Should “normal” companies adopt blockchain in 2020
Many of us enjoy a daily dose of blockchain innovation news. With crypto markets financially on the move again, one could start to believe that blockchain is actually going mainstream this time round. In my mind, “mainstream” suggests that we will see solid mid-sized companies starting to dip their toes into the wells of blockchain fortune. That’s why I ask:
Is it time for “normal” companies to invest in blockchain technology?
In this article I will give my viewpoint on the potential value of blockchain for “normal” companies. Please note that this viewpoint does not apply to blockchain startups or Facebook-like conglomerates, which would require a totally different rational. Instead, these are regular mid-sized companies that do not want to blow their tech budget, by jumping on the latest hype train.
Blockchain is the best way to secure company data!
No, I don’t think it is. Blockchain isn’t the newest and most secure database. Some would claim that blockchain can be the quick fix solution to all database security issues. It seems very promising to introduce an immutable ledger, protected by an advanced encryption algorithm, into your company. However, please take a step back to think about the issues that blockchain would actually solve?
The main issue is that blockchain doesn’t solve any security problems by itself. It still requires control of private keys. Furthermore, your data servers need to be protected. In a blockchain these servers are now transformed into “nodes”, but they do still require protecting. A faulty choice in these fields can put all your data at risk.
Benefit from the lack of trust issues
What a blockchain will help with, is the lack of trust between parties, who do not want to go through a intensive contracting negotiations phase. This will be able to save both time and costs on lawyers or notaries. The challenge would then be, how does my day to day business practice translate into an online, trustless, algorithm? In many cases, this is pretty difficult.
Let’s take my field of business as an example; developing web-based software platforms. Even though this is a digital asset, it doesn’t easily translate into a trustless (smart) contract. The main concern would be, when delivering a service, the receiving party must verify that it was delivered appropriately. Hence, I need to trust that party to do an honest assessment.
I can off course ask a client to lock the money (crypto) up front in a smart contract, but I still require him to verify the quality of my services. From the client’s side, he needs to trust me to deliver the service according to the agreement. Hence, it’s very hard to write a smart contract that acts as a third party to verify if the service was delivered properly.
Maybe a solution can be found in building a link between Test Driven Development (TDD) and a smart contract. When all tests of the TDD are met, the smart contract is executed and payment is fulfilled. Unfortunately, as automated tests do not verify HOW the test came to succeed, I still see many problems in this approach.
Have you identified an trust-less approach that works for your industry?
Does immutability add value?
An additional problem is, that most business software is actually not aided by actual immutability. Mid-sized companies often need to fix user input, control access, apply changes in existing workflows or manage large amounts of customer data. Furthermore, most of these steps need to be done without the client’s consent. This cannot really work if the client holds the private keys to his data.
One could of course resolve this by holding all the private keys for the companies’ customers. But doesn’t this contradict your choice for blockchain in a big way?
Is any enterprise blockchain mature enough?
Lastly, one should ask the question if existing enterprise oriented blockchains are secure or mature enough to start working with them. Can they survive attacks? Will network updates impact the way you’re using them? For how many years will this blockchain continue to evolve? If it will become very popular, will it be able to scale?
Next to Bitcoin (BTC), which isn’t smart contract oriented, the only real mature blockchain seems to be Ethereum (ETH). However, one can certainly remember the CryptoKitties congestion issue. Therefore, I wouldn’t be able to name any blockchain that will provide assurances, apart from Bitcoin (BTC).
Even if a blockchain will solve all of the issues mentioned above, one must still ask, why blockchain? For example, if you need extensive security, wouldn’t you rather choose to encrypt; the connection, the database, it’s records and/or all files. Using the latest encryption standards, like Libsodium, might be much more practical and less time consuming.
High value solutions for mid-sized companies
Hence, for all the love that I want to give to blockchain innovations, I need to conclude that it is not the go-to solution for enterprise solutions, yet. Most mid-sized companies are still much better off building non-blockchain software, also in 2020.
For example, they can easily utilize the power of mature frameworks and open source software. At our company, we use a LAMP stack with Laravel, VueJS, Bootstrap or Tailwind for this. It enables us to quickly build fast and glorious features, with a high level of security and encryption options.
Why blockchain still is fantastic!
Don’t get me wrong. I am very enthusiastic about smart contract blockchain innovations, ranging from Ethereum, EOS, to NEO, Lisk to smaller business blockchains like Stratis and Neblio. However, all my enthusiasm is focused on initiatives that seem very disruptive, but are yet unproven. Mid-sized companies should simply wait for the real world solutions to show themselves, and adopt these services when they do.
Or, as the great Andreas M. Antonopoulos likes to put it:
“Check if a blockchain project needs to be borderless, open, neutral, global & censorship resistant. If it’s not, you don’t need a blockchain. In fact, it’s a slow, inefficient and expensive database which would be much better tackled with a existing database technology, than blockchain.”
The latter might get more investors interested though. :)
Written by Arne Schoenmakers, managing director at Maatwebsite.com.
