If billion-dollar corporate investments are anything to go by, blockchain is one of the most promising technologies of the century. While it may seem difficult to understand at first, blockchain technology can be easy to grasp with the right approach, even for those who consider themselves not “tech-savvy.”
More than three-quarters of executives around the world think blockchain-based assets will be a "strong alternative to or replacement for" fiat in the next five to 10 years, according to audit firm Deloitte’s 2021 Global Blockchain Survey.
The decision to explore and invest in blockchain “could prove as valuable as capitalizing on the internet 20 years ago across many industries. The incumbents who scoffed at the internet quickly became market laggards,” Zachary Schwartzman, blockchain investor and former Internet Analyst at RBC Capital Markets, told CoinDesk.
Here’s our guide to make sure you understand the real-world applications of the technology and how it can benefit your company.
Understand enterprise blockchain and its applications
First things first: Get up to speed with the basics of blockchains. Next, start to unpack what blockchain can offer for your business.
So maybe think of blockchain – a system of digital ledger – as a more complex, secure and interactive version of Excel. That’s why it’s so useful for payments; it’s just a matter of change in balances on the database ($10 less for you, $10 more for me). But there are also other uses, as companies around the world adopt it for their purposes.
“While in many ways still in its infancy, blockchain technology has already demonstrated some real-world use cases for corporations and enterprises. In the payments and supply chain management spaces, for example, digital ledgers provide powerful means for decentralized tracking around the globe or creating shared databases to better record and monitor transactions in real-time,” Steve Bassi, co-founder and CEO of PolySwarm, told CoinDesk. PolySwarm is a decentralized, crowdsourced threat-intelligence-security provider.
Brendan Playford, co-founder of Masa Finance, a decentralized financial data platform, told CoinDesk that one important use case for blockchains lies in helping “the end-to-end tracking and product-verification, from the manufacturing floor all the way to the consumer, ensuring both quality control and authentication.”
The real-world applications of that kind of tracking and authentication of products are easy to envision. For instance, a consortium of luxury brands including LVNM, Prada and Cartier has already launched a consortium blockchain to tackle counterfeit goods. Even whiskey and watch brands are leveraging blockchain to fight fakes.
That all said, another equally important question your company needs to ask is …
Do you really need blockchain solutions?
It’s nice to experiment with innovations and apply new shiny technological solutions. But don’t make the mistake of creating imaginary problems that blockchain can solve. Or deciding that it’s necessary to migrate something to the blockchain just to “get on the blockchain” when current processes are working well.
Jae Yang, CEO and founder of compliance software company Tacen, told CoinDesk that blockchain could be useful as it eliminates the need for trusting counterparties. But, he said, “most companies don’t really need blockchains. It depends on whether there could be a high probability over the dispute of records, such as land titles or loan agreements.”
For businesses that regularly deal with those issues, when a dispute arises the blockchain will already have everything related to it on record, eliminating the need for going through terms and bureaucracy.
“For supply chain questions, if it’s all vertically integrated at your company, then what’s the point of having a blockchain-based system here? There has to be an incentive here. If it’s just a few parties you’re dealing with along the supply chain, then maybe you don’t need a blockchain,” he suggests.
Decide whether to prioritize decentralization
If you’ve decided that a blockchain solution will truly benefit your company, the next thing to figure out is what to prioritize in that solution.
The main consideration here is usually to decide if decentralization or efficiency is more important, as one often comes at the expense of the other. This prioritization is one reason why some companies choose to utilize a private, consortium or hybrid model of blockchain.
You can read more about the pros and cons of each here: What are the four types of blockchains?
“The issue facing companies more and more now is the blockchain trilemma – decentralization, throughput and security. Right now public blockchains haven’t fully solved for the trilemma, so companies that want to incorporate some form of blockchain-based supply chain management system or payments system are going to have to make some compromises,” Jack Saracco, co-founder and chief business development officer of digital bank Ping, told CoinDesk.
Some companies prefer decentralization, Saracco explained, but many others naturally want to prioritize high performance that results in greater throughput. Other companies want to avoid solutions involving high fees and slow transaction times. Finally, some companies need to preserve private data on the blockchain and so will need to sacrifice decentralization in favor of security.
Once you’ve figured out your priorities, you can make a blockchain choice – and no, you don’t need to build it yourself.
You don’t need to build your own blockchain
Companies like proprietary software. Although private custom-made blockchains were briefly popular among companies in the last decade, there’s been a shift to embracing public blockchains.
“There was a time when you saw a lot of public companies trying to manage supply chain issues using permissioned – or private – blockchains, and that push sort of faded away,” Masa Finance’s Playford told CoinDesk. “Increasingly, it has become clear that public blockchains are close to providing the necessary trustless infrastructure and transaction efficiency necessary for enabling enterprise applications.”
Ismael Fleing, co-founder of luxury conglomerate Arity, told CoinDesk that the blockchain industry has “an excellent mindset of collaboration,” and his company chose to collaborate with a technical partner. “There is already progress made by a lot of companies on this technology; you don't have to build your own blockchain to be able to use its benefits. … That's what we did with Everledger; they focused on the making of the technology and helped us understand the technicalities of the blockchain so that we could focus our ideas.” Arity uses blockchain to provide traceability and to show customers the stories behind their unique pieces of jewelry, immortalizing them on the blockchain.
Find and promote technically minded employees
Who should be the blockchain person at your company?
Schwartzman suggests that companies “elevate the smartest technical employee who has spent their weekends learning about crypto economics and various implementations of permissionless chains (i.e., Bitcoin, Ethereum, Solana, Polygon, Starkware, etc.) to their senior management teams.” This is because blockchain – and the crypto industry at large – takes serious time to grasp, and those already committed to it will be the most appropriate employees for this task.
Composability of data enabled by permissionless blockchains like Ethereum and layer 2, or companion, blockchains will offer the most business value derived from blockchain technology, Schwartzman believes. “Therefore, technical executives should spend time learning about permissionless blockchains,” he told CoinDesk. “I could be wrong, but I have yet to see permissioned blockchains marketed for enterprises and championed by external consultants drive business value that a shared database couldn’t.”
Get your hands dirty
How should you – or your designated employees – go about learning more about the blockchain? Nothing beats practical experience.
“Do stuff. Create a wallet, burn ETH, mint stuff and live on Twitter, Discord and Reddit,” Dimitri Tsamados, a technology growth company expert and partner at Eric Salmon & Partners, told CoinDesk. He also recommends a blockchain course, like the one offered for free by the University of Nicosia. Companies could also benefit from incubators like Outlier, he said.
For aspiring startup builders, there’s plenty of high-quality resources available. Silicon Valley venture capital firm Andreessen Horowitz (a16z) has made course videos from its Crypto Startup School 2020 available to all.
The industry lives both on the blockchain but also in many conferences around the world, where companies can make connections and learn more about the industry. McCorry suggests attending at least one conference. The connections and ideas that come out of in-person panels, roundtables and casual conversations amongst attendees are invaluable for any executive who wants to understand not only the technology but the culture and energy in cryptocurrency and blockchain.
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