Should you develop a blockchain app?

Science and technology journalist, Gary Eastwood, weighs in on the pros and cons of developing a blockchain app


There are always tech terms which ordinary business owners decide will save or revolutionize their businesses, and “blockchain” is now the latest buzzword (after “cloud” or “big bata”). Technology companies like IBM are exploring the potential of blockchain by making it easier for businesses to create their own blockchain app through Hyperledger Composer.

But just because a business can develop a blockchain app does not mean that it should. Blockchain is still a developing technology with flaws, and businesses need to understand how it works to figure out how they would benefit from a blockchain app. That can only be done by looking at facts and avoiding hype which proclaims blockchain to be “the future.”

Understanding blockchain

Blockchain has existed for about a decade and is closely associated with the cryptocurrency Bitcoin. But a growing number of businesses and banks understand today that Bitcoin and blockchain are not intrinsically linked, and that blockchains do not have to involve currency at all.

A blockchain is fundamentally a ledger or database recording transactions, but with several differences. For example, while new entries or “blocks” can be added to a blockchain, past entries are cryptographically prevented from deletion or editing by any single party. The ledger is also decentralized and shared between the affected parties, which helps to ensure trust.

Let us suppose that Harry, Pete, and Sally share a blockchain ledger detailing financial transactions they have made with each other. Because the transactions are shared and open between the three of them, they do not have to ask a trusted third-party like a bank to verify that each person’s ledger has not been tampered with. Furthermore, Sally would not be able to tamper with her own ledger in an attempt to claim that Harry had underpaid her without altering someone else’s ledger at the same time. The result is a more trustworthy, efficient method of verifying payments and transactions.

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A new, better database

Businesses can understand whether they should use a blockchain app by looking at current examples. Business Insider has detailed a few examples, noting how blockchain could help homeowners sell their property, provide a better means of organizing supply chain data, and modernize the antiquated process of trade finance.

The key is that all of these examples have a few things in common. They make transactions easier to do or more accessible to groups who may not have had the resources to hire a trusted third party to monitor transactions. Things like OPEN Platform have helped developers immensely, but a homeowner would still have to wait to sell his home until a blockchain ledger verified that he received the appropriate funds, as opposed to relying on a bank to do it for him.

But not all businesses really need to make transactions easier. Most businesses already have a verification process in place, embedded within types of artificial intelligence techniques, with existing banks, and there is no immediate reason to upend everything by betting on a new technology. Furthermore, blockchain works best in a large network with a widely distributed number of nodes or customers. Small businesses with a very limited number of customers will thus not reap as much benefit.

Blockchain’s downsides

Even if your business does not need blockchain’s benefits, you might ask if direct harm can result from building an app. And in fact, there are downsides beyond wasting time and resources to build a blockchain app that no one uses.

Blockchain is not quite as secure as its enthusiasts claim. If we go back to the example of Harry, Sally, and Pete, we discussed how Sally could not tamper with the ledger to defraud Harry by herself. But what if Sally got together with Pete and they both decided to alter the ledger? Because they represent most of this small network, their altered ledger would become truth and Harry’s would become the lie. This is known as a “51% hack,” and is why a small blockchain network carries higher risk. And the numerous stories of Bitcoin wallet providers being hacked also shows that the cryptocurrency and by extension Blockchain still are vulnerable to security flaws.

There is also a risk that if your business conducts a transaction with a customer through blockchain, the customer could then see your entire company’s transaction history by examining your ledger. Blockchain has to balance transparency and privacy, and some businesses may feel that it is currently too transparent.

To develop or not?

I do not want to scare businesses away from developing a blockchain app. If your business is constrained by its database architecture, or if you do not want the expense of relying on a third-party to verify that ledgers are accurate, then blockchain apps can be useful.

But there are businesses using blockchain as nothing more than a tool to build up hype for their businesses (hello, Long Blockchain Inc.) instead of soberly pondering how blockchain apps can help their businesses. Do not create a blockchain app just to be a part of the future. Create a blockchain app because your business will benefit from providing a faster and more secure transaction process. That will help your business more in the long run than any immediate hype. 

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