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Published by [email protected] on Thursday October 3, 2019

There is so much hype swirling around blockchain technology at the moment that it sometimes seems to be the solution for all their existing problems. Across every industry, companies are rushing to implement blockchain solutions in their business models so they can say they are on the cutting edge of technology and innovation. This hype is not without reason. Proponents of blockchain technology say it can take out the middlemen in business transactions, saving companies huge amounts of money while increasing security and efficiency. But before we get carried away in the hype wave of blockchain excitement, it is worth looking at how it can be used and whether it is an appropriate solution to any existing problems.

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There is a very real risk that some companies are over-eager to employ blockchain technology without exploring other options, thinking that it is the best solution to their problems. There are several costs associated with implementing blockchain and one must ensure that these costs will be offset by the potential gains. While it may not be as exciting, there are often quicker and cheaper ways to improve a business system simply by tweaking the existing established framework, rather than redesigning the whole process from the ground up with blockchain.

The first step you need to take before delving into blockchain technology is to understand what it is and how it works. You can read our previous article on blockchain technology to get a better understanding of the technical basics of blockchain. For our illustration purposes here, we can think of blockchain as essentially a database. Traditional databases are controlled by one central authority, who alone has the ability to input, alter and verify data. On the other hand, blockchain is decentralized, which means all members of the same blockchain network will hold a copy of the database, which they can add, edit and verify its data.

This multiple-user setup is a very useful feature in systems where there are several parties involved in transactions and you need to use trusted intermediaries to carry them out. However, if your company simply needs to keep track of internal transactions, then a traditional centralized database is probably still the best way to do it. Blockchain, being such a new technology, still has some issues with scalability which can make it slower than existing databases. Another downside is that blockchain users must pay a fee for every transaction they conduct on the database, which can change unpredictably over time and create unnecessary problems.

A good rule of thumb when considering implementing blockchain is “if it ain’t broke, don’t fix it”. Unless you can clearly identify examples of how blockchain will solve multiple issues with your current system, you might find the cost in time and energy to implement not worth it. Changing to an entirely new system and database is a big undertaking and it may take several years before the new system is up and running to see any advantages.

Ideal use cases for blockchain technology

There is a very real risk that some companies are over-eager to employ blockchain technology without exploring other options, thinking that it is the best solution to their problems. There are several costs associated with implementing blockchain and one must ensure that these costs will be offset by the potential gains. While it may not be as exciting, there are often quicker and cheaper ways to improve a business system simply by tweaking the existing established framework, rather than redesigning the whole process from the ground up with blockchain.

The first step you need to take before delving into blockchain technology is to understand what it is and how it works. You can read our previous article on blockchain technology to get a better understanding of the technical basics of blockchain. For our illustration purposes here, we can think of blockchain as essentially a database. Traditional databases are controlled by one central authority, who alone has the ability to input, alter and verify data. On the other hand, blockchain is decentralized, which means all members of the same blockchain network will hold a copy of the database, which they can add, edit and verify its data.