The failure of many initial coin offerings illustrates that blockchain technology is not easily implemented. Programmers must be proficient enough to solve emerging problems. Organizations should be aware of current issues, such as excessive energy consumption. Below are a few pertinent areas of measurement one can consider before determining if a company can benefit from implementing blockchain technology.
The blockchain difference
Blockchains offer distinct advantages over current data management solutions in terms of trust and data security. Incentives encourage agreements between independent actors who do not need to trust each other. The blockchain’s programming provides that layer of trust.
Only upon agreement is data added to any given blockchain. Network replication by validators almost entirely negates the bad actors. This decentralized system also removes the need for a central authority. With that in mind, areas benefiting from implementing blockchain technology are network security, operational efficiency, and costs.
Current relational data management solutions remain capable for many business operations, especially performance speeds. Blockchains are slower when it comes to security because nodes act independently and do not share processing power. Scaling also remains an issue. Some blockchains can handle much more activity than others.
Types of blockchains
Not all blockchains are the same. Permissionless blockchains (like those utilized by cryptocurrencies Bitcoin and Ethereum) have been the topic of discussion thus far. They are available for anyone to participate in and verify. No central authority administers rules.
Some blockchains incorporate a central authority that gives variable permissions to a limited number of users. Permission blockchains must also be defined for public and private data visibility. Public permission systems would be useful for consumer concerned data. Private permission systems are finding applications in financial services. Some have criticized these private blockchains for not offering significant advantages over a regular replicated database.
Smart contracts are programs that require all the parties to meet conditions before automatically executing the included terms. The automation extends to updating the blockchain and enforcing rules, while human input is limited to affirming the smart contract at the onset. Influencers across industries believe that smart contracts have the potential to transform economies on a global scale.
Unfortunately, some of the most exciting projects, like Ethereum and the Decentralized Autonomous Organization, currently fall short of such large-scale applications. More sophisticated coding will be needed to transform industries. However, several independent organizations are currently benefiting from this technology. So, it will be interesting to see just how their implementations will impact the widespread adoption of blockchain in business.