From finance and banking to procurement, retail and healthcare, many organizations are actively investigating Blockchain’s potential for their own specific needs. But the common denominator across all industries is a basic lack of understanding around what exactly blockchain is.
Before businesses can truly explore the possibilities for corporate applications of blockchain, they must separate the mythology surrounding blockchain from reality. The following three myths have been especially misleading:
Myth 1: It’s impossible to tamper with blockchain
Blockchain companies and enthusiasts talk a lot about the immutability of data on a chain — it’s one of the technology’s key selling points. But it’s not technically possible to guarantee complete immutability – data can, in fact, be altered once written. It’s excessively expensive, and therefore economically unattractive, to tamper with a blockchain, but it’s possible. And for some applications, the ability to make changes may even be required. Errors, fraud, bugs, and a number of other factors may require a record to be removed from the chain.
Myth 2: Blockchain provides 24/7 transparency
A main attraction to blockchain technology is its inherent transparency; however, this isn’t always appropriate or even legal due to privacy and data protection laws, which dictate that not everyone should be able to see all the data within the blockchain. Crucial security concerns, such as potentially exposing the physical address of someone who has just purchased a valuable item, will always trump the desire for greater transparency.
Companies need to understand how to implement blockchain while minding data and privacy regulations. And in the retail use case above, companies will need to take commercial confidentiality and antitrust considerations into account as well. That’s why companies may look to develop and pursue blockchain-inspired solutions rather than pure blockchain architectures.
Myth 3: Code is law, as are smart contracts
Blockchain-based systems are appealing because they provide decentralized and secure processing of transactions and events. However, there is a common assumption that “code is law” with these new transactional platforms.
The concept of “smart,” self-executing contracts is that you can avoid intermediaries – for example, an automatic refund can be issued to a customer when a service isn’t delivered as promised. However, these codes are not laws. Smart contracts are merely business rules encoded in software – and they’re only as good as the person who created the rule itself and the programmer translating it into code. Organizations must remember that code is not law and that smart contracts are not legally binding without separate contractual agreements.
Start with your use case
IT executives exploring what blockchain can be used for are left wondering whether it will be cost effective or even practical to implement. To uncover what is realistic for their business, they need to have a clear understanding of what the technology can and cannot do.
Discovering what’s realistic starts with understanding the use case. What problems do you need to solve? What opportunity are you trying to capture, and why hasn’t this problem already been solved with other technology?
For instance, if your circumstance requires assurance that data hasn’t been tampered with, or if you rely on costly and complex transaction processes, it’s likely worth continuing to explore a blockchain-based solution. But before you embark on this this journey, be sure to consider its entire possibilities and limits, not overestimating its effect in the short run or underestimating its effect in the long run.