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What's Blockchain Good For?

Mitch Wagner

Blockchain is literally a technology in search of a problem to solve.

Don't believe me? Just ask Gartner Inc. analyst Ray Valdes. At a recent presentation at Gartner Symposium, Valdes noted that "blockchain" is the number one search term on Gartner.com.

Common question: "What are use cases for a blockchain?"

People are fascinated by blockchain. They just don't know what to do with it.

My colleague Curt Franklin, who heads up our sister site, Security Now, shared Valdes's information with me, and it contains some fascinating insights into much-discussed and little-understood technology.

Blockchain today doesn't solve a business problem for enterprises, Valdes says. Instead, it's a public relations problem -- the CEO or board of directors wants the company to look cool, and the CIO gets his bosses off his back by conducting a "pointless POC" using blockchain.

The CIO then gets to say, "See, we did something cool? Let's put out a press release! Can you leave me alone now and let me get back to work?"

Photo by Toni Lozano [CC BY 2.0], via Wikimedia Commons
Photo by Toni Lozano [CC BY 2.0], via Wikimedia Commons

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Some 90% of enterprise blockchain projects are centralized designs. They don't need blockchain technology to meet requirements. Indeed, enterprises can move more quickly, at lower cost, and with better quality by avoiding blockchain, Valdes says.

However, blockchain can in fact solve real business problems, Valdes says, such as supply chain integrity, fragmented and slow business processes, and data integrity of the system of record.

Blockchain is a distributed ledger, a database that records transactions. Copies of the whole blockchain -- every transaction on the network -- are stored on every node of the network, rather than in some centralized bank or government institution. Blockchain operates best in recording transactions among untrusted actors.

What's blockchain good for? Johannes Ernst, an indy software developer and technology consultant, tackles the question in a blog post this week. Ernst notes the tendency for "applying blockchain to a problem where using it has no advantage whatsoever," but concludes that blockchain nonetheless has value.

"Blockchain is for weakly connected communities preventing someone from cooking the books," he says.

That's close. But I think blockchain is more useful than that.

Blockchain isn't just valuable when someone might be "cooking the books" -- when someone might be a willfully dishonest actor attempting to perpetrate fraud. It could also be valuable in situations where it's difficult or expensive to keep an accurate record of transactions.

And that covers a lot of ground. It may well cover the majority of transactions, now handled by expensive, hierarchical database systems backed by even-more-expensive public institutions such as banks and governments.

It seems likely that blockchain will become the standard ledger system, a general-purpose database for many purposes, and a platform for running many applications (known in blockchain jargon as "smart contracts"). It could prove to have similar revolutionary value as the web did.

Consider some recent examples of blockchain activity.

Cisco Systems Inc. (Nasdaq: CSCO) and a group of big enterprises and small software developers announced an alliance last month to promote blockchain standards for the Internet of Things last month. One possible use case described by Cisco's Anoop Nannra: Autonomous vehicles might be able to pay for electricity on their own, using blockchain to store funds in a cryptocurrency wallet and to identify themselves as a noncompromised participant in an IoT network. (See Cisco & Partners See Blockchain Opportunities in IoT.)

Likewise, as network functions move from the cloud to the edge and back again, blockchains can help vouch for the integrity of environments where applications are running, he says.

Similarly, blockchain could be used to certify networks for distributed electrical transmission, and to sort out failed Wall Street transactions, Nannra says.

Next page: Loss of faith

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