Hesitation to Bringing Blockchain into the Data Environment

Is blockchain – the global distributed ledger – suitable for any data environment?

data environmentThat’s the question taken up by Julian Ereth in one of his latest posts for Eckerson Group. His prognosis: hold that thought for now. “It is still unclear if and when blockchain will make its way into enterprise data architectures,” he says.

A blockchain approach runs counter to the centralized tendencies of enterprise data centers. In fact, much of the work in recent years – toward enterprise cloud and enterprise data analytics – is all about centralizing. “Blockchains are designed for very specific scenarios with decentralization and immutability as core factors, which limits the use cases for enterprises,” Ereth writes. There will also be governance and security issues that go with blockchain.

A recent report out of the World Economic Forum also advises caution when looking into blockchain-based approaches. The report’s authors, Cathy Mulligan, JP Rangaswami, Sheila Warren, and Jennifer Zhu Scott. “As the decision-makers within an organization, it is important not to be tempted by the hype but instead to think honestly about whether using blockchain is a sound business decision – even in those cases where a well-defined problem exists,” they state.

That points to the very first question decision-makers or administrators need to ask when considering blockchain. “For a blockchain to be an appropriate solution, it is important to understand the business context – does the business problem require the removal of an intermediary?” Mulligan and her co-authors ask. “For example, would it be cheaper to collaborate directly with suppliers/competitors rather than use a clearing house? An example of this is the banking industry using a solution such as CORDA to manage remittances between themselves; this allows them to deliver services faster, securely and more cheaply than with existing technologies. They do this by redefining how business processes are delivered in their industry. Another example may be removing brokers from an industry – such as a technology broker or an insurance broker.”

Another consideration is whether an enterprise wants the data being deployed over blockchain to be permanent. “Is a permanent record desirable? If an unalterable record is superfluous or counterproductive, for example, in a situation where the need to delete information is critical, then blockchain/DLT is not an appropriate solution. It would not make sense, for example, to store an ordinary grocery list on a blockchain.”

Speed is another consideration with blockchain. “If it requires millisecond performance on transactions, blockchains are unable to handle this effectively yet and it is advisable to work with either existing technologies or wait until blockchains can handle such transaction speeds. Various forms of distributed ledger technology carry between a two – and 10-minute processing time.”

Blockchain or distributed ledger technology holds a great deal of promise for many applications, providing a way to support and verify data. However, as with any promising new technology, more investigation and weighing of business benefits is required.