, make for good use case for blockchain:
Attribute 1: Multitude of stakeholders
When there are many stakeholders involved in an ecosystem. This could be either a large number of homogeneous stakeholders (e.g. a community of e-sport gamers in multi-player gaming platforms), and/or non-homogeneous stakeholders (e.g. buyers, sellers, financiers and shippers in global trade). Sovereign identity of stakeholders and authenticity of information provided by them would need to be validated. The great number of stakeholders in different locations create friction for trust and communication, resulting in process and cost inefficiencies.
Attribute 2: Repetitive, Fairly standardised processes
Processes which are repetitive, fairly standardised and high in frequency, makes the case for improving efficiency through automation and streamlining of non-value added processes such as multiple parties creating records for the same transaction. Examples would include cross border payment, other financial transactions such as equities and derivatives and royalty distribution for intellectual property.
Attribute 3: Provenance Tracking/ Record Keeping
Related to Attributes 1 & 2 above, this deserves to be mentioned as an attribute in itself. Where there exists a long chain of intermediaries in processes, keeping track of provenance and immutability of such records will be important for source/ quality assurance and dispute resolution. This can be applied to use cases such as food source tracking, political elections, humanitarian aid distribution and shipping/ logistics.
Attribute 4: Transfer of Value
Beyond usage as a decentralised database, blockchain can arguably also be used as a means to hold and transfer value. This invariably touches on the concept of “tokens”, with the Bitcoin being the most widely-used example, and a multitude of altcoins introduced over the past few years, alongside the regulatory-associated ambiguities of cryptocurrencies and ICOs (yet another subject that deserves to be discussed in-depth for future articles). Setting that aside, the concept that a token can represent an immutable proof of ownership for something of value is powerful. This gives the possibility for ownership of anything in this world (physical or non-physical) such as properties, industrial equipment, shares and even fiat currencies to be represented in the form of tokens, and to be further fractionalised, distributed and transferred.
Whilst this article speaks about what makes good use cases for blockchain, we should not forget that blockchain is still a nascent technology and we are probably still some way to go before we see broad-based adoption and usage. The road ahead will be fraught with implementation challenges. I shall attempt to cover my views on the implementation challenges in my future articles. Until then, happy exploring!
Originally published at ICOEdge.