Chapter 2
IN THIS CHAPTER
Discovering the right blockchain for your needs
Making a plan for your project
Uncovering obstacles to your project
Building a project road map
The blockchain industry is complex and growing in size and capabilities every day. When you understand the three core types of blockchains and their limitations, you’ll know what’s possible with this new technology.
This chapter is all about assessing blockchain technology and developing a project plan. It puts the following chapters about individual blockchain platforms and applications into context.
Here, you see how to assess the three different types of blockchain platforms, what’s being built on each type, and why. I give you a few tools that help you outline your project, predict obstacles, and overcome challenges.
There’s a lot of buzz surrounding blockchains and the cryptocurrencies that run them. Some of this buzz just stems from the fluctuation in the value of cryptocurrencies and the fear that blockchain technology will disrupt many industry and government functions. A lot of money has poured into research and development because stakeholders don’t want to be made obsolete and entrepreneurs want to explore new business models.
When it comes to finding an opportunity for blockchain technology to add value to an organization, often the question arises, “Where do blockchains add value and how are they different from existing technologies?”
Blockchains are a special type of database. A database is a collection of data that is organized in a specific way and stored electronically. Databases are designed to store, retrieve, and manage large amounts of data quickly and efficiently. They are commonly used to store structured data (data that follows a specific format and is organized in a specific way) and are widely used in a variety of applications, including financial systems, customer relationship management systems, and online shopping websites.
A blockchain is like a database in that it’s a digital record-keeping system that stores data in a structured manner. One key difference is that a blockchain is a distributed database — it isn’t stored in a single location, but is spread across a network of computers or nodes. Most blockchains require full nodes in the network and have a copy of the entire blockchain, and when a new piece of data is added to the blockchain, it’s added to all copies of the blockchain in the network. This decentralized structure makes it difficult for any single entity to alter the data in the blockchain, because any changes would have to be made simultaneously on all copies of the blockchain.
After data has been added to the blockchain, generally speaking, it can’t be altered or deleted. This makes the blockchain a secure and reliable record-keeping system, because it ensures the integrity and authenticity of the data stored on it. Some blockchains have implemented systems to delete data unless you pay to keep it posted, but this is not the norm.
In contrast, traditional databases are often centralized and can be more easily altered or manipulated by a single entity with access to the database. They’re also less secure, because they can be vulnerable to hacking and data breaches. As you consider the uses of blockchains, it’s important to note that you can utilize a blockchain anywhere you would use a normal database — but it may not make sense to go through the trouble and expense of using a blockchain when a normal database can do the job. A blockchain is an intentionally inefficient database that is distributed across the web.
You really see value in using some form of a blockchain when you want to share information with parties you don’t fully trust, your data needs to be audited, or your data is at risk of being compromised internally or externally. The majority of blockchains publish a public record of themselves. Even if the data has been encrypted, it may not be private in the future when quantum computing becomes cheaper and more readily available. None of these questions is simple, and the correct solutions can be difficult to ascertain.
This section helps narrow down your options.
Blockchains come in a lot of flavors. You’ll find one that matches your needs — the trick is finding it! Mapping your needs to the best blockchain can be overwhelming. Whenever I have lots of options and often conflicting needs, I like to utilize a weighted decision matrix.
A weighted decision matrix is an excellent tool for evaluating the needs of a project and then mapping those needs to possible solutions. The key advantage of the matrix is to help you quantify and prioritize individual needs for your project and simplify decision making. Weighted decision matrixes also prevent you from becoming overwhelmed by individual criteria. If done properly, this tool allows you to converge on a single idea that is compatible with all your goals.
To create a weighted decision matrix, follow these steps:
Brainstorm the key criteria or goals that your team needs to meet.
If you aren’t sure of the criteria you need to consider when evaluating your blockchain project, here are a few things to keep in mind:
Your team will have its own list of objects and priorities. These are just a few to consider while evaluating the correct platform to use to meet your needs.
Reduce the list of criteria to no more than ten items.
If you’re having a hard time refining your list of needs, consider using a comparison matrix tool.
Assign a relative weight to each criterion based on how important that objective is to the success of the project.
Limit the number of points to 10 and distribute them between all your criteria — for example, 1 = low, 2 = medium, and 3 = high priority.
If you’re working in a team, have each member weight the criteria separately.
Congratulations! You now have a ranked list of criteria you need to meet to be successful with your blockchain project.
You can easily get lost building a blockchain project that doesn’t have a clear goal or purpose. Take the time to understand where you and your team would like to go and what the final objective is. For example, a goal might be to trade an asset with a partner company with no intermediary. This is a big goal with many stakeholders.
Build back to a small project that is a minimal viable use case for the technology that clearly articulates added value or savings for your company. Along the same lines as the earlier example, a smaller goal would be to build a private network that can exchange value between trusted parties.
Then build on that value. The next win might be building an instrument that is tradable on your new platform. Each step should demonstrate a small win and value created.
There are three core types of blockchains: public networks like Bitcoin, permissioned networks such as Ripple, and private ones like R3.
Blockchains do a few straightforward things:
Blockchain technology also allows for a few less-straightforward solutions such as the ability to prove that you have a “thing” without revealing it to the other party. It is also possible to “prove the negative,” or prove what is missing within a dataset or system. This feature is particularly useful for auditing and proving compliance.
Table 2-1 lists common uses cases that are suited for each type of blockchain.
TABLE 2-1 Public versus Private Blockchain Uses
Primary Purpose | Type of Blockchain |
---|---|
Move value between untrusted parties | Public |
Move value between trusted parties | Private |
Trade value between unlike things | Permissioned |
Trade value of the same thing | Public |
Create decentralized organization | Public or permissioned |
Create decentralized contract | Public or permissioned |
Trade securitized assets | Public or permissioned |
Build identity for people or things | Public |
Publish for public recordkeeping | Public |
Publish for private recordkeeping | Public or permissioned |
Preform auditing of records or systems | Public or permissioned |
Publish land title data | Public |
Trade digital money or assets | Public or permissioned |
Create systems for Internet of Things (IoT) security | Public |
Build systems security | Public |
There may be exceptions depending on your project, and it is possible to use a different type of blockchain to reach your goal. But in general, here is how to break down different types of networks and understand their strengths and weaknesses:
There are also hybrids between these three core types of blockchains that seek to find the right balance of security, auditability, scalability, and data storage for applications built on top of them.
Some of the decisions you face while working on a blockchain project within your organization can be difficult and challenging. It pays to take time making decisions that involve
A decision tree is a useful support tool that will help you uncover consequences, event outcomes, resource costs, and utility of developing a blockchain project.
You can draw decision trees on paper or use a computer application. Here are the steps to create one for uncovering other challenges around your project:
Get a large sheet of paper.
The more choices there are, and the more complicated the decision, the bigger the sheet of paper you’ll need.
Write a description of each issue along each line.
Assign a probability value to encounter each issue.
Have teammates challenge and review all your issues and solutions before finalizing it.
At this point, you should have a clear understanding of your goals, obstacles, and what blockchain options you have available.
Here’s a simple road map for building your project:
Write up a project plan.
This is a living set of documents that will change over the life of your project.
Hold a kickoff meeting to begin the project.
The meeting should cover the following: