Q: What kind of data is blockchain designed to store and are disadvantages associated with blockchain that businesses need to be mindful of?
A: The answer is yes, and there are lots. It's essential to understand where blockchain is useful as well as where it's not so good. When you have legacy systems in place, businesses need to know how to integrate and connect to a blockchain network. Very infrequently does a blockchain network come along and replace a legacy system. It does supplement or complement a legacy system. In most cases of what people are doing today, they're trying to reconcile different databases. What that means, for example, is that if a company has a list of shipping records, they enter that onto a sheet, they email that over to me, I pull them out of the spreadsheet and try to reconcile them against all of my shipping records. With a blockchain system, the shipper and have access to the same database.
But not everything goes onto the blockchain—only a very minimal set. Blockchain is not designed for recording absolutely everything, and there are reasons for that:
1. Personal information
Putting personal information onto a blockchain has the potential to violate GDPR (general data protection regulation). Blockchain has a concept of immutability, meaning that once it's written onto the blockchain, it can never be changed, edited or deleted. If you put personal information into the blockchain and someone chooses to exercise their right to be forgotten, you've got a problem.
2. A lot of commercially-sensitive information should not be recorded on the blockchain.
A lot of commercially-sensitive information should not be recorded on the blockchain. For example, if you and I were to do a business deal and I want to trace that deal across the supply chain, that's fine. But, I don't want someone else to be able to see the commercial details of how much I bought, how much I paid for it, or even the fact that I'm buying and selling to you. Businesses need to put enough information onto the blockchain to meet goals of provenance, tracing and tracking. Still, other types of information are better suited to sit in nearby or legacy systems that keep commercially-sensitive data out of the way.
3. Blockchain is not designed for big database queries.
Blockchain is not designed for big database queries. Sometimes, companies will want to run analysis on the supply chain, and they might want to ask questions like how much of a product is going from country to country, or how much of this product sells from X to Y. What you need for those types of queries is a relational database. In database language, blockchains are what we call 'flat files.' They're just simple, long Excel spreadsheets and they're not designed for in-depth queries. What business might need is to migrate the data from the blockchain into a separate database, and then run queries.
There are other common misconceptions, especially around energy and electricity consumption. These can be true of the Bitcoin public blockchain but are not true of all enterprise blockchain protocols. Another misunderstanding is that blockchain is slow—it can only complete 7-10 transactions per second. Again, this speed limitation of Bitcoin and it's true of Ethereum, but it's not true of Hyperledger Fabric or EOS and a bunch of others.
The classic concerns about the why blockchain isn't used at the enterprise level are that it's not performant, too transparent, or uses too much energy. With a good understanding of blockchain technology, it becomes clear that these are only true in some circumstances and that there are other "flavours" of blockchain which are very well suited for use in the enterprise.
In part 3, we dive a little deeper into the discussion around the energy efficiency of blockchain technology.