Blockchain technology makes perfect sense for businesses operating in a variety of industries. It is one of those technologies that has the potential to solve many everyday problems. While a number of organizations are delivering proof of concepts and many are stalling in the research phase, only a very few are in the phase where they have successfully implemented blockchain and brought the technology to life. this into operation in their business.
Let us first understand the basics of blockchain
Blockchain is a blockchain that stores a record in blocks that are linked together by cryptographic technique that creates a digital, distributed ledger. The ledger can be shared and verified by anyone who has access to it. This eliminates the need for costly third-party verification. A cryptographic signature is a signature that gives the blockchain the status of an immutable, or tamper-proof, ledger in other words.
It eliminates the need to reconcile inter-company data and transaction records, as all parties on the blockchain are given access to the same digital ledger. A blockchain can be centralized (a single stakeholder has control over the blockchain) or decentralized (a blockchain that is not controlled by anyone) and permissionless or permissioned. A permissionless blockchain is one in which any stakeholder can view and add to the blockchain and is allowed to refer to the restrictions placed so that stakeholders can view and make changes .
For successful blockchain implementation, it is essential to learn the right strategies for blockchain implementation. Buckle up because this article will cover everything you need to know to set up your own blockchain-powered business.
The steps involved are:
1. Define a use case
First and foremost is defining the use case. The key to developing any blockchain-based system is figuring out the exact problems you’re trying to solve and whether blockchain is the right solution for the same. Understanding the process from the inside out and knowing the bottlenecks in the process is essential. Defining a use case refers to the process of defining, clarifying, and organizing your needs for a blockchain. This adds clarity to your goal. It’s best to start small. Start with pilot blockchain use cases. Discover, test, use and analyze them, then you can deploy it on a larger scale.
Below is a list of criteria developed by PwC to help organizations analyze whether blockchain is the right solution for them.
- Is data shared by multiple parties?
- Is the data updated by different parties?
- Is verification required?
- Are intermediaries complicating things?
- Is the interaction time sensitive?
- Is there any interaction between transactions?
If your answer is ‘Yes’ to most criteria, then blockchain is the right solution for you. Some of the industries that have adopted blockchain technology are banking, insurance, healthcare, real estate, Internet of Things (IoT), corporate and public administration, supply chain management, and education.
2. Choose your blockchain carefully
As a wide range of blockchain solutions exist, it is important to choose one that suits your purposes. Some popular blockchain platforms are:
It is important to do an adequate amount of research as it is often easy to be fooled by impressive marketing tactics. While choosing a blockchain platform make sure it fits your budget and be sure if they own an open source station and if it has an organized technical team. It is essential to get advice from someone with prior blockchain experience. They could come from your team or it could even be a third-party blockchain consulting firm or a company.
Blockchains can be private or public, permissioned or permissionless, and centralized or decentralized. Among the many blockchain platforms, Ethereum is the most popular and often used mainly due to its dynamism and responsiveness. But for businesses just getting started with blockchain, the most effective option would be to use Blockchain as a Service (BaaS). This provides a pre-designed blockchain that can be customized to your needs. This saves time and money spent on developing infrastructure and finding skilled human resources. Some well-known custom solutions offered by tech giants are Microsoft’s Azure, Oracle, and Amazon Web Services (AWS).
3. Blockchain Initialization
To initialize the blockchain, the first block must be created manually. This block must have all the characteristics of the chain. They are then shared at all network nodes. A file in JSON format is generated to identify this block. Some parameters such as Nonce (cryptographic hash generating random value) and Timestamp (confirmation time between two consecutive blocks) must be specified. After the JSON file is populated, the Geth client is responsible for creating the directory containing the blockchain and initializing it.
4. Choosing the right consensus protocol
Protocol refers to solving a mathematical problem that requires a large amount of computation. When a miner comes up with a solution, it should be easy for everyone to verify it. The first person to find the solution will have the right to write the next block. The difficulty of the problem is adjusted in real time based on the total strength of the network. Blocks are written at regular intervals. This system protects against attack attempts and spam. Consensus protocols create an irrefutable unified system among devices in a distributed network, thus preventing the exploitation of the system. One can choose from many consensus protocols available for blockchain.
Some of them are:
- Proof-of-Work (PoW)
- Proof-of-Stake (PoS)
- Authorized Proof of Stake (DPOS)
- Byzantine Fault Tolerance (BFT)
- Proof-of-Weight (PoW)
5. Ecosystem building
The ecosystem is crucial to a blockchain because it works best when there is a large number of stakeholders involved. Creating a community within an industry or an organization that understands technology and its potential will help enhance trust among companies.
According to the report prepared by PwC, stakeholders must decide:
- Ways to tolerate costs and benefits being shared equitably.
- Rules of participation
- Risks and control frameworks can be used to address shared architectures.
- Governance mechanisms are in place.
6. Deliberately designed
Blockchain needs to be designed with care. It must be something that is equipped to solve organizational problems. It must be compatible with existing processes. If a blockchain does not meet these criteria, the processes need to be modified to create the foundation for the blockchain.
7. Uncertain navigation
Since blockchain is still new, regulations for the same are very limited. It is more likely that this will change in the future and therefore, organizations need to continuously monitor the changing regulatory framework and also actively participate in shaping it. Each country has different regulatory approaches to blockchain.
For example, Singapore and Switzerland are trying to regulate tokens to spread the application of blockchain technology, China favors regulation of cryptocurrencies, even though they have banned it. In the US, individual states lead the regulatory efforts rather than the federal government. PwC suggests that businesses must work with regulators to help increase the adoption of blockchain technology.
As we all know, blockchain was originally created for the trading of digital currencies. But soon, the tech-savvy world realized that there were plenty of options for successfully using blockchain technology in their companies. I hope this article has provided you with insights into the points to keep in mind when implementing blockchain. This will certainly be a roadmap for blockchain implementation. While there are chances of disappointment at first, it’s important to remember that blockchain, while still a new technology, is truly the future of digitalization and technology.
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