Is Blockchain Right for Your Organization?

The short answer is “Probably Not”.   

The long answer is a bit more nuanced.  To really understand whether blockchains are right for your organization, you need to pose a single starting question.  Are you the only one who maintains the data that you’re considering for storage in a blockchain?  If the answer is “yes”, then you absolutely don’t need a blockchain. 

To understand this answer, you need to have a clear understanding of why blockchains even exist.  And the answer to that is “trust”.  With a private database, the consumer is required to trust the maintainer of the database.  This is how applications and services have operated since the beginning of time.  We can do things like perform third party audits to verify that the state of the system is as the owner claims (and that’s an entire industry in itself!), but in the end we have no concrete, verifiable mechanism to authenticate the data as it is presented. 

A blockchain is the internet’s solution to this problem.  It allows actors or participants that don’t trust each other to operate in a way that ensures that everyone always knows the state of the system.  It broadcasts transactions and uses mathematically proven concepts to assure all participants that: 

1. The state of the system is accurate 
2. The history of the system is accurate 
3. The participants must acquiesce to the transactions 

So, when is a blockchain right for an organization?  To answer that, we must first differentiate between “permissionless” and “permissioned” blockchains.  The difference is apparent in the name; one blockchain allows some central individual or group to decide who gets to participate and one blockchain does not.  Popular permissionless blockchains include Bitcoin, Litecoin, and Ethereum, among others.  These blockchains allow *anyone* to participate, requiring only that you adhere to their mathematical rules.  One upside is that they require no trust for any third party to use and they are transparent, meaning everyone can see every transaction.  However, this transparency is a double-edged sword, as competitors and others may be able to glean information from these transparent blockchains.  The permissioned blockchain is better suited for groups that would like to interact in a manner that doesn’t require complete trust, but also don’t want to broadcast their entire transaction set to the whole world. 

So, if you have a situation where you want to share data but not all of the participants trust a single source to keep and maintain that data, or you would like to share data across users without giving a single user power over the data, a permissioned blockchain may be right for you.  If you have a situation where you want to expose transactions to the world, permissionless blockchains probably already exist that you can utilize.  But if you’re the sole arbiter of the data, then a blockchain is just a Rube-Goldberg version of a database.