Know where you do NOT want to use blockchain technology and why

[TechExperts]

Organizations are jumping on the blockchain bandwagon to reduce cost, increase efficiency, speed execution and enhance security. Before you move ahead, it’s important to understand where to NOT use blockchain technology. 

Much is said and written about blockchain technology and myriad organizations in almost every industry are eager and excited to test it. You can read tons of articles about why you should adopt blockchain and how to reap its benefits. The truth is, no matter how innovative and game-changing the technology is, you should conduct a carefully thought out assessment before adopting blockchain to your business case. 

Like many other technology decisions, blockchain deployment introduces a series of trade-offs as to where blockchain works best. Certainly, a number of tech journalists, industry veterans, academicians and platform providers have weighed in on the positive aspects of adopting blockchain technology. Here, I am discussing the opposite side of the coin: That’s where you should NOT use blockchain and the reasons behind these recommendations so that you can truly reap the benefit of blockchain.

Blockchain basics

By definition, blockchain technology is a distributed, immutable ledger of business transactions. Each blockchain platform—including Corda, Ethereum and Hyperledger—has a so-called scheme for recording and verifying transactions. These schemes help to ensure the security and immutability of every transaction. Blockchain can be public, permissioned or private, with each approach having advantages and constraints. The basic tenets of blockchain are

• Transparency—distributed ledger
• Security—irreversibility and immutability of records
• Disintermediation—secure peer-peer transaction
• Audit
• Codifying the business contract

With these tenets in mind, let us explore which use cases may or may not fully benefit from blockchain.

Domain and use cases where blockchain may not fully benefit businesses and the reasons why

Let’s categorize the use case into two categories: The first category is where the use case is not suitable at all for blockchain adoption. The second category is where the use case may benefit partially from blockchain adoption.

1. Where the primary intention is just to store some data in a centralized database

The “data” stored in blockchain database is a “record of a transaction” and the database is called the Ledger which records the transaction between two or more parties/entities. The blockchain database is immutable and irreversible. Once an entry made in the ledger, it cannot be deleted or modified.

But consider a standard central database-based application where the primary intention is to store “some data” in the database for future reference and  all the basic database functionalities like add, delete or update are available. Anybody who wants to access the data can raise a database query and get access to the data.

So, if the whole purpose of a solution is to store “some data” (and not a “record of transaction”) in some way with access to the data when needed, then blockchain adoption may not help. That's because blockchain addresses the problems which are beyond just database, like trust, security, transparency and audit trail. Hence replacing any standard database project with blockchain without much of thought is not a wise approach. Remember: blockchain is NOT just about the database.

2. Where database storing transactions cannot be shared and needs to be with a central authority

Blockchain is essentially a distributed ledger of transactional records—with “distributed” being the keyword here. The ledger (database) which stores the “transaction records” is shared among the participating parties or sometimes with the whole network. The idea of sharing/duplicating the ledger among the transacting parties is to achieve more transparency. Take, for example, a central authority who wants to have complete ownership of the ledger and does not want to share the ledger with any participating parties. In such a case, moving to blockchain will be a challenge.

The core principle of blockchain is “transparency” and it is achieved by sharing the ledger will all the transacting parties. For example, in the Corda Enterprise blockchain platform, the ledger is shared only among the transacting participating parties to achieve transparency and yet maintaining privacy. Any use case which does not believe in transparency cannot benefit from blockchain fully.

 3. Where the transaction is between trusted peer-to-peer parties

Blockchain essentially converts a non-trusting, centralized and non-peer-to-peer business network to trustable, distributed peer-to-peer business network. Consider a case of any peer-to-peer file sharing platform where two organizations are sharing the files between them for business outcomes. Here the file transfer happens between these two peer organizations that trust each other. Also, there are no intermediaries in this network, making it true peer-peer to network. The very basic tenet “establishing trust among participating parties by consensus” is NOT needed here, since there is no distrust among these two transacting parties.

Blockchain essentials solves the problem of “trust” among distrusting parties involved in the transaction via consensus. Think again of the Corda Enterprise blockchain platform here, which uses a deterministic consensus model in the form of notary to establish trust. A notary is a network service that provides uniqueness consensus by attesting that, for a given transaction, it has not already signed other transactions that consumes any of the proposed transaction’s input states. So if the existing business network is already a trusted peer-peer network which does not need consensus, then a blockchain solution is partially beneficial.

4. Where intermediaries in the business network are already very efficient and affordable

In many business networks, parties called “intermediaries” facilitate the business and economic transactions. These intermediaries are mostly regulators, agents, government agencies and auditors.  The primary job of these intermediaries is to:

• Establish trust
• Facilitate the whole process smoothly
• Compliance auditing

Often times intermediaries can be very expensive and slow, making the whole network very costly and inefficient. Blockchain addresses this inefficiency in the business network by replacing them with distributed peer-peer to network by:

• Codifying compliance guidelines and business contract
• Establish trust via consensus, immutability and irreversibility

This is why in scenarios where intermediaries are very efficient and affordable, you will benefit partially from blockchain.

Know if you are ready now (or NOT) for blockchain

To recap, blockchain is a revolutionary, disruptive technology and seen as a panacea for most of the problems in transactional based network by bringing:

• Transparency
• Irreversibility and Immutability of records
• Disintermediation
• Auditability
• Codifying the business contract

Yes, it is important to know where to use blockchain but it is just as important to know where NOT to use it. Making sure that you are using blockchain to solve the right business use cases can take your business outcomes to a whole new level.

For more on my recommendations, please read my other blog: Should you move to blockchain? Follow a systematic approach to making your decision. 

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Meet Infrastructure Insights Blogger, Vikas Sajjan, HPE Solution Architect. Vikas has 16+ years of experience in IT industry with his expertise spanning from Embedded Systems to Enterprise Mission Critical Platforms. He is an Open Source contributor and Evangelist and his contributions range from firmware, boot loader (u-boot) to Linux Kernel. Currently he is a Senior Technologist at HPE Solution Engineering Team which is focused on creating Solution Reference Architectures for enterprise use cases based on traditional, hybrid cloud and emerging digital technology scape.