Choose blockchain correctly and use it successfully

Blockchain technology is currently the focus of public attention. In addition to the use of cryptocurrencies, the use of the technology in companies is increasingly being discussed. This is the case because the secure and efficient processing of transactions on the internet is gaining in importance with the advancing digitalisation. Blockchain technology makes a decisive contribution to this.

Use of Blockchain
Blockchain as a decentralized system of distributed databases can guarantee the integrity of a transaction theory based on consensus algorithms. With so-called smart contracts, i.e. with predefined rules and contracts accepted by all parties, transactions between the parties can be automated. This leads to the minimization of transaction costs and to efficiency increases within the value chain of a company and thus to competitive advantages. A smart contract maps the agreement between two parties on the blockchain. It continuously checks whether a contractually agreed situation occurs and automatically executes the action previously defined in the program code.

Smart contracts thus enable process and business model innovations. This is why the companies in a global study by management consultants Deloitte consider the relevance of blockchain as one of their five strategic priorities. More than 80 % of the respondents believe that the technology will become established in the coming years.

Choice of blockchain
Today, different decision models can be used to evaluate whether the use of blockchain technology is suitable for a use case. Most of the models originate from consulting practice. Scientifically based models focus in particular on systematic criteria according to which the suitability of the use of a blockchain solution is evaluated. Companies can proceed as follows during the evaluation:

1. First, the need for multiple verifying parties in a use case is examined. Furthermore, the data storage is examined to determine whether a transaction history that can be traced by all parties must be stored or whether a traditional database must be used.
2. It is analyzed whether a trusted intermediary is required for the voting function and the data storage. If this is the case, the availability of a trusted third party is checked. If no such third party exists, the use of blockchain can be considered.
3. The need for public access to the blockchain is clarified, as well as the level of awareness and trust of the participants The choice of blockchain infrastructure depends on these aspects.
4. The speed of the trans- actions required for the applications is clarified.

The result of this systematic approach is the creation of a proposal for the use of a restricted or non-restricted private or public blockchain. However, the analysis can also lead to the conclusion that no blockchain is required.

Types of Blockchain
There are basically two types of blockchain: public and private. Public blockchains are chosen if the network is to be usable by every participant without restriction and access is open to all. This corresponds to the idea of the open Internet. Since public blockchains are available to all, the system requires a proof-of-work or proof-of-stake procedure to ensure that no abuses can take place. In contrast, a private blockchain is chosen if access to a closed network is only to be possible by authorization.

Choice of blockchain infrastructure
Every blockchain initiative requires the selection of a suitable blockchain infrastructure. In the meantime, there is a wide range of such infrastructures, some of which differ significantly in their application possibilities. The question for companies is what goal they are pursuing with a blockchain and what added value the corresponding infrastructure should offer.

There are public and private blockchains. Public blockchains are, for example, Bitcoin and Ethereum. The latter offers developers and users software components and solutions for the development of decentralised applications, so-called DApps. Blockchain applications of various kinds can be programmed. Ethereum is free of charge and can be freely programmed by anyone. Every user of DApps can access the Ethereum blockchain. Ethereum can be used in three application areas in particular:

- In areas of blockchain-based IT, where information is stored in an Ethereum-based digital ledger that is more effi- cient than today's centralized identification methods and has great potential in proving authenticity and quality.

- in the supply chain and logistics, where blockchain should provide transparency and immutability and thus facilitate logistics processing and detect deficiencies in supply chains

- In Internet of Things device management, where Ethe- reum-based applications create smart contracts to enable in- teractions of connected devices.

In addition to the advantages of the independent decentralized platform as well as the possibilities of individualized blockchain solutions, the disadvantages of Ethereum are the limited scalability due to the con- sideration and the lack of confidentiality of the transaction data.

Private projects or consortia, on the other hand, often rely on private blockchains. Hyperledger, for example, is an open source platform for private and access-restricted decentralized databases. This enables companies to develop their own blockchain solutions. For example, the Hyperledger-based Hyperledger Fabric is based on a plug-and-play system in which the consensus algorithm is determinable and tools are available for implementing a private blockchain. This enables the correct allocation of rights and information to the network participants.

Hyperledger impresses with its high scalability. It also offers easy-to-implement solutions for information and rights management. With standardized modular solutions as well as the high throughput speed, these are optimal conditions for the use for private and closed projects. Hyperledger can also be used in the financial sector, although the modular architecture cannot cover all special cases in the financial sector.

In contrast, B3i, a reinsurance consortium based in Trust Square in Zurich, relies on R3 Corda, for example. Corda is the leading platform for establishing access-restricted blockchains specific to the financial industry. The platform impresses with its high scalability and the possibility of integrating meta files such as contracts into the blockchain. R3 Corda was developed by

The blockchain has been developed by banks and technology companies to implement private and restricted-access blockchain solutions, to implement smart contracts, and to achieve consensus generation at the transaction level instead of the network level. Specific features ensure that inter-party transactions are unique and valid. The platform also has a high throughput speed. It is also possible to attach agreements and contracts to the transactions.

Platforms with advantages and disadvantages
In summary, Ethereum is a relatively quickly deployable platform, while Hyperledger Fabric scores with its modular structure. R3 Corda is particularly suitable for access-restricted solutions. In terms of transaction volumes, public blockchain platforms lag significantly behind private ones, while in terms of transaction fees, all platforms are far superior to today's central systems.