Why Does Your Business Need a Blockchain Solution?
Blockchain technology has become an essential part of the enterprise software stack for organizations that want to streamline business processes and issue digital assets. Not all organizations need a blockchain solution, but for those that do, the technology can be transformational. As our Chief of Staff Jeremy Millar points out in 6 Questions to Ask When Considering Blockchain Solutions for Enterprise, “You have to find the right problem before you can build the right solution.” Blockchains helps businesses solve for three main scenarios:
1. You need to process data efficiently.
A blockchain platform serves as a digital layer for the processing and coordination of information. The distributed architecture and consensus mechanisms of blockchain networks facilitate more efficient data coordination than paper-based and centralized systems. While blockchain technology does offer advanced data coordination, many legacy systems can be optimized through improved distributed systems design. Blockchain platforms are designed for completely new business functionalities that go far beyond information processing.
2. You need trusted transactions and secure business networks.
Blockchain technology was originally developed to digitize trust and agreements, just as Internet technologies have digitized information and its exchange. The unique design of a blockchain ensures an immutable record of transactions that all network participants can trust. Moreover, programmable smart contracts enable the automation of business logic, simplifying alignment and reconciliation across complex business networks. An increasing number of Global 2000 companies in major industries such as financial services and global trade are already using blockchain-based platforms to launch enterprise consortia.
3. You need to create, issue, and manage digital assets.
The digitization of goods and assets has emerged as one of the most exciting business applications of blockchain technology. The built-in tokenization capabilities of blockchain networks like Ethereum enable enterprises to create, issue, and manage digital assets for use cases as wide-ranging as central bank digital currency and fractionalized real estate ownership. In recent years, a variety of open source and proprietary blockchain and distributed ledger technologies have been developed for digital asset solutions.
Blockchain vs. Distributed Ledger Technologies (DLTs)
A distributed ledger is a database that is maintained across several locations and that supports multiple participants. A blockchain is a type of distributed ledger technology that has a unique architecture and additional functionalities. Unlike traditional DLTs, blockchains use a chain of cryptographically-secured blocks to create a tamper-proof record of transactions. The additional functionalities of a highly programmable blockchain such as Ethereum include:
- Digital asset creation. While DLTs can register a product in a digital format, the Ethereum blockchain’s native token capabilities allow for the issuance and management of completely new and customizable digital assets and financial instruments.
- Cryptoeconomic incentives. DLTs were not originally designed to incorporate cryptocurrencies. A blockchain enables incentive mechanisms to be hardwired into the protocol to reward positive network behavior and punish nefarious activity.
- Interoperability. Because some DLTs are built on proprietary frameworks, users can experience vendor lock-in for certain functionalities. Modular and open source blockchains like Ethereum allow enterprises to integrate the technology into their existing systems and securely interact across private and public blockchain networks. Read more about blockchains and interoperability.
For a full comparative analysis, read our two-part series on blockchain vs. distributed ledger technologies.
How Hyperledger and Ethereum Integrate
Hyperledger is a global and open source collaborative effort that was created by The Linux Foundation in 2015 to support enterprise blockchain development and deployment. The Hyperledger suite, also known as the “greenhouse,” includes distributed ledgers, libraries, and tools that are all open source and free to download and use. The greenhouse is comprised of several Ethereum-based projects, including Hyperledger Besu, an advanced Ethereum client that was contributed by ConsenSys’ protocol engineering team in 2019. For many enterprise teams, Hyperledger is a valuable environment for active collaboration, vetted deployment options, and industry best practices.
What Are the Benefits of Enterprise Ethereum?
Ethereum is an open source blockchain platform and the most actively developed blockchain in the world. Enterprise Ethereum refers to private, consortium, and hybrid implementations of the Ethereum codebase for business applications. Because of its flexibility and extremely secure architecture, Enterprise Ethereum offers unique advantages to businesses that are considering blockchain solutions:
- Unrivaled programmability. Ethereum’s smart contracts provide limitless formats to hard-code business logic directly into the protocol, helping enterprises automate reconciliation, compliance, reporting, and more.
- Advanced privacy and permissioning. Ethereum platforms like Hyperledger Besu offer advanced security controls so businesses can configure network access and ensure confidential transactions. Read more about blockchain network permissioning and private transactions.
- Rapid tokenization. Ethereum’s native tokenization capabilities allow businesses to easily fractionalize large assets, expand their line of products, and unlock new incentive models at both the consumer and institutional levels.
- Low-cost, quick deployment. Ethereum’s open source codebase helps businesses maintain a low-cost business model and avoid vendor lock-in. All-in-one business platforms like ConsenSys Quorum accelerate the time to production from months to weeks.
- Production-grade performance. No other blockchain network has performed at the volume and scale of the Ethereum network. Private Ethereum networks provide customizable permissioning, immediate finality, scalability, and always-on reliability, with the option to interact with the public Ethereum network.
To learn more about the proven benefits of Ethereum for enterprises, read 11 Ways Ethereum Can Benefit Enterprise and 5 Reasons Why Enterprise Ethereum Is More Than a DLT.
Key Factors for a Successful Blockchain Solution
The design decisions you make at the beginning of your deployment lifecycle will have far-reaching consequences for your time-to-production and the potential impact of your blockchain solution. To see a complete list of key technical and non-technical factors for your platform choice, read 30 Blockchain Platform Technical Factors and 30 Blockchain Platform Business Factors. Also check out our piece on design thinking and how to hide blockchain complexity in products. Here is a distilled list of the top 10 considerations in your discovery process:
- ROI. What will be the return on investment of your blockchain use case?
- Platform. Which platform is built to meet your specific functional requirements?
- Ease of integration. Is the technology compatible with your existing systems?
- Performance. Has the platform proven that it can operate securely at scale?
- Network permissioning. Do you need to configure network access for an enterprise consortium with multiple parties?
- Private transactions. Do you need privacy mechanisms to ensure that transaction data remains confidential?
- Support. Do you need support services and ongoing maintenance?
- Standards. Does the technology stack align with industry standards and specifications?
- Development. How do you put together a blockchain development team?
- Tooling. What infrastructure, middleware, and application-layer tools should your developers use?