Blockchain Demystified: What it is and How it’s Transforming Business Analysis
Ever since the emergence of cryptocurrency, one of the most known and infamous uses of the blockchain technology, the industry has struggled to leverage blockchain as a value driver. Nowadays, it is commonly described as a technology solution in search of a business use case. Despite the burgeoning investments into research and numerous startups operating under the umbrella of blockchain, not many business applications have really captured the value locked within blockchain technologies. The necessity for communicating the varying use cases for blockchain to a variety of audiences who have differing levels of technology understandings and divergent business needs remains a critical gap.
For blockchain-based initiatives to be successful, disparate applications must evolve from their fringe projects to widespread industry acceptance. Pilot programs leveraging blockchain usually involve stakeholders who grasp the nuances of the technology behind blockchain but lack an enterprise outlook or scope. Therefore, business leaders and executives must step in and decipher whether blockchain is the right solution to address their problems. In order to assess whether the use of blockchain provides true value, all decision-makers must have a foundational knowledge and appreciation of blockchain as a technology. Business analysis professionals play a vital role in promoting a shared understanding within an initiative or across the enterprise. They must consider a twofold approach when engaged in a blockchain undertaking. First, they must contemplate the relatively benign question of “What is blockchain?” Second, they must determine in what context it is useful in delivering value to the enterprise. Both these issues are explored in detail within IIBA’s latest technology whitepaper on blockchain, “Business Analysis in the Blockchain Age.” A simple explanation of blockchain and its potential industry use cases are described below.
What is Blockchain?
Blockchain is a distributed and irreversible ledger of registered transactions that is replicated peer-to-peer among networked and synchronized database systems that utilize built-in security technologies. This definition may seem like a mouthful, but it can be easily understood when we break it down into parts. Simply stated, the distributed and irreversible ledger indicates that blockchain is a type of database which is shared among many participants, and every time data is written to this database the updates are permanent. Each transaction is communicated simultaneously so that all participants have an identical copy of the database. The “ledger” term refers to the ongoing appending of each update to a physical accounting ledger (for example), so that the previous information is not lost. These transactions are made virtually tamper-proof by utilizing built-in security features that rely on cryptographic techniques. Now to put it all together, the unique proposition for blockchain is the ability to process data in an efficient, verifiable, and secure manner. So, it begs the question, how is the use of blockchain different from traditional databases and data management systems? The answer is that blockchain is especially useful when transactions take place in a low trust environment of participants or when a trusted intermediary is not available. The foundation for deciding whether blockchain can help relies on the business context in which data integrity must be maintained. For example, cryptocurrency transactions require an online environment and a need for anonymity among participants who share a low expectation of mutual trust. Essentially, blockchain involves greater ecosystem planning, a costlier implementation, and a much more focused application than traditional databases. Although, there are many ways to portray the types and configurations of blockchain models, blockchain can best be depicted by the type of participants in a blockchain environment, versus the level of consent granted, as shown in the below chart.
Typical applications of blockchain
Once the BA professional understands and communicates the essence of blockchain to the wider audience of decision-makers in an enterprise, it is easier for these stakeholders to derive value from blockchain as a solution. Further, a knowledge of typical industry business use cases where blockchain can be utilized prompts the discovery of specific use cases for an organization.
Supply chain management: Application of blockchain that promotes traceability and transparency about the movement of goods from the originating producer to the retailer.
Healthcare: Application of blockchain to Electronic Health Records (EHRs) that contain information from all the clinicians involved in a patient’s care. These records follow each patient over their life and enable accurate tracking of a patient’s condition at any point in time.
Contract management: Application of blockchain for storing, maintaining and validating each stage of business contracts to provide transparency and regulatory compliance.
Higher education: Protection of intellectual properties and faculty research as digital documents throughout multiple stages of revisions to maintain a single source of truth.