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WEF releases framework to assist business decisions regarding blockchain adoption

WEF releases framework to assist business decisions regarding blockchain adoption

The World Economic Forum (WEF) has released
a white paper, presenting a practical framework designed to assist executives
in understanding whether blockchain or distributed ledger technology (DLT) is
an appropriate and helpful tool for their business needs.

The toolkit is based on real-world experience of blockchain
in a variety of projects across a variety of industries that have been analysed
by Imperial College London to develop an initial framework. The framework has
been reviewed and further developed by members of the 2017 World Economic
Forum’s Global Future Council on Blockchain and has been trialled through a
variety of means, including with global chief executive officers (CEOs) at the
World Economic Forum Annual Meeting 2018 in Davos-Klosters.

Over the coming months, the World Economic Forum’s Center
for the Fourth Industrial Revolution, in partnership with various institutions,
plans to release customised versions of this toolkit focused on specific
sectors and use cases.

The report emphasizes the importance of not being swayed by
the hype surrounding blockchain and notes that the decision that the decision
whether to adopt blockchain is not merely a technological decision, it is also
a business decision. Good use cases would solve real problems for organisations,
while great use cases solve real problems at a cost that is significantly lower
than the benefits.

Three types

The document classifies DLT systems into three major
categories: permissionless, public systems; private, permissioned systems; and
hybrid systems.

Permissionless, public, shared systems allow anyone to join
the network, to write to the network and to read the transactions from those
networks. These systems have no single owner and everyone on the network has an
identical copy of the “ledger”. The most common examples are cryptocurrencies,
like bitcoin and ethereum. To counter malicious actors these systems add an
extra component such as proof of work, proof of stake or proof of authority.
Proof of work is computationally expensive, uses a significant amount of
electricity, does not scale well and requires large numbers of network
participants to be able to generate “trust”. However, the approach allows large
numbers of participants to collaborate based on the codes only in a decentralised
manner.

Permissioned, public, shared systems are a form of hybrid
system that provide for situations where whitelisted access is required but all
the transactions should be publicly viewable. Government applications are an
example, where only certain people should be able to write to the network but
all transactions can be publicly verified.

Permissioned, private, shared systems are those that have
whitelisted access. In these systems, people with permission can read or write
to such systems. They may have one or many owners. Often consortia are formed
to manage the ownership. 

Decision tree

The toolkit presents a decision tree with the following sequence
questions to decide whether blockchain is an appropriate technology solution
and what form of blockchain would be best-suited to solve the problem on hand.

A. Are you trying to
remove intermediaries or brokers?

The organisation needs to answer questions such as would it
be cheaper to collaborate directly with suppliers/competitors rather than use a
clearing house? An example is the banking industry using a solution such as CORDA to manage remittances between, allowing
them to deliver services faster, securely and more cheaply than with existing
technologies.

B. Are you working
with digital assets (versus physical assets)?

Blockchain needs “digitally native” assets, that can be
successfully represented in a digital format. If an asset has a physical
representation that can change form, then it is difficult to effectively manage
that asset on a blockchain. An example would be tracking and tracing food
production on a blockchain. If a company wishes to track and trace wheat across
the entire supply chain as it becomes bread, it is difficult to use blockchain
to manage its transition from wheat, to flour, to bread.

C. Can you create a
permanent authoritative record of the digital asset in question?

The toolkit highlights this as perhaps the most critical
question, since a blockchain needs to be the source of trust. If there are
multiple sources of trust regarding the state of an object, then the object
cannot be effectively stored on the blockchain.

IF a permanent record can be created, it is important for
all parties with the responsibility for the state of the digital asset in
question to agree how that state will be handled/managed in the new business
process prior to any development occurring.

A second and separate question is whether a permanent record
is desirable or now? For instance, blockchain would not be an appropriate
solution where there is a need to delete information.

D. Do you require
high performance, rapid transactions?

If the business process needs transactions to be completed
in milliseconds, blockchains are unable to handle this effectively yet.  As of now, it would be advisable to work with
either existing technologies or wait until blockchains can handle such
transaction speeds. The document notes that as of April 2018, various forms of
DLT carry between a two- and 10-minute processing time.

Credit: World Economic Forum (Page 6 of Whitepaper: Blockchain Beyond
the Hype
)

E. Do you intend to
store large amounts of non-transactional data as part of your solution?

According to the toolkit, it is currently not advisable to
store non-transactional data on a blockchain. If, however, the trust in
question is related to transaction records, rather than the underlying data
itself, then a blockchain may be applicable. Any private information or any
data that may be covered by local and global data-protection regulations, such
as the European Union’s GDPR (General
Data Protection Regulations), should not be stored on the blockchain.

F. Do you want/need
to rely on a trusted party?

If an industry requires the use of intermediaries or trusted
partners, for compliance or liability reasons, then deploying blockchain might
be complicated, even if there are other benefits of use. In heavily regulated
sectors, it may be necessary to include regulators in the project and deliver
means by which the regulators can ensure compliance with laws, such as
antitrust and environmental law. It is also possible that each regulator
requires visibility into a different aspect of the transaction data, and the
issuer does not seek to display the entirety of the transaction data to any one
regulator for legal or other reasons.

G. Are you managing
contractual relationships or value exchange?

The toolkit highlights that a blockchain looks at managing
transactions around digital assets. If a business problem is not really about
managing contractual relationships and value exchange, then a different
technology could probably solve that problem more effectively.

H. Do you require
shared write access?

If there is no need for some/all of the members of the
network to have the ability to write transactions, then another technology will
probably provide a better solution.

I. Do contributors
know and trust each other?

If the actors/entities already know one another and trust
one another, there is probably no need for blockchain. But if they do not know
or trust one another and/or have misaligned interests, there may be a good
reason to use blockchain.

J. Do you need to be
able to control functionality?

If the ability to change the functionality on a blockchain
(e.g., node distribution, permissioning, engagement rules, etc.) without having
a detailed discussion across the large open-source forums for blockchain is
desirable, then a private, permissioned blockchain might be the correct choice.

K. Should
transactions be public?

If transactions need to be kept private, then a private,
permissioned blockchain would be appropriate. If not, then a public,
permissionless blockchain may be used.

The document goes on to provide a walkthrough for a few use
cases. For example, a company with software that produces special effects for
movies and is used by more than 7 million game developers and industrial
designers, faced the challenge of providing large-scale graphics processing
units (GPUs) to render customer projects. The major centralised cloud providers
have not been able to provide sufficient capacity. The chronic GPU shortage and
lack of economies of scale make GPU cloud rendering unaffordable for the
majority of users. Here a public, permissionless ledger could allow distributed
GPUs to be shared across the globe, reducing costs, reducing waste from
underutilized GPUs and creating an efficient use of distributed computational
power.

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