One of the questions that the Cesirae team is most often faced with from clients is, “Should I use Blockchain for [insert business process].” As a technology company and, specifically, a blockchain architecture firm, we would like nothing more than to objectively answer “Yes” to these inquiries. In reality, distributed ledger technologies are not a solution to every IT use case that an organization may be looking to solve. In this article, the Cesirae engineering team will highlight some key considerations for blockchain applicability as informed by our own research and architectural endeavors with clients.
What is Blockchain?
Blockchain is a shared, immutable ledger for recording the history of transactions. It fosters a new generation of transactional applications that establish trust, accountability and transparency — from contracts to deeds to payments.
A blockchain consists of a well-ordered set of data, on which all peers eventually agree. What all participants agree upon is construed as the single truth. This single truth is the single true state of the distributed ledger. A ledger is a book or file recording and totaling economic transactions. Importantly, transactions are recorded in chronological order as they are executed. The order of transactions is extremely relevant and is one of the reasons why blockchain protocols are designed the way they are. Ultimately the data recorded depends on the structure and purpose of the ledger. Going through and processing each transaction in the ledger enables us to derive all kinds of meta information. This can include but is not limited to the number of transactions, activity per account and, of course, individual account balances.
When is Blockchain a good fit?
Blockchain technology presents an incredible opportunity for innovation and increased efficiency in operations if properly architected and appropriately applied. A blockchain system allows for secure decentralization of data with fewer points of failure and an increased reassurance that the dataset in question is, in fact, the authoritative data. Information is not easily tampered with in such a system, as compared to a traditional database approach where admins may keep overly simplistic passwords or other vulnerabilities that create weaknesses in an infrastructure.
A blockchain approach also allows for the use of tokens (most commonly thought of as the ‘digital currency’) to execute transactions. The utilitarian implementation of tokens in a blockchain’s design, referred to as ‘tokenization’, allows for the digital currency to be tactfully engineered to the application, such as accountability in the case of supply chains management — food, diamonds, shipping containers, expensive wine are all great examples. If a use case requires the need to store records and fast-track payment processing, then the blockchain may introduce significant opportunity and innovation to the industry. We are at the infantile stages of acceptance of blockchain as a viable way to track goods, but many blockchain companies and issuers of digital currency are diligently working towards these applications today. One of our key clients is working with us to leverage the blockchain for the management and ownership tracking of physical and digital goods, while simultaneously streamlining the need for a separate payment system within this same instance.
When assessing whether a blockchain implementation is appropriate for your business, it is helpful to peruse models created by some of the most informed institutions on this topic. One of our favorite models for blockchain suitability was presented in April 2018 by the World Economic Forum in a publication entitled Blockchain: Beyond the Hype. A Practical Guide for Business Leaders.
While this particular model certainly presents a nod towards financial industries, it does highlight a few key considerations that others fail to mention. The need to remove third parties intermediaries or brokers from a transaction cycle — such as banks — introduces one of the greatest and most disruptive uses for blockchain solutions. Instead of having to pay third party fees to transfer sums of money around, a cryptocurrency environment allows for unmetered and untaxed transactions across the globe. The latter reason is precisely why regulation is forthcoming in this space, as banks and other intermediaries currently have the added responsibility of ensuring that funds aren’t being transferred to adversarial organizations and terror groups, while the blockchain can technically provide these groups with a confidential transaction network that sits directly in the public domain. This specific consideration for removal of checks and balances touches upon a greater ethical question of privacy and convenience, forcing governments and individuals, alike, to further elaborate on the bounds of this sensitive area that is an inherently protected civil right in most countries. Cesirae will expand on this ethical dilemma and the upcoming governmental regulations across the globe in a future publication (we can write a book on this one).
When is the traditional database approach more applicable?
Although not a very popular statement as a blockchain consulting and products-focused company, the truth is that distributed ledger technology is not always suitable. One quick glance at the World Economic Forum’s model and one can derive a few such instances. Most notable is the question of high performance, data criticality and high availability. While a blockchain can be implemented to support these use cases, if your company has a hard requirement for high performance of a data system, then chances are that any relevant data set is required within seconds for a user of the system and transactions must be fast, if not immediate. In such an instance of data criticality, a traditional database architecture is most appropriate to ensure that the aforementioned requirements are met and data sets are available with the intended reliability. Chances are that this same use case does not require any payment system integration and users are just recalling data or making informed decisions from either structured or unstructured data. You probably won’t be seeing modern-day military information systems with life-or-death data being migrated to the blockchain, and that’s totally understandable.
Another area addressed by blockchain engineering teams across the world is that of integrity of data entries. While some teams have found creative ways to validate incoming data, the question remains — how does one ensure that records being input into the blockchain are real records and not some made-up entry intended to artificially inflate the infrastructure or give the impression of greater usage of the system? Sure, this problem also exists within traditional database systems, but use in those systems can be restricted to localized user groups where data entries can be further controlled. Traditional databases also provide a sense of familiarity that is necessary for some customers and applications, primarily those seeking integration with legacy information systems and IT security layers provided by the current marketplace of third party solutions.
Will blockchain technology replace and permanently disrupt the database market? Probably not, but you can count on blockchain solutions providing a guaranteed means to reduce costs, increase public access to data and question the need for intermediary governance. Blockchain solutions are here to stay and will be a commonplace solution in a number of industries such as logistics, provenance, records keeping, real estate, financial transactions, and others. Reach out to us at Cesirae for a consultation on your particular needs and get started on your path to innovation.