Chris Murphy, Director of Cloud Content at Oracle, spoke with Sarabjeet (Jay) Chugh, a Senior Director of Emerging Technology Products at Oracle, to answer the question, “Do you need Blockchain for your organization?”
Since there is so much recent excitement about emerging technology and the potential of blockchain, today’s workforce faces the risk of project planners applying this technology to problems that it doesn’t fit with. Chugh’s intention is to help organizations avoid that issue, sort out business use cases for blockchain, and decide if blockchain or a different solution, like a database, is the best fit.
One key factor when looking at blockchain is to choose a project that needs distributed control of data instead of centralized. If the problem can be solved centrally, using a central database, the answer to “Do you need Blockchain?” is probably not.
Companies shouldn’t use blockchain simply because they want to leverage the new technology. Starting with blockchain and searches for problems to tackle with it is the wrong approach. Instead, identify the problems in your organization and then ask yourself if blockchain is the best way to solve them. If not, find a different solution.
Questions to Ask When Deciding on Blockchain
Generally, blockchain can help in situations where multiple parties need to maintain shared information, but those parties may not completely trust each other or don’t have completely aligned interests.
Blockchain can also be a good fit if you don’t want to rely on one central party to store and validate transaction data but you want a shared data source that can’t be easily altered or written over by participants without detection. Blockchain logs any changes to a ledger when data is updated so everyone can easily identify changes.
It can be difficult to decide if blockchain fits in your project. Luckily, Chugh identified a set of three questions that organizations can ask when deciding if your problem is best solved with blockchain or if it would better benefit from another solution, like a database. If the answers to these questions are “yes,” blockchain is likely a good solution for your problem.
- Do multiple parties need to access and make changes to the shared, single source of truth data? Do multiple people need to update or make changes? If yes, this ties into the idea of distributed control of data mentioned earlier. You could use either blockchain or a distributed database.
- Do you lack a single, always-on, trusted third-party who can mediate information disputes? If yes, blockchain could be your best bet. Unlike in a distributed database, blockchain data is held by many parties and new information is verified through an agreed-upon consensus mechanism rather than a central administrator. You may not want to rely on a single, centralized party to handle data due to concerns about delays, high fees, or that a single point of control is at risk of hacking or manipulation.
- Are there parties on the blockchain who aren’t completely trusted? You may not trust other parties, or your interests may not perfectly align with each other. You may not know each other at all. If this is the case, blockchain could benefit your organization. It doesn’t depend on the trust of either a central administrator or the people writing to the data source.
Once you’ve answered these questions and decided that blockchain is the right option for you, Chugh identified a fourth question to ask yourself:
- Do you want to limit who can access the blockchain? If yes, you probably want a permissioned blockchain. This lets multiple organizations join to form a consortium with a founding organization that initially sets up the process of joining the blockchain platform. Unlike in a centralized database, the leader doesn’t control the data source. Each member can create its own blockchain instance, and the leader simply establishes the process for joining them. This allows parties to add data—subject to verification via the consensus rules. However, nobody, not even the founding organization, can remove data.
The final question, one that is more commercially driven, to consider when deciding whether or not to use blockchain is:
- Is the problem significant enough that a fix will result in a better bottom line? If a solution will only improve results by 2 percent, it might not be worth investing in blockchain or really any solution right now. Investing in emerging technology like blockchain becomes worth it when you have a problem that your company really wants to address and that will drastically improve the company’s bottom line.
Potential Use Cases for Blockchain
Murphy and Chugh identified a few promising potential use cases. Some of the use cases included pharmaceutical supply chains, franchise businesses, peer-to-peer mortgage lending, knowing your vendors, and tokenization.
- Pharmaceutical supply chains: Blockchain could help multiple parties better verify precisely which drug lots were transferred and at what time at each point of handoff. This helps with the effort to combat counterfeit drugs entering the market. The same concept can be applied to other supply chain tracking and there some great benefits of a blockchain supply chain.
- Franchise businesses: When franchisees and franchisors share documents related to orders and invoices, having the transparency of a blockchain can improve efficiency and trust.
- Peer-to-peer mortgage lending: Sharing all of the personal financial information that lenders need to make a mortgage decision can be a major challenge that prevents peer-to-peer lending from being used for mortgages. Blockchain could solve that problem by letting a borrower share that information with a peer-lending group.
- Knowing your vendors: With blockchain, your vendors could be required to show that they’re in compliance with industry regulations and credentials. This information could be verified by issuers via blockchain. This helps ensure that you are knowledgeable about your vendors and what they are doing.
- Tokenization: A number of loyalty programs are exploring the option of using blockchain to provide a common standard of exchange—a token that could let individuals pool airline miles, hotel points, grocery store rewards, etc. in order to cash in benefits on other goods. Smart contracts on blockchain could provide that standard of exchange to say, for example, how many miles make up a token. This concept could be applied to a wide range of other use cases.
For more information about answering the question, “Do you need Blockchain?” and the potential use cases, check out the full Forbes article and additional Quest resources attached below.