Like an overloaded electric outlet during the holiday season, blockchain and its offspring, cryptocurrency and digital tokens, are the answer to every problem, they are the hammer when every problem is a nail. Blockchain will solve all problems that we have faced in business and technology since beginning of time….not.
Blockchain will solve all problems that we have faced in business and technology since the beginning of time….not.
When to Use Blockchain
In my business, I spend the vast majority of my time helping businesses, business executives and business operational teams design business models that are powered by blockchain; I help them align new business models 100% with the capabilities enabled by blockchain and design businesses for the new, distributed economy.
There are good reasons to use blockchain. As I’ve written before, understanding the business possibilities allows you to take innovative to a whole new level. While speaking, advising and supporting use case development, I have noticed that understanding, simply, where to draw the line on the use of blockchain is not well understood. Therefore, you can ask yourself the following questions to help guide you to understand if blockchain is the answer:
- Immutable: Does your business benefit from an immutable ledger that holds the history of trusted data or transactions — “Value not Information based” — to be used in enforcing trust in such transactions?
- Trust: Does your business benefit from a level of trust that historically would be enforced through contractual, paper based agreements and granted through centralized business process execution?
- Custody: Does your business need a undeniable chain-of-custody where ownership and identity are resolute?
- Security: Does your business require a level of security that a distributed, trusted, and consensus based technology can provide? Does it require cryptography and digital signatures to prove authenticity, identity, etc?
- Data Accessibility: Does your business benefit form the pseudonymous, openness of its data while eliminating the complex ecosystems of companies and resources that are required to perform a less than adequate job of servicing that which a peer-to-peer, trusted, open ledger could perform?
- Multi-party: Does your business need multiple parties to read the same information and write to a shared ledger because no specific individual party should be in control?
- Peer-to-peer: Does your business benefit by executing in a network fashion in which peers interact to obtain an outcome directly without an intermediary?
If any of the above questions are no, you should seriously review and honestly ask yourself, “can I build my business with a traditional business model based on traditional centralized paradigms and technology?”
On The Matter of Cryptocurrencies and Tokens
In addition to the basic measures outlined above, as you design your business, if your business requires an intrinsic source of funding, where a payment is paid by the system rather than a third party, a token, you need to ask yourself the following question:
- Cryptocurrencies: Does your business need or benefit from either an established or private currency where the above capabilities are required for participation and exchange of value?
- Tokens: Does your business need a utility token in which the exchange of currency into a closed loop exchange system enables your business model to operate in otherwise impossible terms?
If you answered yes to the above questions, you most definitely need blockchain, however, if you take away either, and your business does not fall apart, “you don’t need a cryptocurrency and you may not need blockchain.”
Decisions Decisions
I feel like I’ve done good when I help businesses understand that they don’t need blockchain for the idea they are pursuing. Using blockchain when it isn’t required is a very expensive proposition with survival ramifications. If you try to force fit blockchain into your current business without a business model redesign, you will at best be wasting money and hampering your business operations, and at worst jeopardizing your businesses future. Designing a business that is fueled by blockchain, however, is an evolving skill; a skill that most don’t hold as up until two years ago, the economic and operational models for business design only varied slightly.
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Designing a business that is fueled by blockchain, however, is an evolving skill; a skill that most don’t hold as up until two years ago, the economic and operational models for business design only varied slightly.
In the end, if your business model needs the above capabilities or if having been designed for the new blockchain economy excels with these capabilities, then blockchain is for you.
Originally published at https://www.linkedin.com on October 27, 2017.