Blockchain is a cloud-based network of secure and transparent transactions that has the potential to revolutionize many industries. Blockchain can enable companies to achieve true supply chain visibility, financial transparency, data security, and trust over their suppliers and other business partners. As business and government leaders realize the applications and benefits of blockchain, the global market grows (See Figure 1)
Despite the benefits of blockchain technology, its adoption so far has been slow as compared to other digital technologies such as AI, IoT, etc. Studies show that one of the main barriers to the adoption is a lack of understanding of the technology.
This article explores the top 5 best practices for blockchain implementation to help business and IT leaders better understand the technology and make better future decisions.
Figure 1. Global blockchain market growth from 2018 to 2025
Clearly set the goals of the project
Another best practice is to work out a detailed plan regarding the goals and objectives of the blockchain project before starting it. Answering the following questions can point business leaders in the right direction:
- Is a blockchain system even required in the business?
- What will be the short and long-term returns on investments?
- Who will require access to the data in the blockchain network?
- Is a database required for the project?
- Will an audit trial be required for the blockchain system?
A comprehensive plan and strategy, which can be updated as the project proceeds, should be laid out before initiating heavy investments. Businesses that require end-to-end transparency, data security, and accountability can benefit from blockchain technology.
Plan the governance structure
One of the main things that make the implementation and functioning of a blockchain network complicated is its governance model. Another best practice for business leaders is to plan and define a governance model prior to the implementation of the blockchain system. The governance model includes rules for managing and implementing changes in the operations of the blockchain network. Including the following factors is important:
- Specify how new users or parties will be added to the blockchain network
- Specify a mechanism through which bad actors can be smoothly removed from the network
- The blockchain governance model should be able to manage the politics of every user and party in the network
- The governance model should be updatable based on the changes in the procedures of the blockchain
Decide on the platform
Choosing the platform is the initial step of implementing a blockchain in your business.
Business leaders can either develop their own or use an existing platform. Having a comprehensive plan for the platform is a best practice that business and IT leaders can follow.
Consider the following factors before choosing a blockchain platform:
Centralized or decentralized
In a centralized system:
- higher management has decision-making authority
- is easy to use
- there is a lack of control over transactions
- there is less data integrity
- faster performance
In a decentralized system:
- decision making is dispersed among all the users
- there is more data integrity
- there is more control over the data
- there is higher flexibility to adapt to market demands
- slower performance
Developing a new platform can be expensive but aligned with your business while choosing an existing one provides the necessary framework, standards, guidelines, and tools to build open-source blockchains. Using an existing platform might save some money while sacrificing personalization. Another important factor to consider is that existing platforms that are initially free can be expensive and difficult to implement and use.
The development process of a new platform must be feasible and practical for the business. The project scope must be aligned with the business needs.
Mature blockchain platforms have stronger information sharing, get better support from the vendors, and have more diverse developer communities.
Private or Public
A private or permissioned blockchain gives restricted access to certain parties. These are better for businesses where data must be kept private. Public blockchains, on the other hand, are open for others to join and access the data. They also require more computer processing power since the data is shared with multiple parties. Ethereum and bitcoin are two popular public blockchain platforms, while the Hyperledger projects are private or permissioned blockchains. The Hyperledger project is an enterprise blockchain project, initiated by the Linux foundation, selecting between public and private platforms comes down to the level of privacy, security, and costs suitable for each business.
Evaluate storage costs
The main job of the blockchain platform is to recreate or replicate the data and share it with other parties. Storing large files can significantly amplify storage and computing costs. Studies show that permanently storing data on a blockchain can cost up to $100 per gigabyte (GB). Some medium to high-level transactions on a Hyperledger platform can use around 197 terabytes (TB) of storage. The approximate storage required per transaction per second per year can be seen in Figure 2.
Figure 2. Storage required on every transaction per second (TPS) per year for a blockchain ledger
Business leaders can use the following way to avoid these extra costs:
- Using efficient cloud storage systems such as Amazon’s Simple Storage System and Google Cloud Filestore to avoid extra costs on files of big size.
- Blockchain users can add links to the files stored on a network and store the actual files on whichever platform they choose.
Consider long term data security
Another important best practice while implementing and using blockchain technology is not storing personally identifiable information (PII) in the network. Even though blockchains are cryptographically secure at the moment, it does not mean that they can not be breached in the future.
It is possible that criminals can create advanced mechanisms to hack the systems in the future, and even though these breakthroughs are rare, they can have a significant impact on the organization.
In the case of a breach, the hackers can access the PII and abuse it for various criminal purposes. For instance, as technologies such as quantum computing are developed in the future, they can equip hackers to break blockchain cryptographic keys.
Therefore, not storing PII in blockchains is a critical best practice that business leaders must follow while using a blockchain system in their organization. Another way of making the blockchain quantum ready is to use quantum cryptography to make it more secure. Even though quantum cryptography is not commercially available right now, it soon might be. Learn more with this quick read.
You can also check our blockchain hub to browse through data-driven lists of blockchain tools and solutions.
If you have any questions, feel free to contact us:
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