What can a blockchain do for various companies?

Author: Olya Green, Taraxa

8 min read

 

The practicality of blockchain technology will depend on whether trusted intermediaries can bridge the gap between the digital world and the real world.

-Harvard Business Review, 2019

When a company is fully deploying a new technology architecture, executives often ask the question: "How much does it cost?" But before that, another equally important question may be asked: "This technology will How can we improve our internal processes? "This question is asked more when applying new and complex technologies such as distributed ledgers, especially considering that there are still some false speculations circulating in this field. The consequence is that it prevents companies from seriously considering the advantages and disadvantages of the blockchain, hinders the creative thinking of related applications, and in turn hinders the digging of new revenue channels. In this article, we will walk you through the common concepts in the blockchain world and reveal to you what this emerging technology can and cannot do.

 

The danger of extreme thinking

To Mengxin, cryptocurrencies are indeed like a close circle of speculators and crypto anarchists who feel that blockchain technology can solve all the inefficiencies of modern economic systems. Although it sounds okay, in fact, this extreme idea will give rise to many unreliable and marginal expectations, making business leaders looking for next-generation technology also doubtful.

 

The potential of technology to change corporate trust and reputation mechanisms is exaggerated

There is no doubt that blockchain technology has the potential to subvert the trust mechanism of enterprises and even the whole society. But most startups have not realized that the solution of blockchain technology will eventually be integrated into a larger enterprise system- Microsoft, Google, Wal-Mart and JP Morgan Chase 's continuous investment in distributed ledger technology is proof at this point. In addition, this idea has another dangerous implication: a large number of isolated solutions are born for "lonely" crypto enthusiasts. But obviously, when the encryption technology is integrated with the traditional business, it will produce greater efficiency and promote faster applications. Large companies will naturally become the biggest beneficiaries of blockchain applications, whether through smart contract software, decentralized governance mechanisms, or simply using their immutable ledger to manage business data and so on. Distributed ledger technology ( DLT ) can reduce trust issues , make the data collected by the enterprise or the authorization of stakeholders more credible, and entrust a third party to labor-intensive markets for many years (such as hiring an audit team to review internal reports) Provides a more efficient solution. Therefore, if an enterprise delegates selected tasks to a distributed network, it can not only reduce operating costs, but also achieve rapid expansion . Essentially, it's all due to the deployment of a strong trust verification mechanism to resolve trust issues between stakeholders faster and better.

 

Wrong expectations from user applications

Observing the main crypto projects and their target applications, they can find that they have a typical characteristic: they give a lot of tasks to potential customers, and they want users to complete everything. This optimistic idea that prevails in the blockchain community has generated a naive belief in the project side. They feel that users will be willing to deal with all kinds of unbelievably complex matters, such as losing private keys and mnemonics. I can never open my wallet again. Although blockchain provides various advantages, it is still a painful decision to reward or save effort. Of course, we have a way to reduce this kind of cognitive difficulty. For example, we designed the bottom layer of the blockchain system with the original intention of “ keep the centralized system honest ”, so that the design principle can hide all the complexities from the user Link. From a user experience perspective, this is often overlooked. Easy-to-use user-friendly interfaces are built on the front end and back end to help speed up the implementation of technology in the enterprise and optimize the application process.

 

Crypto anarchy is not tolerable in enterprises

Although this sounds fine, this extreme idea can also lead to untrustworthy and marginal expectations, and eventually dismiss business leaders who are looking for a new generation of technology. Especially those enterprise blockchains that don't have time to make idealistic conjectures. We need to build practical and useful applications in the real world. The following are some aspects that companies may do before applying blockchain solutions to optimize internal and external business processes:

Cost and efficiency

Important questions every management asks are:

  • What kind of bottlenecks will we encounter when we replace the original system with blockchain technology?
  • What costs do we incur when we deploy blockchain technology?

Another misunderstanding common in the business world is that blockchain solutions are expensive. Again, it depends on which blockchain you adopt. For example, it is not appropriate to use the Ethereum blockchain to process internal data logs, because in addition to architectural issues, the upper limit of the TPS (that is, transactions per second) of the Ethereum blockchain is very low. Higher costs. It is important here that every business needs to carefully check the technical details of all aspects of a blockchain.

Regulation and governance

Important questions every management asks are:

  • What impact does the current regulatory policy have on our application of blockchain technology?
  • What would regulators want to know about our applications?
  • Should we use public or private chains?

