When should I use blockchain?

Different cases require different solutions. Although blockchain’s main and still leading use case is cryptocurrencies, it gains popularity in other areas. One research points out that besides traditional banking and trading usage, blockchain applications are rarely known even among Computer Science students.

Beyond crypto

Some research papers try to make use of blockchain technology in favour of Internet of Things (IoT). Blockchain enables many parties to contribute to one tamper-proof data source. Information can be centralised and exchanged effortlessly between multiple devices. Combined with the cryptography used, the technology makes the whole environment highly resistant to fraud, especially when a device is hacked.

Use-cases for specific types of blockchain

Blockchain’s type determines the area which it can be applied to. When creating a medical data storage system for a hospital, it is clear that only doctors should be able to add notes and results to the system. Similarly, data reading would be limited only to the patient and his doctors. Private permissioned blockchain could be employed in the situation. The choice of suitable blockchain platform depends on characteristics (mentioned in the Trilemma) that are the most favourable.

Business-to-business (B2B) markets find decentralisation the least important feature. While public permissionless resigns itself to scalability.

Among many other use cases such as financial platforms, online voting or even digital identity, there are attempts at adapting blockchain for consent management systems (CMSs), which are used to manage the creation and modification of digital content. With the proposed CMS based on blockchain, Agarwal et al. consider the need to track and manage consent to private data in three areas: gathering electronic health records, smart infrastructure (smart cities) and within social media applications.

Why not a payment system?

For enterprises, the use of private blockchain became widespread among other types. Taking into account all blockchain benefits and how quickly cryptocurrency has gained popularity, the ideas such as an instant payment network or a lightweight financial system (with relatively low stakes) might seem suitable.

Undeniable advantages are:

  • disintermediation,
  • avoiding the need to reconcile many systems when exchanging information between many parties,
  • quick transaction settlement and regulatory transparency (a regulator can watch the system in real-time).

However, the main problem is confidentiality. The transaction should not be visible to other network participants, especially when making payments or exchanging confidential assets. Even without the exact data being visible, it is possible to correlate information.

Database alternative

Blockchain technical counterpart to handle the same type of problems is a (traditional) centralised database, which is the other most apparent use case.

In addition to providing a single view of the entire system, which is not owned by any particular party, it characterises robustness on the level of multiple organisations. There is no need to have a backup system. Lost data can be recovered from other network participants. Yet again, with a distributed P2P shared database, the difficulty is to ensure confidentiality.

Types of networks (author: Paul Baran)

All the data is broadcasted in the network. In case of a centralised database, the same information would be visible only to an intermediary and involved parties. Estimating performance of the two solutions might not seem obvious, but in terms of processing transactions, a centralised database is faster because it has to do less. In blockchain, a node has to do the same processing and additionally verify cryptographic signatures, and might need to spend time to establish consensus, etc. Hence, choosing between the blockchain and centralised database is a matter of deciding between acceptable trade-offs.

Hybrid

However, there are situations where a golden mean is needed. Either everyone has access to data, but only a limited group can add information, or vice versa – anyone can add it, but only the privileged have the right to read the data.

Examples are the passport system or the diploma system at schools. Public permissioned blockchain can handle these situations. Such solutions have one more advantage. Because participants are qualified – although they can be anonymous but need to meet definite rules – the mechanism that is used to reach a consensus may be less rigorous. This oddity means Bitcoin’s PoW withdrawal (which uses vast amounts of energy to add each block) and opening to the new protocols, e.g. Proof of Elapsed Time (PoET) or Yet Another Consensus (YAC).

Supply chain management

Using blockchain became particularly popular with SCM. The idea is to track a physical asset as it moves across many organisations to a client, and therefore to monitor the whole workflow and environmental conditions. With blockchain, the process results in improved security and gives real-time insights.

Starbucks can follow a coffee bean from a farm, where it gets collected, until reaching the barista, who serves it.

Starbucks supply chain (source: clearspider)

Each step of the travel (an event) can be submitted as a transaction. Similarly, blockchain serves as digital traceability technology to GE Aviation, that follows aircraft parts, and Bühler tracking journey of their crops from farms to markets. 3M, assuring that no-one tries to counterfeit their labels by tracking products in the supply chain, has even come up with Label as a Service (LaaS).

AT&T Business telecommunication company found a use case for their IoT products. Automated data collection serves to track supply chain processes. Supply chains are also of main interest for Nestlé food corporation, to which blockchain facilitates food and beverage tracking from the source to the customer. The service enables facile collaboration with business partners on products history.

Although supply chain management seems to be a dominant blockchain use-case, an Asian investment holding company, Singapore Exchange Limited made use of blockchain for the settlement procedure. With smart contracts, their Delivery-versus-Payment ensures that securities are delivered only after making the corresponding payment.

Summary

The high-level view on the blockchain applications can identify their common parts. Firstly, data is constantly collected from various sources. Secondly, access to that data is granted to many entities. Additionally, blockchain allows to track all of the data access requests.

Blockchain technology becomes relevant if dealing with a lack of trust in the network. Then the responsibility is spread over many members, and each of them has a reason not to let the system break (either by an attack or by entering incorrect information). Moreover, even when compromising some servers, there is always a dozen or more servers that allow regaining balance. However, convincing competitors to rely on technology and entrust an intellectual property to machines is challenging. That is why consortia are created. It is the authority and independence of the leaders that guarantee comfortable conditions for solving problems – regardless of market relations.

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Java software engineer, DevOps enthusiast. Enjoys developing her own and university projects on GitHub. Her spare time spends actively doing rock climbing and pole dancing.