When should I use blockchain and when a database?
A lot of companies and consultants are looking for meaningful use cases and blockchain implementations, the problem is no one has really experience dealing with the professional blockchain principles, architectures or the technologies. The result of the first considerations could be the transfer of existing concepts to blockchain technologies. This way, consulting companies will make a lot of money, but sustainable solutions will not be produced. The result will be very complex and expensive systems where solutions with a simple database and an standard application server would have been cheaper and better.
What are the parameters you can look for to find the right decision?
Business model: If the business between two partners 1:1, or sell company products or service to many companies 1: many, or sell many marketers something to many customers many: many
Governance of the IT solution and the business model: Is one of the partners responsible for the IT solution and business model?
IT platform: Is the IT platform, e.g. Application Server, etc central or distributed over many participants?
Let’s look at all possible combinations which can work and which are suitable for a blockchain solution:
| Business Modell | Governance | IT Architecture | Solution |
|---|---|---|---|
| 1:1 | database | ||
| 1:many | database | ||
| many:many | single/hierarchical | central | database - platform use case |
| cooperative | central | fail | |
| single/hierarchical | decentral | DLT or blockchain | |
| cooperative | decentral | blockchain |
If the transaction only takes place between two parties or a supplier sells a product to many customers, then a blockchain based solution is probably not the appropriate approach in many cases. But it is possible to use it, if the features of a blockchain are helpful, i.e. you want to have journal where you can prove the immutability of electronic contratcs or publication. The functionality of stampery is good example for it.
Blockchain is more exciting in a market where many suppliers want to sell something to even more customers.
If one chooses a hierarchical governance and a central IT architecture with central databases and application servers, the result will be a classic Silicon Valley platform approach. The money will be made by the platform providers like Uber, Amazon or Ebay.
Theoretically, a solution with cooperative governance and a central IT solution could work. All the projects I have seen so far in the way have failed terribly, it’s not possible for the central solution to fulfill all unspoken requirements from different stakeholders with more or less equal rights.
There are still two useful scenarios:
Hierarchical professional business and technical control and specifications and decentralized IT architecture. The technical features of the blockchain are in the foreground, transparency, stability, etc. can be the base of an successful and useful IT system.
When governance is cooperative and the IT system is decentralized, all basics for a sustained system are given. Everyone can define the type of the deployment, features of his front-ends and services. Every participant can decide which services he offers himself and which one can used from someone else. This is the most useful scenario for the blockchain.
But ….. blockchain based application doesn’t mean it’s blockchain only.
If you decide in a business application for a blockchain, however, this does not mean that you are building a blockchain only application. The blockchain remains the right platform for the transaction data; all the others should be stored outside the blockchain, since otherwise you would have to spend a lot of time to encrypt and decrypt data.
It’s a hard job to find the right blockchain architecture principles, everybody enters new territory.