In April, Amazon made its managed blockchain available to the public. Two weeks later, the company announced that it would offer $10,000 to any employee who quit Amazon and formed their own delivery company.
While the two announcements may not seem immediately connected, the relationship is there if you scratch the surface. But before I get into why, let me back up a little. Since blockchain exploded into the public consciousness with the price surge of Bitcoin in late 2017, business leaders have been wondering whether they should be exploring blockchain solutions. When Amazon made launching a blockchain as easy as opening a Facebook account this year, the question took on new urgency.
Today, though, it’s still not a viable technology for most business applications. Here’s why.
When blockchain makes sense
Blockchain is a technology that consists of a digital “chain” made up of individual “blocks” or data inputs. The chain is immutable, meaning that once a block is added, it cannot be changed or removed by any party. It’s also shared; no single party has control over the chain.
So, at a very high level, blockchain tends to make sense for businesses that have a need for an immutable record of transactions and are willing to share their data with a third party (or multiple third parties).
While the first half of that proposition appeals to a lot of organisations (banks, for example), the second half – the part about sharing data – often does not.
“A solution in search of a problem”
I’ve talked to a lot of business leaders interested in exploring how blockchain could support their operations. But it’s rare that blockchain is a simpler and more efficient solution than whatever the organisation is currently using.
In fact, most blockchain efforts out there (with the exception of cryptocurrency) are still in the pilot stage as various groups try to see what will and won’t work.
Take, for example, the state of Illinois, which has partnered with blockchain company Hashed Health to create a blockchain-based pilot program to help issue and track medical licenses. The use case is compelling: government data is a great candidate for sharing publicly, and medical licenses are the kind of sensitive data it makes sense to make untamperable.
And just because we haven’t found many workable applications yet doesn’t mean they’re out there. That’s exactly what happened when economist Alvin Roth developed a model for trading houses without money – a lot of people made fun of him, until it found its home as the structure for America’s kidney donation bank.
Blockchain for partnerships?
One blockchain application many analysts have proposed is partnerships that require close collaboration. In that situation, blockchain would allow for a sort of “trust but verify” approach, ensuring that no party could manipulate the transaction record.
An example, you say? Oh, I don’t know, maybe… a major online retailer like Amazon partnering with a lot of dispersed delivery companies and interested in transparently managing the supply chain.
To be clear, I’m speculating here. But Amazon rarely does things that don’t benefit Amazon directly, and the timing coincidence of the two announcements is striking.
Should your company use blockchain?
As I said in the beginning, blockchain isn’t a viable solution for most companies right now. But that doesn’t mean you should write it off without considering it. Generally, I’d say blockchain may benefit your company if:
- You’re pretty big – medium to enterprise level – or you have a dedicated dev team used to building software and developing systems. The blockchain by itself is useless; to make it work, you’ll have to figure out how to build it into an application, which means you’ll have to have the internal resources for that project
- You’re willing to share your data. That’s baked into the nature of blockchain. It’s non-negotiable
- You need an immutable ledger. This is probably the easiest criterion to meet, but note that needing an immutable ledger alone isn’t reason enough to adopt blockchain
- Blockchain is simpler and less complex than any other solution out there. This is the real kicker. If you’re only using blockchain to use blockchain – and using it adds complexity to your company – it’s not a good solution
In other words, if you’re mainly interested in blockchain because you feel like you should be, you’re probably safe letting other people experiment before you invest a bunch of resources.
Interested in hearing more in person? Find out more at the Blockchain Expo World Series, Global, Europe and North America.