Let’s start with the truth: Blockchain is not for everybody. After all, “truth is like the sun. You can shut it out for a time, but it ain’t goin’ away.” So why not speak about it from the very get-go? And since I’m at it, I must confess that I wouldn’t have just quoted Elvis (not Costello, the other), had Spotify not suggested that I listen to Elvis Presley’s 1973 Aloha from Hawaii Via Satellite concert while writing this piece. It’s all about feeling inspired in the moment.
As you know, there’s been so much hype around Blockchain. Many professionals have been behaving the same way around this technology as my dog around food. That’s from a place called FOMO, or the fear of missing out. As a result, so many Blockchain projects have been started here and there without much initial considerations, before being sacrificed on the altar of excessive expenditures among other “unforeseen” variables shortly after.
So, would Blockchain truly work for your organization?
Decentralization, At All Costs?
If your existing centralized system works and consequently contributes to increasing your organization’s revenue every year while minimizing expenses, why change anything? To regularly upgrade existing systems in order to stay up to date technologically certainly makes much more sense than breaking everything to incorporate Blockchain. It’s a bit like the new Executive hire who utterly needs to impose his or her mark immediately and does so by undoing every single bit of work his or her predecessor undertook. That never works too well…
If a key-factor behind the growth of your business lies in its user interface (UI) and user experience design (UX), and all processes that pertain to your interactions with your clients are efficient and in line with your financial goals, then why would you want to disrupt such a performing service or platform by embracing a new technology, with which you’re likely not to have much experience? Thus, instead of jumping on the potentially precarious bandwagon the unknown represents, the key might rather be to refine, upgrade or simply replace specific solutions.
Finally, the adoption of Blockchain signifies new IT expenditures, which represent investments whose ROI’s are always highly scrutinized. To engage expenses related to Blockchain projects can become entrapping for CFOs and CTOs, if those projects do not reach production and then do not deliver as expected or sold on paper. The hiring of software developers, who master the proper coding skills to build and maintain a Blockchain-based application and/or a Blockchain network is naturally essential. The problem is that there’s currently a shortage of skills in this area, hence an inflation in their compensations. Then, you have to add the costs inherent to (rapidly growing) storage, among other expenditures.
Should You Adopt Blockchain?
A major benefit of Blockchain technology is efficiency. Do your operations lack productivity? If the answer is yes, then it might be a good idea to investigate what Blockchain can bring to the table. There are indeed countless B2B processes, for example, that are extremely straightforward in their conception yet archaically managed, because of dysfunctions that oftentimes pertain to the manual handling of tasks, which clearly illustrates a severe lack of automation between stakeholders’ systems. Moreover, thanks to the execution of smart contracts, those processes that used to necessitate the intervention of intermediaries can now be automated in the Blockchain to allow partners, suppliers and customers to transact directly, in a peer-to-peer fashion. Therefore, the exchanges of data and/or documents become quicker and simpler, since they don’t have to go through a third party.
Is data security a key-issue? Blockchain networks are virtually impossible to compromise. First, data stored in the network is immutable, which means that no one can tamper with it. No one has indeed the authority to delete, create or update a data. It is the same treatment for smart contracts. Their code cannot be altered. Furthermore, the Blockchain audits itself every 10-15 minutes. It means that if a node were to be compromised, the other nodes would pick on the abnormality and correct the incriminated data. The fact that the Blockchain is a network of inter-connected nodes makes it hard for hackers to compromise. A hacker would have to not only compromise one node but the rest of the network, which is impossible today.
Finally, is there a trust issue between you and your customers, partners or suppliers? There are indeed industries where opacity does exist. And it is mostly because of an absence of automation and therefore reconciliation, which leaves room for misinterpretations, disputes and sometimes fraud. Blockchain brings transparency to all operations, by allowing all parties involved access to the same information. Each participant (a customer, partner or supplier) is responsible for his own node, and each node in the network stores the exact same data.
Are There Industries Where Blockchain Adoption Is Necessary?
At 1Kosmos, we are in the business of contactless identity enrollment and authentication. Identity is anyone’s most valuable asset therefore it requires the utmost level of protection, so it cannot be compromised. Did you know that hackers sell bank login credentials for $190 when the account carries a $2,200 balance? The price jumps to $500 for a $6,000 balance and $1,200 for a $20,000 account balance. Hackers get to engage into such transactions because they can. They can easily compromise a centralized database, which is the type of repository a great majority of organizations (including banks) leverage to store their customers and employees’ data.
There have been numerous incidents where hackers have targeted companies dealing with personal customer details. Equifax, Facebook, Yahoo, Apple, Gmail, Slack, and eBay data breaches have been in the news in the past few years, among so many others. What do they all have in common? The data was stored in a centralized system... and it can actually be a walk in the park to compromise data from the inside. A centralized data repository system involves the designation of an authority, who grants access to the database by providing users with credentials for authentication. For example, a database administrator can not only grant access but also create objects and issue database commands. Thus, this authority is in control of what happens with the database. If the security of the authority is compromised, the data can be altered or deleted. If the system that manages access to the database is compromised, then the data can also be altered, deleted or simply stolen. More precisely, the user of a conventional centralized database has access to four data functions: Create, Read, Update, Delete. Logically, anyone with access credentials can utilize the Create, Update and Delete functions to alter data. Read is only as good as the data which is read. That simple!
On the Blockchain front, every time a data or the elements of a transaction are written to the Blockchain, they are validated through the solving of a complex algorithm (mining process), before being stored in a block that is replicated inside each node of the network, for all participants to view in real-time. Moreover, a Blockchain network does not accommodate functions that could allow anyone who has authority over a node to tamper with the data. Thus, basic functions of data storage such as Create, Update and Delete, which are intrinsic to a centralized database, are not allowed in a Blockchain network. Finally, the blockchain network self-auditing ability infers that if a node were to fail, the other nodes would identify the issue and correct it immediately.
Blockchain Or Not Blockchain?
If data security and compliance (GDPR, FIDO, NIST) are on the top of your list, then a centralized system does not seem to be an option any longer.
So, do you need to start taking a crash course (at the bare minimum) to learn the ins and outs of implementing Blockchain technology at your organization? Fortunately, there are solutions like ours in the contactless ID enrollment and authentication business, where the utilization of Blockchain is entirely seamless to users (customers, employees), while ensuring the highest levels of security.
Finally, can I invite you to search “blockchain use cases” online (or a variation of that)? You’ll be able to read about projects that are currently being developed or are already in production, and one may actually pertain to your industry.