When Your Business Doesn't Need Blockchain

In 2017, Karl Wüst and Arthur Gervais released their insightful research, “Do You Need a Blockchain?”. Their work simplifies a crucial question: identifying when blockchain is essential and when it's not, and what traditional IT alternatives can be used instead. Let’s delve into the criteria to assess blockchain's relevance and utility in a project.

When Is Blockchain Truly Beneficial?

Let's explore the different types of blockchains that are practically applied 

Private blockchains are typically initiated in a closed format, with nodes functioning through a corporate VPN or set up within an intranet. This approach is widely used in creating corporate blockchains, as exemplified by Hedera Hashgraph and IBM Chain. A similar model is used by NASDAQ's Linq, a blockchain-based data storage system developed in 2015, which manages and records asset transfer histories for its client Chain.com. Consortium Blockchain. These blockchains are implemented for closed, distributed systems with a predetermined set of participants. Control in such blockchains is usually in the hands of a consortium of companies, shareholders, or organizations. They decide who can create transactions, launch new nodes, or access information within the ledger. A notable example is the Korean Startup Market (KSM), initiated by the South Korean trading exchange KRX. It serves as a platform for trading shares of emerging startups. Blocko developed a blockchain for KRX designed to maintain data in an immutable ledger, aiming to prevent the listing of non-existent companies, the involvement of fake legal entities, and the use of forged documents in stock issuance.  Blockchain operates as a trust environment. The immutable nature of DLT registries, like blockchain, is crucial for bringing together numerous participants and simultaneously maintaining information integrity. This immutability is particularly beneficial for the 'auditability' of blockchain: since the information within the blocks is unalterable, it allows for the addition of necessary documentation for goods verification or business process checks, especially if these processes can be converted into software logic. As all participants in the chain have access, this can expedite inspections, particularly if auditing firms are part of the same blockchain network (as is the case with Chainalysis Reactor). Blockchain integration requires fitting it into the existing infrastructure. When creating a controlled private environment, one must consider how blockchain will integrate with current processes. Key considerations include whether your business processes can be translated into programmatic logic, and if there's a need for multiple parties to conduct audits or access information. If the answer to both is yes, then blockchain might be justified. However, it's crucial to consider whether a trusted third party could effectively manage the task instead.  

Blockchain in Low-Trust Environments

While decentralized data storage is a hallmark of DLT systems, managing participant metadata is often better suited to CRM systems. Each unique task may require a specific solution, and blockchain is not always the necessary choice.