Blockchain and business. Part 1. When is blockchain necessary for business?
Blockchain and business. Part 1. When is blockchain necessary for business?

By starke_kunst | art of crypto | 16 Dec 2019

Blockchain technology has already gone through phases of trigger, hype and disillusionment, and is currently entering a phase of practical reflection and development. I highlighted this process in my previous article.

It is a mistake to assume that blockchain technology is universal and able to solve all existing problems. However, for those areas of activity where there is a problem of trust between users, blockchain can bring additional value. I considered such areas in some articles as "Blockchain and the digital advertising market" and "Blockchain and the decentralized video distribution"

Today we will discuss the appropriateness of using blockchain for business, and in the next article, we will consider the most popular solutions that exist on the market.

When is blockchain necessary for business?

To begin with, we’ll look at the key advantages and disadvantages of this technology. Usually, in such articles, many authors write about "decentralization", but what does this mean in practice?

A modern blockchain is a software installed on many computers, each of which is protected independently. In this, it differs fundamentally from centralized systems, where in order to change data you need to access only one account. Blockchain allows you to organize networks where participants want to interact with each other, but do not want to share security risks. In these networks, you’re on your own.

Blockchain is applicable when there are many participants whose interaction takes place in a completely untrusted environment (for example, a group of competing companies, private individuals or branches of a large company). The main thing is the distribution of security risks among all participants.

Such networks can be truly “unsinkable” because a synchronous attack of a large number of computers is required, each of which is protected independently of the others - the more diverse the protection, the more secure the blockchain.

Therefore, one of the main criteria for applying the blockchain is security: “Does your project require functioning in a completely untrusted environment and a complete distribution of security risks?

If you are willing to sacrifice a lot for the sake of network security and have a well-planned protection of administrative functions, the next question will be: "Are you ready to pay for each transaction?"

Free transactions allow any member of the network to fill the blockchain with useless information that is replicated hundreds and thousands of times. So, without cryptocurrency, transaction fees and execution restrictions, a good secure blockchain for public networks cannot be built.

Problems with transaction payments are solved with the help of additional functionality that allows some participants to pay for others. Typically, such a luxury is offered one-time and only to new users of the blockchain, but the owners of the system in any case will have to deal with commissions for each transaction.

The next criterion is: “Is there any mutual settlements and transfers of ownership of certain information from one participant to another in the business model?

Blockchains are networks in which the ownership of digital information is transferred from one blockchain account to another. The simplest type of information is a number, so the data in blockchains resemble bank balances. One identifier is one number. The blockchain protects the “balances” and the methods of transferring them between different addresses.

Mutual settlements in the blockchain can be not only payments but any exchange of digital values (for example, reputation points, information that allows you to access valuable resources, game items). If your project provides for the exchange of such digital values the blockchain can be an excellent foundation, resistant to hacking.

Thus, if your project affirmatively answers the above questions, then you can consider the use of blockchain technology in your business. We will discuss the most popular solutions of this technology existing on the market  in the next article.


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