Is Blockchain Right for Your Business?
Being a business executive requires making important decisions on a daily basis. To find ways to improve your business, you need to decide what kind of new concepts and technologies to invest in. One of such technologies, which might attract business owners, is blockchain. Blockchain is a technology that can be useful for various organizations, including businesses of different shapes and sizes. In this article Blockchain Architect Dmitry Lavrenov guides through key blockchain characteristics and provides a decision tree to help you figure out whether your organization needs a blockchain or not.
What is Blockchain?
Blockchain is neither a company, nor an application, nor a supercomputer – it’s a data structure that holds transactional records stored in the form of blocks. Blockchain is a distributed ledger, completely open to everyone on the network while guaranteeing transparency, decentralization and immutability. Information that is stored on a blockchain is almost impossible to change.
Decentralization, transparency and immutability are the key characteristics of a blockchain.
Decentralization. This characteristic means that information isn’t stored in a single place – it is distributed across a variety of data servers that participate in the network. In other words, multiple copies of your information are stored in different locations on different devices in the network – there is no central point, which controls it.
Transparency. All changes to the information are presented in the form of transactions. When a ledger stores all transactions, the history of changes and the current state of data can be easily tracked and verified, ensuring transparency.
Immutability. A unique cryptographic key secures every record that’s written on a blockchain. Information and any changes to it are shown as transactions that form blocks. When a new block is added, it contains information about its transactions, as well as about previous blocks, pointing to the previous block with a hash-pointer. This way, it creates a chain, where information is presented as its immutable hash-value. All the records are chained together, making a blockchain and its information immutable and reliable.
The Decision Tree
An example of a decision tree
Now let’s dive deeper to find out whether blockchain is the right technology for your business. In order to decide, you should first answer the following questions:
Question. Does your business consist of independent actors that need to have shared trusted information storage?
Explanation. Independent actors can be people, departments, companies or organizations. Shared trusted information storage is created to manage and control shared data used by different business units and processes, especially when they can’t trust each other.
If your business doesn’t consist of independent actors or business units, your processes don’t need a shared data storage and, consequently, don’t need a blockchain.
Question. Are there multiple writers?
Explanation. A writer is a business unit that has the ability to change stored information.
If you answer “no” to this question, it means that your data storage is managed only by one business unit and others don’t need to verify data and changes to it.
Question. Do you need an immutable history of transactions?
Explanation. Blockchain is a data storage technology. Changes to data can be performed with the help of transactions. Blockchain stores all history of transactions, allowing you to verify the latest state of the information from the beginning of implemented changes.
If your business doesn’t need to store information changes that can be verified in the future, you don’t need to implement a blockchain technology.
Question. Do you want a trustless environment?
Explanation. There are a lot of cases when business units face a trust issue. For example, a business unit receives goods from another one. If the first one is interested in selling quality goods, it usually should spend additional time and money to verify quality. Blockchain provides a platform that solves the trust issue. It’s a trust-free environment where business units can work with other parties without worrying too much.
If your answer is “no,” it means that your business doesn’t have flows with trust issues between units.
Question. Are you looking for contractual solutions?
Explanation. Contractual relationships or contracts often go hand in hand with certain problematic situations. In particular, it is challenging to make sure that both parties fulfill all contract obligations.
If the answer is “no,” it means that there are no flows between business units that require some agreements between them to be executed.
So, Do You Really Need Blockchain?
Having answered all of the questions brings you one step closer to a better understanding, whether blockchain is the technology that will make your business thrive. Responding “yes” to the first two questions is the pass mark for considering blockchain for your business. If you answer “no” to these questions, your other answers shouldn’t be taken into account.
The “yes” answers to the next questions only increase the necessity of a blockchain in your organization. Needless to say, affirmative answers to all of the questions give a bright green light for implementing a blockchain-based solution, which would create trusted shared storage of your data with such features as decentralization, transparency and immutability. These features ensure a trustless environment, which in turn brings many benefits. For example, a trustless environment in the form of a smart contract is able to process transactions via protocol, which automatically executes, controls or documents legally relevant events and actions according to the terms of a contract or an agreement.
Blockchain is quite a new technology that many aren’t very familiar with, requiring additional research to understand the basic concepts in detail. The decision tree presented above is one of the methods to figure out whether blockchain is right for your business or not. Investing in blockchain can be a great gain if it’s chosen for the right reasons.