Jun 21, 2018

What is blockchain business value for a company?


With all the hype around blockchain, it can be hard to nail down the facts. Companies can determine whether they should invest in blockchain by focusing on specific use cases and their market position.

Despite the hype, blockchain is still an immature technology, with a market that is still nascent and a clear recipe for success that has not yet emerged. Unstructured experimentation of blockchain solutions without strategic evaluation of the value at stake or the feasibility of capturing it means that many companies will not see a return on their investments. With this in mind, how can companies determine if there is strategic value in blockchain that justifies major investments?

Blockchain business value as a distributed ledger

Blockchain is a distributed ledger, or database, shared across a public or private computing network. Each computer node in the network holds a copy of the ledger, so there is no single point of failure. Every piece of information is mathematically encrypted and added as a new “block” to the chain of historical records.

Blockchain business value

Blockchain’s core advantages are decentralization, cryptographic security, transparency, and immutability. It allows information to be verified and value to be exchanged without having to rely on a third-party authority. Rather than there being a singular form of blockchain, the technology can be configured in multiple ways to meet the objectives and commercial requirements of a particular use case.

Discover blockchain’s misconceptions here

DLT technology

Blockchain is rapidly moving to decentralized distributed ledger, in some cases with blockless technologies. LIFEdata is working on an innovative DAG, directed acyclic graph. With a DAG, once can make safe contracts that will be executed exactly as agreed upon. you don’t have to trust anybody. It works in circumstances where the other methods don’t work. In a DAG you can have a bunch of transactions in parallel and the degree of parallelism adapts dynamically to the current load. But challenges still remain. See a real business case: Create a coin is intended to serve as a rapid transaction payment enabler for the holder and as the principal currency of various industry vertical technology services ventures. The coin needs to be a fast, secure and scalable currency that has great flexibility for practical business usage, for example, general payment, conditional payments (insurance), lottery, ecommerce, auctions…

Conditional payment terms
Conditional payment requires two party consent to enter into a contract. The terms of the contract need to be known beforehand. Contracts are considered valid if:

In order to enforce a legally binding contract all parties to the contract need to be identified. This point can be mitigated if both parties enter in a contract for which the collateral can be stored in escrow. This means that insurance and similar contracts can act without identity but Service contracts can’t.

Offer and Acceptance
The most basic rule of contract law is that a legal contract exists when one party makes an offer and the other party accepts it. This requires that there is an exchange of value between involved parties and that all parties understand and agree on all major issues.

Smart contracts
Because contracts are executed through blockchain technology there are two additional requirements to this conditional payment:

Conditional payment requires that said payment is made once a condition is met. The data for this condition needs to be gathered from an Oracle that is trusted by all parties.

Turing complete
Because the contract is in the form of a smart contract and the contract can contain any permutation of a normal contract the technology that is used has to be Turing complete. Turing completeness means that a system can compute every Turing computable function. This of the class Turing machines and are used to indicated that the system can simulate real life functions. Technical requirement for conditional payments are:

  1. Proof of offer and acceptance
  2. Oracle
  3. Turning complete
  4. Identity (soft requirement)

See a comparative analysis of the most promising DLT technologies here

What is your take?

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