The hype of Bitcoin and Blockchain has reached a fever pitch and grabbed the attention of big businesses and governments alike. But with so many major players scrutinising the promises of the technology, will it live up to the hype? Industry leaders and investors are carefully evaluating the emerging technology, with use cases like cryptocurrencies, supply chains and smart contracts coming to the forefront. But executives and corporations are taking a much closer look at the potential return on investment (ROI) of Blockchain. Tech giants like IBM and Accenture are throwing considerable weight behind Blockchain research and development, lending more credibility to the case of its economic viability. But many business leaders are still playing the waiting game, waiting to see how the financial analysis turns out and forecasting economic benefits, cost savings and risksbefore committing to large-scale investments in Blockchain platforms.
What can Blockchain do that a conventional database can’t?
Blockchain brings to the table quite a few advantages over conventional databases. The main feature is the level of trust implemented between multiple parties, thanks to its distributed architecture and immutable ledger of data transactions. This structure means there is no single point of failure that can be hacked or exploited by unscrupulous agents. The transparency it offers also makes it reliably auditable, with no single party being able to alter data entries without the changes being visible to the entire membership base.
Any alterations are permanently recorded on the Blockchain. Once written, the data cannot be changed, only added to. Each time a new transaction is written into the chain, it gets connected to the last transaction, creating a record that can be tracked to the beginning of the Blockchain. Cryptocurrencies like Bitcoin use the same model. But unlike cryptocurrencies, Blockchains for business use are specially designed for confidentiality and allow members to share information selectively. You can choose to share specific data with specific members. This grants an unprecedented level of privacy, but uploading, controlling and managing all your data becomes solely your responsibility.
Conventional databases need a central authority or intermediary to maintain records and verify new transactions. Such an authority is also responsible for ensuring data integrity, making sure all records are accurate. This means there is an authority overseeing the behaviour and data entries of all members. These databases compromise user privacy to some degree in order to ensure the security of the data.
Blockchain removes the need for such an authority entirely, making all user data 100% confidential.
You may be thinking ‘what happens if I make a mistake when entering data?’ This is a very valid concern and such incidents are bound to happen. Blockchain allows you to simply append the data. In other words, all changes are treated as updates. The Blockchain will keep your mistake on record and create a new entry next to it, indicating that the new entry is the correct one. It’s like crossing out a misspelled word on a paper and writing the correct word after it. Anyone who reads it can see a mistake was made and was subsequently corrected.
What this means is that in a business environment, there is no possibility for data entries to be faked or removed by unethical means. All members of the chain will be able to see a complete history of all alterations, so all members can be assured of the legitimacy of the data on the Blockchain.
The benefits and limits of Blockchain for business
While a potentially powerful tool for business, Blockchain is not a universal solution for every business problem. The real value it delivers will depend on the specific business application of the technology.
The key advantage of Blockchain is the digitisation of trust in business operations. Any business use case that is dependent on the integrity of a single master record or tamper-proof source of assurance for multiple parties is an area that could be revolutionised by Blockchain. It can also improve efficiencies and reduce costs by removing the need for intermediaries of third-party verification, automating transactions and reducing human involvement in specific areas.
But despite its features, any practical Blockchain systemswill still have to face a number of growing pains. The reason for this is that despite how digitally integrated businesses have become, organisations by and large still prefer to keep their own set of records. Corporations very rarely maintain a shared database because doing so would mean relinquishing exclusive control of that data. Keeping a shared database may not be desirable from a security standpoint either, because it can mean the network would have to be more open and thus more vulnerable to attacks and leaks.
Scalability is another challenge. A lot of factors can affect the efficiency and performance of a Blockchain network, the major one being permissioned versus permissionless design. Cryptocurrencies like Bitcoin generally follow the permissionless model, which limits their processing speed to tens of transactions per second. There has been some development on this front however, with some platforms promising up to thousands of transactions per second. Another innovation revolves around foregoing conventional hardware nodes in favour of virtual cloud-based nodes. This can make Blockchain networks extremely flexible and easy to scale.
Making a business case for Blockchain
Businesses need to consider many factors when evaluating a Blockchain platform for a particular business needs. The nature of the data being stored on the Blockchain, the profiles of the participants, development and implementation costs, regulatory approvals, value for the business and the cost of migrating to a new platform are all critical to the decision to adopt. While there may be huge advantages to adopting Blockchain for a particular business operation, it may not always be technically or financially feasible to do so. A lot of businesses may find that conventional systems work just fine for their current needs.
To cater to the varied circumstances and operational demands of different businesses, a range of Blockchain platforms are in development which offer substantial flexibility in the level of Blockchain integration.
There are already many platforms out thereoffering proven, ready-made Blockchain frameworks for specific applications, which lowers the barrier to adoption considerably. On-boarding on such pre-existing platforms can be considerably faster, cheaper, less risky and less resource-intensive, making them an attractive alternative for many businesses.
Making a comprehensive assessment of the ROI Blockchain can deliver is not a simple task. But doing the hard work up front of researching proven Blockchain technologies relevant to your business challenges and learning from the pioneers in your category can go a long way in helping you make the decision that delivers the best results for your business goals.