Do You Need A Blockchain

Blockchain is the technology of 2017. You may thank bitcoin, altcoins (cryptocurrency), and ICOs (Initial Coin Offering) for the rise of blockchain. Thousands of projects have already been built on top of blockchain and more projects are being created every day.

According to a survey, 58% of large enterprises are thinking of a way to implement blockchain in their projects. But, do they really need a blockchain?

In this article, you’ll learn the purpose of blockchain and what questions you should be asking yourself before making a decision on blockchain.

Why now?

The blockchain concept was first introduced by Stuart Haber and W. Scott Stornetta in 1991 as “a cryptographically secured chain of blocks,” which means a chain or blocks that are linked and cryptographically secured. Each block is a combination of three items; a hash pointer to the previous block, a timestamp, and transaction data. By design, blockchains are secure and difficult to modify.

There are three key reasons why blockchain is becoming mainstream today:

  1. Increased digital processing power
  2. Rapid growth in cybercrimes
  3. Rise of bitcoin and cryptocurrency

Blockchain, by design, requires higher processing power than normal data computing. It is all because of redundancy of data, distributed storage, and cryptography. Data encryption and decryption is a costly affair by nature. Today, computers have more processing power thanks to modern processors developed by NIVIDIA.

Blockchain is seen as a shield against cybercrime.

Cybercrime has grown multifold in the past few years. The hacking of a billion-plus Yahoo accounts, the Equifax data breach, and increased ransomware damages are just a few incidents. As a matter of fact, over one million cyber threats are released every day and by 2020, over 200 billion IOT devices will need security. Today, Cyber Security is one of the biggest challenges for CEOs.

Bitcoin and cryptocurrency are one of the biggest reasons for the increasing popularity of blockchain. Bitcoin is a cryptocurrency created by an anonymous person named Satoshi Nakamoto, who used blockchain technology to create and distribute secure digital currency.

Fundamental problem

Today, blockchain is “the blockchain” because of Bitcoin. And if you look at the reason why Bitcoin was created, there is one word that can describe it better than anything else, i.e., TRUST. Bitcoin was created to overcome the mistrust and non-transparency of financial institutions.

Blockchain brings trust to a transactional system.

So, my first question to you is, is your system (current or new) missing the trust factor? Do you need to prove to your customers that the transactions are verified and validated by unbiased third-parties?

Understand blockchain

Blockchain is only good for transactional systems. Let’s look at the definition of blockchain:

Blockchain is a technology to create and maintain a cryptographically secure, shared, and distributed ledger (a database) for transactions. Blockchain brings trust, accountability, and transparency to digital transactions.

All transactions that exist on a blockchain are shared and distributed among a network of peer-to-peer computers. Transactions are encrypted and decrypted using private and public keys.

Watch this video to learn what blockchain is:

Let’s remove the security part from the list. I bet most of the enterprise systems do not want to be public, transparent, or distributed. Also, a system built on blockchain does not only take a longer time to process transactions, but also requires many more times the resources, such as processing, electricity, and data transfer. If that is the case, you don’t really need blockchain.

Here are some of the questions you need to answer.

  1. Is your system a database/transaction based system?
  2. Is speed and performance a major need of your system?
  3. Does your system need to be transparent and public?
  4. Are you OK to distribute your data to millions on public and shared computers?
  5. Does your system need approval from a crowd?
  6. Of course, security is a major need of today’s systems, but does your current technology not provide all security options?
  7. Are you OK to make your project open source and public?
Ask these questions:
The following decision diagram will help you navigate through your questions and lead you to your answer.



Figure. Blockchain Decision Maker


Blockchain technology fundamentally has a problem and it’s not for everyone. Splitting a single transaction into blocks, distributing, and duplicating it on millions of computers, getting approval from them, encrypting and decrypting is a lot of work and it's not feasible for most systems.

Here are some of the key challenges with blockchain.


As we’ve seen in our earlier definition, blockchain is not easy to implement. Data is redundant on millions of distributed computers and all these computers must agree and validate. All users on a blockchain are public but anonymous, and can be anywhere in the world. It’s not something where you can pick up a phone and make a call. Blockchain technology isn’t easy to understand by non-technical people and requires an expert level of understanding of technology.

Public and Transparent

Not all systems need to be public and transparent. A blockchain based system requires approval from all participating nodes. While the blockchain process is public and transparent, it could easily lead to some disagreement among participating parties and delay the processing.

Performance and Time

Performance is a major concern in a blockchain transaction. Each transaction is distributed and peer-to-peer and requires all involved parties to validate and approve the changes. Not only does the process lead to a transaction performance but the time of completion is high.

Transaction cost

Distributing data and cryptographical operations are time- and resource-consuming and lead to higher transaction costs. Blockchain transactions require a special kind of hardware and have a high demand for electricity. Normal computers aren’t sufficient to participate as blockchain nodes. You will need to spend thousands of dollars on new computers that can support blockchain transaction processing.

Open Source

Public blockchain software is open source and usually available in Github to download and contribute to the public.