Do I need a blockchain?

That is a frequently heard question nowadays. And before you know it, Blockchain is turned into a hammer and everyone is looking for nails everywhere! In this article we will put blockchain in the right perspective and follow a number of interesting decision models that help answer the question “Do I need a blockchain?”

Perspective

Blockchain is a disruptive new technology, which has existed since 2009 and which makes it possible to make arrangements in an unsafe environment, without the intervention of centralized parties. The unsafe environment is “the internet” and we have had to introduce the central parties out of necessity because of this unsafe environment. The internet has already had a huge impact in recent years. Think of Post > e-mail, Cinema > Netflix, brick-and-mortar shops > web-shops etc. With the help of blockchain technology, ‘agreements about value’ now also follow; such as money, possession of a house, or the recording of contracts.

If you think about it carefully, various interesting opportunities will follow. But do not go too fast: It is not that easy! The most common mistake is thinking that a blockchain can do something beautiful in every environment. But that is not the case, because blockchain adds trust, and if that is already there, then it adds little to nothing, yet costing a lot of time, money, and energy. Specific:

  • Introducing a blockchain internally in your own organization does not automatically make sense. Trust is already apparent.
  • Introduce a blockchain in a chain of different companies, that can actually be useful. They have different interests, (read: they do not trust each other). In the latter case, a closed blockchain may be worth considering.
  • But the ultimate solution is a public solution. In the public environment, trust is largely absent and that makes blockchain valuable.

Use case

When you start with a decision tree, you start with a good concise description of a problem that you may want to apply the technology for. Pay attention to the scope. Determine what is and what is not covered. And, also with blockchain, “garbage in, garbage out” applies. So if there is a problematic process that needs improvement, then blockchain will certainly not solve that for you, you will have to start with process redesign instead.

Decision models

The following decision models, decision trees, and checklists all aim to determine whether applying blockchain technology is sensible or not. I recommend going through all of them before you get started. This means that you have to answer similar questions over and over again and gradually you will be able to get a better picture of the power and weaknesses of blockchain.

1) Birch model

… It is clear that this decision model is meant as a joke. But with a serious undertone. Anyone who knows David Birch, knows that he does know what he is talking about. And the serious message he conveys with this model is that since 2016 there are a lot of people who suddenly think they need a blockchain. But often the answer is simply no.

Incidentally, despite the fact that the answer is no, it can still be interesting to work with blockchain. Because it can certainly be educational as an internal project to develop something involving blockchain.

2) Birch-Brown-Parulava model

This model focuses not so much on technology, but more on the concept of the distributed ledger. Firstly, it distinguishes between public and private blockchains and then on exactly who can validate the blocks.

3) Suichies Model

“Do you need a blockchain at all?” Is the title.

After first highlighting a number of reasons why you do not have to work with blockchain at all, this model makes a distinction between permissionless, permissioned, but also the hybrid version that could be in between.

4) IBM

This model looks from a market-oriented perspective. You may wonder whether you should start talking in complex contracts (2). We have seen at thefiasco with the DAO, That simple Smart contracts are already quite a challenge, but okay, talking cannot do any harm. That attention is given to privacy is good, and it is important to properly outline the required architecture before getting started.

  • Will there be data on the blockchain?
  • Which data?
  • Is it sensitive to privacy?
  • What about the GDPR? (General Data Processing Regulation)
  • Can you simply place only the hash of the data? Something this is highly preferred.

5) Blockchain cheat sheet

The above decision model comes from Antony Lewis. He keeps a blog about Bitcoin, blockchain and, distributed ledgers. The question “Could this be solved before blockchain existed” is interesting. Logically, you do not have to look further if the answer is yes. But it also makes you realize that blockchain contains techniques that all existed prior to blockchain itself: peer-to-peer technology, database technology, and cryptography. Blockchain brings them together in a smart way!

Also, note that in this model you can sometimes go two ways via the arrows. So when end up at “apply a blockchain”, it can also be possible to not do it.

6) Sebastien Munier’s checklist

Sebastien Munier, the writer of the blog where most of these models are collected, has made something himself as well. A checklist.

The checklist is clearly more focused on technology and I’m not convinced of the numbers mentioned, because that can vary per application. And the technique develops further. The fewer check marks you have, the more you give in on the benefits that blockchain can offer. For example, the confidence in the system by outsiders decreases due to the emergence of centralization. … Until you get to the point that it might be better to call it a shared ledger.

7) ETH Zurich

The last of the seven decision models comes from the Computer Science Department of ETH Zurich in Switzerland. They have developed the above model, which they substantiate extensively in a PDF Paper.

Conclusion

There. Been through them all? Good. Was it correct that you gradually became more aware of the power (and weaknesses) of blockchain? I hope so.

In general, at least it can be said that the subject “trust” plays a crucial role. And that when there is already confidence, a blockchain adds little. Blockchain is especially valuable when you can think about the boundaries of your own organization. Thinking, in terms of cooperation. Perhaps even with competitors, if the prestige of the industry as a whole can use an improvement. For many organizations this is a big step, to think in this new way. It is understandable that often private solutions are chosen, to have an overview of those involved.