Blockchain for Business: Three Key Concepts

When it comes to deciding whether blockchain is right for your business, there are a number of things to consider.  It’s important to have a basic understanding of the main concepts that blockchain brings to the table in order to make an informed decision. First and foremost, recall that blockchain is a distributed, immutable ledger; beyond that are fundamental components that make it unique, including permissions, consensus mechanism, and smart contracts. Understanding each of these components will better help you navigate the technology and determine if it could be in your near future.

Not all blockchains are the same. Some are permissioned and some are permissionless.

Permissionless blockchains are exactly as they sound—anyone is allowed to participate in them. While that might be good for marketplaces and the exchange of ideas, it is not ideal for industries or use cases that require knowing who you’re doing business with.

For that reason, business blockchain implementations gravitate toward permissioned blockchains. In a permissioned blockchain, each participant is identified, and a business can set specific policies that constrain network participation, activities, and access to data and transaction details. Because of this, permissioned blockchains make it especially easy to comply with certain regulations such as HIPAA or KYC (Know Your Customer).

Consensus refers to the process used among network participants to verify and make updates to the ledger. Essentially, consensus decentralizes control of data within the network by providing the criteria and rules for adding data so that no one party controls how it is written to the ledger.

There are several ways to achieve consensus as well as to make decisions around implementation details such as when your consensus approach should include protocols like Proof of Work. Having these choices in consensus mechanisms is important to allow businesses to tailor the network so that it fits the needs of their organization or industry.

Smart contracts are business logic in the form of code that is stored on the blockchain and shared among participants. A smart contract acts as an agreement or set of rules that govern a business transaction.  By enabling transparent, repeatable, and secure business processes and workflows, smart contracts can help to simplify and reduce risk in transactions and serve as a fundamental building block for business solutions built on blockchains.

Permissions, consensus, and smart contracts—each are unique and all are necessary to understand when considering the idea of enterprise blockchain implementation. If you have any questions, or would like us to speak in more depth on any concepts discussed above, please feel free to contact us using the link below.