Discovering blockchain and the added value it offers has been a rather bumpy road for our team. Small wins have been constantly overshadowed by doubts and a multitude of questions. We have looked at each other dozens of times, asking whether blockchain is not a complete hype after all and shouldn’t we be spending our time doing something else. But no, we have not given up since the idea of finding something new that makes the world a better place has been and still is very appealing. We can now proudly say that after several months filled with discussions and doubts we know there is a business value to blockchain, but it is not quite where we initially thought it would be.
At the beginning of our blockchain journey, we had to climb over several walls to find the answer to the question: “Where is blockchain’s business value?”. We first had to break through a thick bitcoin wall as we met a lot of people who single-mindedly placed an equal sign between bitcoin and blockchain. Then there was the wall built by blockchain technology purists made only by linking the hashes in a database. After that we got stuck on the wall built by blockchain libertarians claiming that ‘everything is blockchain and it will save the world’. Once we had climbed that wall we were on our own. There were no more walls to climb but there were no answers either. We realized that we need to find our own truth.
At the darkest hour when the light at the end of the tunnel seemed to be fading, we turned to the LinkedIn Blockchain Business community to ask their opinion about the blockchain. More specifically, we wanted to know if and when would blockchain be a better solution than a relational database from a business point of view.
Our question sparked a lively discussion within the community. By the time of writing this article, the thread had 139 comments. The people commenting have left us valuable links that have helped us tremendously and could be useful for others too (see the end of the article for the links). However, in general, the responses posed more questions than they actually answered. By and large, what we got was the suggestion to dig deeper into blockchain, saying that when we’d reached the answer, we’d know. At first, this made us question whether blockchain was perhaps unclear for these people too and weren’t they struggling just like us. Now, after five months of more digging and conferences in Berlin, Stockholm, and Helsinki, we can say that they were right. We have made our peace with blockchain and are currently building a prototype for leasing companies to demonstrate the business value blockchain could offer. The next is what we have learned along the way.
Finding Common Ground and Common Sense
What first became clear to us was that blockchain will not replace a relational database. Rather, they can be seen as tools that complement each other. Moreover, what we understood was that while the database side of the picture is clear today, then everything related to blockchain is still evolving, with no one quite sure where it will end up. Therefore, before starting a conversation on blockchain, it is always a good idea to ask the other party how they understand or define the nature of blockchain. There has been more than one occasion where the other party sees blockchain as a bitcoin, a database or a new world order, so making sure you are talking about the same thing helps to avoid a lot of misunderstandings in the later stages.
Also, an insight we gained from the comment thread and something to keep in mind is that there is quite a common understanding about the characteristics usually linked to blockchain such as immutability, decentralization, removal of intermediaries, no single point of failure, transparency, and security. Still, on the cost and speed of the blockchain, the opinions started to differ. Some people found it more expensive than a standard relational database system, while others thought that blockchain solutions would soon be offered as a service making them much cheaper and easy to use in everyday business. The truth probably lies somewhere in between. It is probably worth mentioning though, that Amazon is already offering Hyperledger Fabric as a service, which significantly reduces the cost of setting up a blockchain based system. To wrap it up, the lesson we learned was that although the characteristics of blockchain may be well known and commonly understood, we still need to use common sense when we are applying these characteristics and assessing the opportunities and possibilities offered by blockchain. The common-sense aspect brings us to the next hot topic related to blockchain, namely the argument of trust.
In Blockchain We Trust. Or Do We?
One major aspect in most discussions and pieces written on blockchain is trust. Trust was also stressed in our comment thread. It was mentioned so often that we started to feel like the world has had a serious trust issue we hadn’t been aware of so far. It has been highly interesting to see how differently people argue for the trust in blockchain. It is the immutability that seems to be the main pillar of blockchain’s trustworthiness. As it is impossible to change the information once it has been entered in blockchain, it feels like blockchain is automatically the right solution for most of the trust related issues. The sad truth is that this is not the case — information is still just information, no matter where it is stored. Hence, it feels extremely dangerous to sell blockchain as a solution that automatically solves the problem of information correctness, when in reality it is just a container for information.
An important aspect to stress here is that it is very difficult to guarantee the correctness of information when the information of the physical world is transformed to digital. An illustration of that is a use-case of organic food production, where blockchain is used to guarantee the authenticity of an apple at the individual stages of the supply chain. Two distinct problems appear in connection with this use-case. The first is the fact that the data is entered by a human being as it does not take a lot to make a person to forge the apple’s data in some part of the supply chain. The second is the apple itself, as an apple is a physical object and the end-user has no possibility to verify that the apple they are eating is the same apple that was registered. It has been suggested that this could be overcome by using robots and tagging the physical objects with RFIDs, but the problem remains because these are still physical objects whose authenticity is difficult, if not possible, to guarantee. In short, it can be said that although blockchain has a tamper detection, it is not tampering proof.
Based on our research and the experience of building the prototype for our own product we have learned quite a few important lessons. Firstly, when it comes to blockchain the scenarios that are based only on digital information are preferred. The next important aspect to keep in mind along the way is that the trust itself can be a concept defined within the legal and organizational framework, it cannot be something that is inherent to the technology. This means that recording transactions are just a small piece of a bigger picture, as we also have to have mechanisms in place to support the blockchain in the wider context. These mechanisms need to be created. Today, there is no legal framework for smart contracts, for example, it is unclear how a smart contract should be defined so that it could be used in court and what would be the details needed to verify the trustworthiness of the information in the blockchain.
It has also become clear that blockchain is still in the phase of being a solution looking for a problem. This could be caused by the fact that too much emphasis is put on the core characteristics of blockchain technology and the additional value of the technology is overlooked. Relying on our research, which includes a long list of articles, conference visits, workshops and discussions with experts, we have finally come to realize that the real value of blockchain lies in using it as a collaboration platform and not as a purely technical tool.
Today, the business activities are often strongly linked to the business entity. This is largely related to the fact that it is difficult to build a platform that would allow the creation of new services, which are based on existing ones. Also, there is a lot of room for improvement for existing services that involve external parties. Blockchain can be seen as the integration platform for businesses since it provides one of the crucial elements of integration — identity. Armed with the knowledge we have gained, we are now building a leasing platform to demonstrate how a blockchain solution helps companies to improve their customer experience through faster communication between different parties. There is still a multitude of questions we need an answer to, but since there is real business value in blockchain for us, the road does not feel as rocky anymore. By now, we have nearly solved the technical issues at hand and have built a solution that offers real value to leasing businesses.
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Diagram 1 about when to use and when not to use blockchain
Diagram 2 on when to use and when not to use blockchain
On avoiding pointless blockchain project
Excellent overview of the nature and future of blockchain:
Overview of permissionless blockchain
How blockchain could impact the financial world
Where would blockchain make sense?
Overview of the recent POC-s
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Written by: Martin Valler