Beyond the hype: How to use blockchain technology wisely
Lots of new technologies have surfaced in the few last decades, including personal computers, robots, Artificial Intelligence, and, of course, the almighty Internet.
Progress is still making headway, with a multitude of new breakthroughs currently gaining a lot of attention. One such brilliant newcomer is blockchain.
Over the past few years, blockchain has become the hottest buzzword in the tech landscape thanks to the success of many Initial Coin Offerings (ICOs) and the dramatic price increase of cryptocurrencies. Also, according to CBInsights, blockchain startups raised $1.6B in February 2018 alone.
It stands to reason that everyone is talking about blockchain and looking to integrate it into their businesses.
So, how do you know if you need a new blockchain application? Here are a few crucial factors to consider.
The blockchain business craze
Blockchain is often referred to as the second World Wide Web. In the same way that companies once rushed to set up a website for no reason during the dot-com boom, many are trying to do the same with blockchain without a real understanding of how it can benefit their business.
Whether a stakeholder develops a custom blockchain solution or just leverages smart contracts to automate operations, the decentralized ledger is often considered to be a silver bullet.
But adopting or integrating blockchain into the existing business strategy is a really tricky issue. While we, as a blockchain development company, truly love this technology and know there are many exciting solutions with blockchain at the core (Arcade City, CargoConX, Medicalchain), it’s important to understand that not all businesses need a blockchain solution.
In order to separate hype from reality, you need to be crystal clear about what your project already includes and what you need to implement.
Does your idea require blockchain?
Blockchain vs. traditional databases
A key point here is that a lot of projects can be launched just using a relational database. So, if you are satisfied with your database solution, it doesn’t make any sense to move to the blockchain. It will result in having to rethink the whole infrastructure as well as investing a lot of time and energy with no real outcome or benefit.
Long-established databases like Oracle and MySQL play a crucial role in today’s technology stack with decades of development and countless servers deployment. They contain some of the most optimized code in the world and process thousands of transactions per second.
If you are unhappy with your current database architecture, then switching to a distributed ledger really makes sense. Still, a significant number of conditions should be satisfied in order to ensure the robustness and viability of leveraging blockchain in your application. Otherwise, it’s necessary to go back to the strategy selection point and take one more look at the project.
The requirements can be summarized as follows:
iTechArt delivers trainable IoT system based on blockchain and machine learning
As you can see, it is possible to come up with a flowchart touching on general questions to decide whether blockchain is the appropriate technical solution for you.
If trust isn’t an issue and there is no need for high immutability of data, a traditional relational database will provide better scalability and performance. Blockchain will be an ideal decision when there are no trusted parties and immutability and when data security is a top priority. So, if the answer to most of questions is “yes,” then you need to start considering which type of blockchain you need.
Blockchains are broadly classified as permissionless or permissioned. With a permissionless blockchain (like Bitcoin or Ethereum), anyone can join the network to create nodes, produce blocks and perform transactions. On the other hand, a permissioned blockchain (Ripple) is one where you authenticate users and then they can access, execute and validate transactions on the network. If parties do not trust each other, using a permissioned blockchain makes sense.
As illustrated, starting and investing in a project that doesn’t really need a blockchain may result in a costly mistake. Consequently, it’s necessary to perform comprehensive research to ensure you get it right.
What about smart contracts?
As for blockchain applications, smart contracts hold great promise for facilitating agreements between consenting parties. However, companies should consider the following criteria before choosing this option.
First, consider the extent to which your data is shareable. If you share data with multiple parties, blockchain might be a suitable solution. It will facilitate communications while enhancing privacy and security.
Second, think of the degree of scalability and the number of transactions per second you will actually need. Scalability appears to be one of the major reasons why companies decide not to choose a blockchain solution.
Not every piece of economic activity should be included in a decentralized application, though smart contracts have great potential to streamline business processes.
Don’t implement blockchain just because 2019 is coming
There’s no doubt that ‘a blockchain-based project’ sounds awesome. But it is vital to weigh the pros and cons of a specific business case before making the leap.
Gowling WLG outlined a wide range of industries - led by Fintech, which is generally considered to be the best fit for a blockchain — that could benefit from a distributed ledger:
We can see from this infographic that retail is regarded as a less suitable option in the blockchain space. As a justification for this idea, consider the case when Long Island Iced Tea decided to alter the name to Long Blockchain and go for more blockchain-based activities. As a result, they received a delisting notice from Nasdaq.
But then again, giants like Walmart and Alibaba are rushing to leverage distributed ledger technologies to serve their customers better. In particular, Walmart has already implemented a blockchain application for its supply chain, winning an edge over its competitors in the process.
One of the crucial steps before leveraging blockchain for app development is to define the functional sectors and businesses that could be influenced.
Blockchain is being billed as a technological revolution that completely redefines the way we do business. However, both startup and enterprise companies should take an honest look at the reasons for their blockchain ambitions and properly evaluate whether the effort is justified.
Setting up a blockchain is easy, but it takes much effort and resources to build a good ecosystem. iTechArt can help you with both. We guess, you’re frequently asking yourself the following question:“How can blockchain help my business?”. Well, we know the answer. Contact us and we’ll be happy to discuss all things blockchain.