In practical industry applications, regulatory policy has always been the most concerned issue for everyone. When choosing a public-private chain, you may consider the public chain, because the public chain is more common and more transparent than the private chain, so the regulator will feel more kind. This applies to all areas of regulation, whether it is finance or other industries, such as CMS in the medical field .

From the perspective of governance, if you want to preserve the important concept of corporate responsibility and taste the sweetness of decentralization, then using a private network on the blockchain sounds very tempting. However, we must realize that having control means a high risk of network disruption. More importantly, if you have complete control over the blockchain network, it is equivalent to giving up its trust and immutable characteristics. On the contrary, the public network retains the core characteristics of the blockchain, that is, immutable, transparent, and can interact with all participants without trust. If you are concerned about data privacy, you are actually more concerned, because if you encrypt the hash value and signature to hide some transactions when needed, there is no risk of leakage of this kind of data.

safety

In terms of technology: Is the blockchain really "black"? So far there have been no cases of successful cracking of the Ethereum or Bitcoin blockchains-except for some flawed Bitcoin / Ethereum smart contracts that have been hacked. However, no technology is completely secure against hackers. Fortunately, the community is constantly researching potential vulnerabilities and submitting new fixes . Although there are also opinions that private chains are more secure, there are also a large number of teams currently developing security enhancement tools for public chains. For example, the Ethereum blockchain already has several mechanisms to ensure the privacy and security of network participants, including ring signatures, hidden addresses, and storage of public chain private data. For another example, Taraxa chose the block DAG as the underlying architecture of the blockchain, which can ensure the secure execution of all transactions without sacrificing network throughput.

Quickly recognize the fact that blockchain technology is also not good at it

When refining the practicality of the blockchain, let's first think about what is unique about this technology: it is the integration of economic incentives and encryption technology to ensure that there are digital records at any time to reflect the main players Real consensus. Then, we can understand what aspects cannot be achieved with the blockchain alone without online or offline auxiliary tools, which is also helpful for evaluating the business model of the blockchain.

100% real

Let's make up this scenario first: when you hit the coin to a cryptocurrency exchange, or download a dApp, there will be a group of people running nodes to maintain the software at the same time. Although there are interfaces online and offline, any technology still relies heavily on reliable intermediaries to effectively connect individuals, businesses, or devices that are separated from a wall of digital records, and blockchain technology is no exception. Therefore, keeping digital records synchronized with offline counterparties is not an easy task for any current blockchain.

Be the sole source of truth

A digital record can be immutable and verifiable, but how do I know which asset record this digital record is? How do you make sure that the warehouse's operational data is collected through this particular sensor? This is why we have always emphasized that, whether it is identity information or transmission / processing, data must be protected at the source . To do this, we need to attach a physical identifier, such as a chip or tag, to the target object to associate it with a specific digital record. However, this cannot be achieved by the blockchain alone. Here we need auxiliary tools such as sensors and specific software to achieve it.

Protecting poorly written smart contracts

Smart contracts should be used as a safeguard to ensure that transactions are not initiated until the terms of the transaction are secured. The problem is that smart contracts themselves can be tricked by malicious actors trying to disrupt the network.

Eliminate the risk of human error

For example, you used blockchain technology to track the boxes in the warehouse, but you may have scanned the same box twice, causing records to be accidentally tampered with.

But don't be discouraged. Even if we peel off the godlike decoration of DLT technology, there is still one thing that can prove the true value of DLT: the blockchain can provide immutable transaction records (or digital audit trails) And can be used to verify the integrity of the data. So, which scenarios can really realize the value of this advantage? Imagine all use cases where you need to record participant behavior to track responsibility. Creating encrypted identities on the blockchain can highly guarantee the identities of participants as described, which is applicable to the scenario of tracking the responsibilities of each party in the supply chain. In our application case , we use digital signatures and private keys to build an immutable virtual identity audit log, thereby reducing the probability of fraud in the telecommunications industry.

Considering the various potentials of DLT technology, it should never be confined to the small circle of cryptocurrency enthusiasts. It can quickly process operating data, reduce costs by completely eliminating third parties, and create a 100% reliable audit log. Finally, it brings a series of feasible solutions for enterprise development and user acquisition-this is where DLT's capabilities lie.

In the end, after being properly understood and applied, the functions of the blockchain will play a role in various industries, helping the industry to launch new business models and take the lead in achieving innovation and optimization.