Distributed Ledger Technology - A Practical Framework

Introduction

We are seeing tremendous amount of Hype around Distributed Ledger Technology (DLT) or Blockchain as it is popularly known, since last 1-2 years. Blockchain is a type of DLT, since many are accustomed to the word Blockchain we will use that terminology here.  

Blockchain has been hailed as the solution for everything, from resolving global financial inequality, providing IDs for refugees, to enabling people to sell their houses without an estate agent. Industry experts project on average that the technology will take more than 5 years to gain widespread adoption, according to a Cowen survey. Many blockchain enthusiasts also say the technology will work best not as a new system within private enterprise, but in its pure form — an open-source, publicly accessible platform powered by a global network of users.

We are seeing many blockchain companies mushrooming and it quite amusing to see introductions such as “xyz corporation is focused on developing and investing in globally scalable blockchain technology solutions. It is dedicated to becoming a significant blockchain business that creates long term value for its shareholders and the wider community by investing in and developing businesses that are on-chain", without them really understanding the effort and legwork needed to make a blockchain work (other than of-course crypto-currencies).

In summary:

• Overwhelming amount of hype surrounding Distributed Ledger Technology (blockchain is a type) in recent times
• Proposed as a solution to wide range of problems without sensible approach to the technology
• Large number of evangelist who believe almost every industry problem can be solved by DLT including buying and see
• A knee-jerk pivot to DLT when other existing technologies could suffice.  Consumes resources in pointless experiments and down the development of sustainable solutions for the problems at hand
• The high enthusiasm and over dependence on DLT as saviour to problems may damage long term prospects

There are practical use cases for which DLT will be appropriate and it requires some of work and investment. The movement toward cashless societies, a peer-to-peer (P2P) economic infrastructure, new asset classes, possibilities of digital fiat issuance and different trust mechanisms are critical to understand in the context of blockchain. It is important to go through the grind and get it right and embed in organisations and industries  

Decision Framework – when to use DLT/Blockchain

Before getting into the framework it is important to know the types of DLT, which the picture below will make it clear.

The answers to the question on below flow diagram may help quick analysis whether a blockchain is appropriate solution for a given problem or not.  Blockchain gurus can probably give more authoritative answers and probably recommend a better framework.

Almost every day new use cases are coming up.

So, it will be good to use this generic framework something like below: