Blockchain Technologies and Data Management

By Emil Torosyan, MA, MBA and Yannick Willemin, Eng., MBA

Decentralised storage systems, such as blockchain technologies, may soon become an additional method for data management and storage. The previous article presented a brief introduction about the data life cycle, its stages and how data operates through centralized storage systems. This short article will largely focus on how blockchain technologies can be used for data lifecycle management and data storage. It will introduce its benefits and shortcomings and it`s application in today`s world.

Blockchain technologies provide an opportunity to potentially manage the data life cycle more efficiently. The first question here what is blockchain and what exactly it is offering? A Blockchain is best defined as a solution to the double-spending problem (e.g. consensus mechanisms) using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions [1]. The participants (i.e. nodes), of this decentralised network record their transactions into blocks which are aggregating chronologically onto a chain: the blockchain [2]. As such, ‘the blockchain is a distributed [network] that does not rely on a trusted central authority to maintain and validate the ledger’ [3]. The blockchain is commonly referred as the ‘internet of value’ as it goes beyond decentralised financial system with the rise of decentralised markets. While Blockchain 1.0 is about finance, Blockchain 2.0 offers smart contracts, decentralised applications (Dapps) and decentralised Autonomous Organizations (DAO) to influence all types of organisational processes [4].

Managing the data lifecycle through blockchain can be quite convenient since it keeps all records intact and authentic with a possibility to store the data for a very prolonged period. Blockchain also is much more cost efficient than traditional data lifecycle management methods. While cloud storage is based on a `pay per data volume per duration` business model, blockchain requires a different business model. Indeed, a blockchain database must offer infinite storage over time. IPDB analyzed the cost per GB for a lifelong storage on their blockchain solution and came out with USD100 per GB [5].

Like any other new and quickly evolving technology, blockchain also has its weaknesses. First, the blockchain infrastructure needs to be adopted by many participants to deliver its full potential. Currently, most participants use a blockchain network in relation to cryptocurrencies. Regarding blockchain for enterprises, the landscape looks like the internet with very few websites. In such a small environment, a so-called 51 percent attack is an eventuality which needs to be taken in consideration. Such an attack happens when 51 percent or more of computers on the network start to back false information as authentic, that then treats that information as authentic even though its false. On the other hand, its decentralized character makes it difficult to steal the data and minimizes the damage from a full point of failure.

Second, blockchain’s success also largely depends on the adoption of a global regulatory framework. Countries have very different approaches on a national level while the distributed nature of blockchain requires a global regulatory framework. For now, the matter of initial coin offering (ICO) and cryptocurrencies are the focus. Blockchain at the enterprise level will follow as soon as incumbent companies join; in fact, enterprises will tokenize new revenue streams enabled by blockchain supported data management. That is only possible if a clear regulatory framework is in place. The specific issue regarding the right of being forgotten will become a challenge with a technology based on immutability. Beside the political regulation, a technical regulation, i.e. the definition of standards, is necessary for maximum integration with other technologies.

Third, the ethical topic might become a critical topic for blockchain technologies because of the potential issues with smart contracts and DAOs. Then it is about handling automated contracts and rogue companies in a decentralised system [6].

One key point regarding the adoption of blockchain-based solutions in the enterprise field is the possible integration within ERP systems. This point is currently already being addressed and all ERP system providers have specific offers with teams working to support customers willing to use blockchain systems. For example, SAP is offering a blockchain as a service (BaaS) platform. The use-cases are broad, interesting implementations currently happen in the supply chain business (joint venture between IBM and Maersk), in the public sector (administration on blockchain), and utilities (energy grid management).

The characteristics of blockchain could also potentially shorten the data lifecycle presented in the previous article. The following diagram illustrates a transition from centralized to decentralised storage system.

The last two stages of data lifecycle may become irrelevant since very little or no data will be destroyed given that blockchain could provide lifelong data storage capacity. The data archival stage could also become redundant since all data will be equally available when stored in the blocks. However, this changed yet to be observed.

It appears that blockchain can offer an effective mechanism for managing data lifecycle. However, for now it may not be quite ready for a wider use by companies since its still in its early testing stages by major players in various industries. Blockchain technologies have the potential to be the future platform for transactions. It still has certain shortcomings such as lack of a global legal framework and specific security vulnerabilities. However, with time these shortcomings may be mitigated, paving the way for its wider use. Enterprises that are currently capable to introduce blockchain technologies to manage data that is not vulnerable to described shortcomings are standing to benefit the most when blockchain becomes the platform for transactions.

References: [1] Nakamoto, 2008; [2] Cohen and Mougayar, January 2015; [3] Berg et al., 2017; [4] Swan, 2015, pp.9-10; [5] Jamila Omaar, July 2017; [6] O’Dwyer, 2015, p.3