But wait. Do you really need a blockchain?
"I need a blockchain because I can raise money for my business that way."
This is possibly the worst reason to consider blockchain technology. Do you actually have a viable business proposal? It's all very well being swept up by the technology, but there is no magic to fundraising through token sales (ICO), and the process is expensive. It’s not unknown for a good ICO to cost up to half a million sterling to run. A successful business, however it is funded and whatever technology it uses, solves a problem for its customers. Start by planning your business with all the commercial rigour it needs. Is there a pain point that can't be solved with current technologies? If so, then maybe you do need a blockchain after all. In that case, grab the opportunity with both hands.
Is there always a benefit to decentralisation? It can depend heavily on the industry. For instance, there’s plenty of talk at the moment about peer to peer energy. The Brooklyn microgrid is a good example of this, where residents are generating power from renewables and selling direct to neighbours. Notably, the power company maintains the delivery grid. One of the key elements of a centralised utility, much as we dislike paying our bills, is that they roll their profits back into investment in the infrastructure. If we pull too much of the profitable business away, will investment continue to support those who cannot be in a peer-to-peer system?
Equally, in banking, are we all going to take responsibility for our transactions, or are we secretly comfortable with a centralised agency carrying out a lot of the processing for us?
The development of distributed ledger technology is fairly well advanced in fintech. There is a good halfway house emerging where transactions are decentralised, but perhaps it's not reasonable for every user to take individual responsibility. Only a minority of consumers are likely to be willing or even able to work with the private keys that currently secure cryptocurrency wallets.
We know that there are very strong arguments from both sides of this particularly monumental fence, but it's a question worth pondering even if you're a staunch supporter of a completely decentralised banking system. Remember it's the users that decide who wins and who loses, not the proponents of either side.
Another example of when decentralisation probably isn't the ideal way to go would be with cryptocurrency payment platforms.
The major issue at the minute is a severe lack of buyer protection and protection for the sellers/merchants too. When you buy something via Amazon, your purchase is protected. If you have issues you can raise them with Amazon and they'll step in as intermediary to sort out any problems. Having that business in the middle that takes responsibility to ensure all parties behave as they're supposed to provide buyers with a comfort blanket and encourages spending.
The same system in cryptocurrency would make sense too. If anything, it matters more in cryptocurrency right now because the space is so rife with bad actors, fraudsters, and scammers.
UTRUST is a company that's building a cryptocurrency payment platform, and buyer protection is right at the top of their list of priorities to include.
First of all, by only releasing the buyer's payment to the merchant once they've received what they've paid for (it's held in escrow by UTRUST), the onus is on the merchant to deliver. If the buyer's items don't turn up, they don't pay. Simple.
Secondly, should any issues arise after you have made your payment, UTRUST will open a dispute with the merchant. In case of an unsuccessful refund request, the UTRUST mediators get involved to help out.
So, in a similar way to Amazon and PayPal, UTRUST will act in the best interests of those using its platform to buy and sell with cryptocurrency. Without that third party or centralised aspect, buying and selling online with crypto would continue to be the torturous, risky affair it is today.
For more information on the work UTRUST are doing, please click here.
"This will sort out my supply chain"
Yes, distributed ledgers have real potential in the supply chain. The traceability of goods is a fine goal and one that is already being realised in small proof-of-concept trials (tracking tuna to sushi, or mangoes to Walmart). As The New Food Economy’s Jessica McKenzie reminds us, though, success depends on full and honest information, meaning the blockchain will only be as strong as its weakest link. Your focus right now should be on developing the supply chain, not the blockchain. Once all the business processes are clear, then you can start applying smart contracts along the road as required to manage wicked problems.
"Transparency is our goal"
Really? Are you sure? It is the nature of a distributed ledger that everyone has access to the data, everyone agrees on it, and no-one can change it. Do you want the information on the ledger to be visible to the public? If not, consider a private (permissioned) blockchain, or use your existing database. You should also consider the stakeholders: Is the network a circle of trust? Unless there is a good reason to have, for instance, immutable transactions, you probably don’t need a blockchain.
You’re still sure you need a blockchain?
Every use case needs to be decided on its own merits, so it’s a good idea to consult people who are developing and implementing blockchain technology. In most cases, we find that the use of blockchain represents just a tiny element of a much larger system. It could be a smart contract that manages a repetitive function, an authentication-without-knowledge system which protects confidential information in a database, a payment mechanism, or a hookup to the Internet of Things. The user never needs to know. All they are interested in is whether the system works. If blockchain will make your business work, then go for it.
What do you think? Blockchains FTW?