Blockchain Data Analytics For Dummies. Michael G. Solomon
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does well and then identify unsolved enterprise problems for which blockchain technology would be a good fit.
Reviewing blockchain core features
In this section, you look at some features that blockchain offers.
Transferring value without trust
One of the unique strengths of blockchain technology is that it supports transferring items of value between entities that do not trust one another. In fact, that’s the big pull for blockchain. You have to trust only the consensus protocol, not any other user. Your transactions are carried out in a verifiable and stable manner, so you can trust that they are being handled properly and securely. This capability eliminates the need for a third party to act as a transaction broker. In today’s economy, most transfers of value include at least one intermediary, such as a bank, to handle transfer details.
Reducing transaction costs by eliminating middlemen
Because blockchain allows entities that don’t trust each other to interact directly, it eliminates most middlemen. Whether you’re considering transferring money from one party to another or providing a product for payment, nearly all transactions need a middleman. Middlemen are entities such as bankers, importers, wholesalers, or even media publishers.
Blockchain makes it possible for producers to interact directly with consumers. For instance, artists can offer their art directly to buyers, without needing a broker or publisher. Eliminating middlemen either eliminates the fees paid for their services or replaces the fees with automated processes that greatly reduce costs, and these savings can be passed on directly to the consumer. Although blockchain transaction handling does incur a small cost, it's generally much less than what middlemen charge. That’s good for producers and consumers.
Increasing efficiency through direct interaction
Lower fees aren’t the only benefit of eliminating middlemen. Any time you can remove one or more steps in a process, you increase efficiency. Greater efficiency generally means reduced time required for a process to complete. For example, suppose a musician decides to release her latest single directly to her fans by using a blockchain delivery model. Her fans can consume the new single the moment it drops. With a publisher, the content must be delivered, approved, packaged, and then finally released. Although the delay for digital media may be minimal, blockchain can eliminate any delays introduced by middlemen.
The contrast becomes even clearer when looking at delivering physical goods by using blockchain. If you buy strawberries from California, have you ever thought how many times they were handled before you got them? Lots of processors stand between you and the grower. Blockchain can reduce the number of people who participate in the supply chain for pretty much anything.
Maintaining a complete transaction history
Another design feature of blockchain is its immutability. Because you can’t change any data, anything written to the blockchain stays there always. “What happens in blockchain, stays in blockchain.” Good news for any application that would benefit from a readily available transaction history.
Let’s revisit the strawberries example. You might go to the grocery store today and buy strawberries with a label that says “Fresh from CA.” You really have no idea whether the strawberries came from CA or perhaps Spain (the second leading exporter of strawberries). But with blockchain, you could trace a pint of strawberries all the way back to the grower. You’d know exactly where your strawberries came from and when they were picked. This level of transaction history exists for every transaction in blockchain. You can always find any transaction’s complete history.
Increasing resilience through replication
Every full node in a blockchain network must maintain a copy of the entire blockchain. Therefore, all data on the blockchain is replicated to every full node, and no node depends on data that another node stores. If several nodes crash or are otherwise unavailable, other users of the application are unaffected. This resilience means that fault tolerance is built into the blockchain architecture. In addition, by distributing the entire blockchain to many nodes, which are owned by different organizations, you practically eliminate the possibility of one organization controlling the data.
Any application that benefits from high availability and freedom of ownership may be a good fit for blockchain. Many database applications go to great lengths to replicate their data to provide fault tolerance, and blockchain has it built right in!
Providing transparency
The last main category of blockchain features is directly related to the fact that the entire blockchain is replicated to every full blockchain node. Every full node can see the entire blockchain, providing unparalleled transparency. Although data stored in blocks is commonly encrypted, the data itself is available to any user of any node. If the data is unencrypted, anyone with access to a node can see it. If it is encrypted, a user with the proper decryption key(s) can access blockchain data from any node and then be able to decrypt it.
Blockchain transparency makes it possible to trust the integrity of the data. Any node can (and does) routinely verify the integrity of each block and, therefore, the entire blockchain. Any modifications to the “immutable” blockchain data become immediately evident and easy to fix.
Examining primary common business requirements
Now that you know some of blockchain's core features, it's important to also have a clear picture of your primary business requirements. The only appropriate blockchain use is when a blockchain feature aligns with a business requirement. Although many business requirements differ from one enterprise to another, some common requirements exist:
Controlling and recording transactions: This requirement is the process of using applications and data systems to promote, control, and record the activities required to carry out a business operation. The act of recording activities documents some actions that change the state of the enterprise’s stored data.
Reducing or eliminating excessive cost: Ongoing pursuits of enterprises that want to stay in business are to monitor the costs of operation and to identify and reduce (or eliminate) waste.
Pursuing efficiency: Process efficiency can deliver the dual result of reducing cost and increasing quality. Both results are desirable to a profitable business operation.
Preserving artifacts for analysis: Compliance, incident investigations, and analytics require the existence of historical transaction data. Collecting, managing, and archiving this type of data requires planning and ongoing resources.
Protecting availability through redundancy: An enterprise’s information system assets have value only if they're accessible on demand by authorized individuals. The organization must enact plans to store and maintain redundant copies of critical data for when the primary data become inaccessible.
Exposing data without compromising privacy: This business requirement is often the most problematic. Most enterprises place a high value on their data, whether it's regulated sensitive data or intellectual property. Sharing an enterprise’s data has value but is also risky. Sharing data in a manner that benefits the organization and its users is often a delicate balancing act.
Matching blockchain features to business requirements
As you read through the list in the preceding section, you may have noticed how nicely each of the business requirements maps to the earlier blockchain features list. That correlation was intentional. You also likely thought of several business requirements that weren’t in the list. That’s okay. The point of the previous two lists was to show that some