Blockchain? Deployment and value captured

This is the third in a series of blog entries about the concept of blockchain. For most of us, the problem is all too familiar: a fire sweeps through someone’s home, reducing their treasures to ashes.

The worst is when that person finds out that, not only have the much-loved treasures (whatever they may be) gone up in flames, so have their documents of ownership, tucked away in a drawer in the same home. Proving their ownership rights to the insurer now becomes considerably harder.

But the same can happen when somebody robs you. As Arman Sarhaddar, CEO of Vault Security Systems AG (with its iVAULT brand of products) explains:

These days, in some places not even your locked and supposedly guarded storage space may be safe. That happened to me – when I returned, my valuables and personal items were gone.

The above example is one case where blockchain can help the consumer, and even the insurer. Many more applications are also feasible. We explain some of the technical issues below.

1. What are we trying to accomplish?

The blockchain can help answer the important questions listed in Table 1 below.

Table 1 – Checklist: What challenges do we solve with the blockchain?
What are we trying to do? What value do we want to capture? For whom is this of use?
Record the transaction Information and knowledge about what changed hands Clients
Track the transaction Attribution and who is responsible Suppliers
Verify the transaction Access to records or permission to view them Manufacturers of goods
Aggregate transaction Ownership Creditors or investors
Reputation and trust Public agencies
Contracts Employees
Transaction ledger

Table. Adapted and expanded upon from Felin, Teppo and Lakhani, Karim (Fall 2018). What problems will you solve with blockchain. MIT Sloan Management Review, p. 36. Retrieved 2018-10-20 from http://sloanreview.mit.edu/x/6015. See also https://blog.drkpi.com/show-me-the-facts-1/

A blockchain attempts to maintain a permanent, trusted database, which the owner, and trusted advisors and manufacturers have access to only with a secure key. In turn, history and proof of purchase, the provenance of works in a collection and all related legal and insurance documents can be held on a blockchain.

However, before you decide to use a blockchain, it helps to address the questions outlined below:

  • Do multiple parties share data?
  • Do multiple parties update data?
  • Is there a requirement for verification?
  • Can intermediaries be removed and reduce cost and complexity?

If you answered yes to three of the above questions, then you have the potential to apply blockchain.

Blockchain technology - What kind of blockchain is best for me?
Blockchain technology – What kind of blockchain is best for me?

2. Privacy

The traditional blockchain paradigm is complete transparency. Business applications, however, need to meet certain privacy criteria.

Not all transactions should be visible to everyone. The reasons for this may range from concerns of commercial confidentiality, to legal requirements.

Regulations, such as Europe’s General Data Protection Regulation (GDPR) simply make it impossible for companies to make all data accessible. Instead, some information, such as a patients ID number, must be protected.

Thus, any enterprise blockchain platform should provide an extensive set of privacy features. Only then, can GDPR compliance be assured (see this resource page from MC Lago – checklists and forms that help)

3. Security

Another requirement, closely related to privacy, is security. Businesses usually need to prevent data theft at all costs. They also need to ensure all actors are clearly identified. Again, this necessity might be imposed by the business case or by regulations.

Thus, enterprise blockchains need to implement authentication features and control who can participate in the network.

Security, Safety, Privacy, and Data Protection: Vaultsecurity.ch to the rescue.
Security, Safety, Privacy, and Data Protection: Vaultsecurity.ch to the rescue.

4. Transaction throughput

As Table 2 below illustrates, public blockchains may have advantages, but transaction throughput and energy consumption levels may not be to everyone’s liking.

Enterprise applications are usually transaction-intense and need to be scaled in terms of transaction throughput.

At the other extreme, public blockchains need to be scaled in terms of the number of nodes that can participate in the consensus protocol.

In most enterprise applications the number of validator nodes can be relatively small: for example, one representative per company participating in the consortium. Thus, transaction throughput can be prioritised.

Hence, enterprise applications may not be public. Instead a combination of features of a consortium / private-type blockchain may be used.

Table 2 – Checklist: Deployment Models for a Blockchain
Access Key Characteristics Typical Use Cases
Public Unrestricted Immutable and distributed Cryptocurrencies,   general purpose
Consortium Restricted to consortium members (public may have read-only access) Immutable and distributed Consortium-specific cases, such as trade between members
Private Restricted to single entity, read-only access can be public / unrestricted Internal audit, database management, supply chain within corporation and its subsidiaries

Note. Adapted and expanded upon from Uhlmann, Sacha (2017). Reducing counterfeit products with blockchains. Master Thesis, Univ. of Zurich. Accessed 2019-01 at https://www.merlin.uzh.ch/contributionDocument/download/10024

By the way, the video below shows in a straightforward way how the blockchain principle can work for you and that its foundations – asymmetric cryptography and distributed systems – have been known for decades by computing science researchers.

Also check out iVAULT on bloxlive.tv – Interview at #WEF2019

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5. What is your opinion?

Distributed ledger technologies are collectively known as blockchain. While they offer great opportunities, we have to separate the wheat from the chaff when it comes to hype. We hope this blog entry helps you in that process.

What interests us, however, is what you think:

  • Do you have experience with crypto tokens?
  • Is your company trying to use blockchain technology to make its processes faster, more efficient or transparent for its customers or suppliers?
  • What questions do you have about blockchain?
  • What do you like or dislike about blockchains?

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Urs E. Gattiker

Professor Urs E. Gattiker, Ph.D., is CEO of CyTRAP Labs that provides smart data, training and solutions to optimize content strategy, increase reach, strengthen your brand and secure GDPR compliance). He also is COO of iVAULT that provides multi-purpose blockchain solutions, safeguarding supply chains against fraud and counterfeit (see his books).