How to Validate If Your Ideas Need a Blockchain

The 6 Questions You Need to Answer

Febin John James
Feb 12, 2018 · 5 min read

“I am a Blockchain engineer”.

This is a sentence I say when I meet people. I would tell them even if they don’t ask me what I do. I have an urge to occasionally add the word “Blockchain” in my conversations. It’s supposed to make me sound cool. I don’t know if it works but I keep trying. But, that’s not bad when compared to people who use Blockchain for all their problems. Yes, Blockchain does solve some hard problems. That doesn’t mean you can use it for everything. If you do then you will be creating more problems like your solution would be expensive and slow.

Credits : xkcd

Thankfully Kurl Wust and Arthur Gervais, researchers from Switzerland have written a paper and explained when to use Blockchain. This story is a derived work. Here are a few questions you need to answer to figure out if your ideas need a Blockchain. The researchers have considered the current limitations of Blockchain (like cost and through output). In the future, Blockchain will be more efficient. These questions have a limited validity.

1. Is data storage required?

“John wants to build a speed reading app. Does he need a Blockchain?”

In John’s situation, he is developing a speed reading app, there is no data to be stored. Blockchain is a distributed database and purpose of a database is to store and access data. If you don’t have any data to be stored then no need of Blockchain. If you have data to be stored then let us continue our validation by asking the next question.

2. Are you the only one who is writing data?

“John wants to build an app to summarise news from different sources.”

“Mary’s business involves two other small businesses and an accounting firm. They involve in regular transactions with each other.”

According to the researchers, if you are the only person who is writing data, there is no need of Blockchain. In John’s situation, he doesn’t need a Blockchain. He can build an Android or an IOS app, use apple push or google messaging to push summaries. It would be cheaper. The purpose of a distributed database is to avoid inconsistencies. If you are the only person who wants to write data, there will be no inconsistency. Hence, no need for a blockchain. I would slightly disagree with them, if you are a university who wants to certify students, I think Blockchain would make sense here. Since you don’t have to build the tech infrastructure to certify students, instead you can use a Public Blockchain like Ethereum.

If multiple entities are regularly involved in financial transactions, each of you has to maintain a ledger. Here there are possibilities of inconsistencies since multiple people are involved and transactions need to be tallied. A Blockchain would make sense here. In Mary’s situation, the entities had to maintain a separate ledger before Blockchain. Here there are chances of inconsistencies, a Blockchain is required. If you have multiple writers, then let us move on to the next question.

3. Do you have trusted third party?

During my childhood me and my brother involved in continuous trades (clothes, chocolates, etc). When there is a dispute our mom would interfere and settle it.”

In this situation, our mom is a trusted third party. We don’t need a Blockchain. If you can trust a third party who can be a mediator in your deal, then you don’t have to use a Blockchain. Of course, the fee should be nominal. If you don’t have a trusted third party, let us move on to the next question.

4. Are your writers anonymous?

“Mark wants to build an app where anyone can voice their opinion about political parties. He wants to protect the privacy of its contributors.”

We don’t want to reveal our identity when we purchase from a local store. Bitcoin, Ethereum, etc. solve the problem of revealing identity during a financial transaction. If you want to protect the privacy of your writers, use a Permissionless Blockchain like Ethereum. It would make sense in Mark’s situation because he can protect the identity of users (It again depends on the Blockchain, identities of several bitcoin users have been revealed). If people involved are not anonymous, let us ask the next question.

Persmissionless Blockchain

In a Permissionless Blockchain, there is no authority who is validating a transaction. It’s validated by the people involved in the network. For eg, when Bitcoin transactions are made.There is no authority who sanctions a transaction instead, the transactions are validated by miners in the network. If people involved are anonymous then you need a Permissionless Blockchain.

Credits : xkcd

5. Do the writers mutually trust each other?

I can’t believe a few drivers on Uber have a rating of 4.5 stars. Am I being manipulated?”

Blockchain solves the problem of trust. For eg. In a centralised database, the authority can manipulate data to its viewers. In Uber’s situation, this could be a possibility. Maybe the riders are generous. In a Blockchain, all viewers will see the same data. If the data is contributed by people is within your circle of trust. Then you don’t need a Blockchain. If your writers don’t trust each other, let us ask the next question.

6. Do you need public verification?

Sara wants to bring transparency to Tuna fish supply chain. She wants people to know where the fish was caught, processed, packaged, etc”

Do you want to make your data be transparent? In that case, you need to use Public Permissioned Blockchain. Here public will be allowed to read the data in your Blockchain. In Sara’s case, the person who buys tuna can be assured it doesn’t have any health risks. If you don’t want your data to be public and it should be only visible to the parties involved then you can use a Private Permissioned Blockchain (Hyperledger).

Answering these question will help you identify if your ideas need a Blockchain. Blockchain can be costly if you use it inappropriately. Since Blockchain would be slow in retrieving data when compared to a centralised server. But, if you use it for the appropriate problems it would be rewarding.

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