Stages of Blockchain Implementation

The blockchain is a tool to minimize discrepancies, it enables trustless transactions between counterparties. Since it replicates its data on all the computers in the network it promotes transparency and accountability. But, how does a company go about implementing blockchain? This article walks you through the process.

Assess whether blockchain is the right solution

Though blockchain is a powerful tool, it might be the wrong solution to some problems because it can be expensive and inefficient. A couple of researchers from Switzerland have written a paper to help an organization to check if a blockchain based solution is required.

When is blockchain not required?

Since blockchain is a database, we can assume there is a need to store information. Information that is likely to be records of events (actions of different entities). If there is no need to store such information, blockchain is not required.

Blockchain creates trust between counterparties. If you are the only person who is writing and reading information, blockchain is not necessary. If you have an inexpensive third party who is trusted by the counterparties, then blockchain is not needed.

When is blockchain required?

The blockchain is required in situations when people cannot trust each other. Situations where the information one authorizes needs to be publically verified. If there is a need to record events, that can be verified on a future date. Transactions involving multiple entities, where data must be instantly tallied. A situation which involves business where people don’t trust each other and an inexpensive trusted third party is not available. We will go through some examples to gain clarity on the above points.

Universities

Universities issue a physical certificate to students which stand as a proof that a student has accomplished a program/course. However, these certificates can be falsified. Some universities support online verifications, but these are recorded in databases that can be easily modified.

On a blockchain, data once entered cannot be altered. It will exist there for eternity. A university can digitally certify a student’s academic information into a public blockchain. Since the data in a public blockchain is accessible, anyone can verify the records. The university has to bear only a one-time writing cost, reading data on a public blockchain is free.

Identity Verification

This is very similar to the above examples, except instead of university it can be any reputable organization that certifies the identity of a person. Since the records are queriable, any entity can verify the record on a blockchain.

Logging Events

In the tuna fishing industry, fish gets exchanged across various hands. How can we ensure that fish was caught from an authorized location? If the fish was processed by a trusted entity?

A private blockchain can be deployed across the organizations involved in the tuna supply chain. When the fish is caught, the fisherman’s IoT device will log the information into blockchain. As fish passes through various parties for processing, distribution, etc. the data gets logged on to the blockchain. Any person can verify the fish’s life cycle from the point it was caught.

Transferring Ownership

One of the prominent use cases of blockchain is smart contracts. A smart contract is a digital contract that enforces itself. Two or more entities can enter into a smart contract agreement with each other. A smart contract usually contains condition based triggers (e.g. if A sends $500, then transfer the ownership of the car from B to A).

How to get higher management’s agreement on its implementation?

If you can prove that implementation can save a justifiable amount of time or money, higher leadership is likely to approve your request.

Has someone misused your organization’s name in the past?

In this case, you can digitally sign information on a public blockchain that can be publically verified. This only has a one-time writing cost. If the information you want to certify is not large, your expenses are likely to be less.

Does your business have a substantial amount of discrepancies with other parties that cost a lot of money?

In this case, you need to deploy a private blockchain with the entities involved in the business. It makes sense as long as you are involved in continuous transactions and your losses are higher than the cost of implementing and maintaining a private blockchain network.

How often do you have legal issues when involved in business with different entities?

This is a tricky question because in the digital world we have only two answers, yes or no. However, in the real world, we encounter situations where the answer is both yes and no. As long as your contract can be coded into a smart contract and your legal costs are higher when compared to the implementation of a private blockchain, this approach makes sense.

Things to consider when implementing blockchain

Blockchain is a tool which ensures integrity as long as it is programmed correctly. If there are any flaws/loopholes in the implementation, undesired outcomes are likely to happen.

Organizations on a blockchain network are issued a public key and a private key. A public key is visible to anyone (e.g. username), whilst the private key must be kept as a secret (e.g. password). If the private keys are compromised then the integrity of the blockchain is threatened. The blockchain network must be able to handle such situations. An admin can be assigned to the blockchain network who can make the compromised private keys obsolete and new keys can be issued.

The data entered on a blockchain cannot be altered.

Hence it can go through multiple authorizations before it is permanently recorded on the blockchain. People might try to beat the system and try to act selfishly. Transactions on a blockchain should undergo continuous assessments and the system must be upgraded if any loophole is found.

Since blockchain-based solutions can cause irreversible damage, it would be a good idea to take a module of the system, instead of taking the entire system into the blockchain immediately. Once the module is thoroughly tested and proven successful, other modules can be moved into the blockchain.

In certain situations, it is not possible to check on paper if blockchain is viable. In those cases, one can test traditional systems and blockchain-based solutions on similar modules. Later, the time and cost can be compared to check if blockchain is the right solution. If the blockchain based solution comes out costly and time-consuming, then a traditional solution can be used.

Blockchain is a tool that enables integrity in a system by increasing its transparency and accountability. Though blockchain is a powerful tool, it is not the right solution to certain problems. One must assess if blockchain is required and if it is cheaper when compared with traditional solutions before its implementation.

In cases when such assessment is not possible, blockchain can be run on a trial basis and the results can be compared with traditional solutions. Blockchain is a software that will act as instructed. If there are loopholes in the instructions people can take advantage to act for their own benefit. Continuous assessments are required to prevent such outcomes.

Author
Febin John James is one of the top writers in Innovation and Technology on Medium. He writes for publications like Hackernoon, FreeCodeCamp, etc.

Blockchain Business Review from Apla provides high-quality educational material from the world of blockchain to inform the business community of the competitive advantage that can be gained by integrating distributed ledger data storage within organizations. Our mission is to promote knowledge about blockchain and its uses in both the private and public sector and demonstrate the value of blockchain integration.

Stages of Blockchain Implementation was originally published in Apla on Medium, where people are continuing the conversation by highlighting and responding to this story.