In the previous blog post, I described how you can investigate and strategise around whether Blockchain could help you to solve a specific business problem, or seize an opportunity. If you believe it can, the next stage is to decide how you will use blockchain to realise the maximum value.
To do this, it is necessary to understand:
- How a blockchain application is built up
- What the various layers consist of
- What choices you will make at each layer.
The second part of the Oxford Blockchain Strategy Framework can help you do this in a structured way.
Breaking down the Blockchain into layers
When building a blockchain strategy, there are 3 layers you need to consider. You should always begin with the use case and remain focused on it throughout. At this stage in the analysis, things can get quite technical, therefore it is recommended that you involve someone with technical competence such as a solution architect, to help you get the best results. The 3 layers are as follows:
- The Protocol Layer
- The Network Layer
- The Application Layer
Building the foundation for your Blockchain solution
The protocol layer is home to the foundational software of the Blockchain. In this layer the “rules” of the blockchain are hardcoded, which decide how the blockchain will behave. For example, which algorithm will be used for verifying transactions, or how many transactions will be included in each block (put simply, a block is an encrypted group of transactions) etc.
When choosing what type of protocol is right for you, you should consider the following:
- Do you have the developer competence and resources to build and/or maintain your own protocol? Or should you consider using something which is supported and maintained by a reliable open-source developer community?
- Can an existing protocol be used (eg. Bitcoin or Ethereum) or does your use case require a specific protocol to be designed?
- What are the key functionalities/capabilities the protocol should cater for? Will it need to action payments? Does it need to be fast? How important is immutability and security?
Running and connecting the Blockchain
The network layer could be described as the hardware aspect of the Blockchain. In this layer are the computers which are running the software (the blockchain protocol). This is the layer which makes the blockchain function. The nodes are also found in this layer, ie. those computers which hold a copy of the ledger and verify the new transactions within the ledger. The network can be large or small, and it can be public or private.
When considering what to do at this layer, you should consider the following:
- Who needs to run a node? What kinds of access levels are needed (read or write)?
- Does the network layer need to integrate with any other systems?
- How long does data need to be stored? Are there any archiving policies or regulations which impact the data storage requirements?
Creating a user interface for your blockchain solution
The final layer consists of the application itself with which the user will interact. This needs to be purpose built for the use case and facilitate the process which will be carried out.
Here you should consider things such as:
- Who is the end user? What requirements do you have on user experience?
- How does this new product, service or process fit into the existing organisation? What are the organisational structures and behavioural patterns existing today?
- Do any changes need to be made to these organisational structures and behavioural patterns to accommodate this new product, service or process?
- You should make sure you have a plan in place for change management from the beginning to ensure maximum value is attained from the cross-functional change brought about by your Blockchain solution
Putting the pieces back together
- Is Blockchain the right technology to solve an identified problem or seize an opportunity in your business?
- How will you use Blockchain to ensure that it solves the problem and takes advantage to this opportunity?
Having done these analyses, you will be able to be more concrete when forming your strategy, and move towards a plan for implementation. Furthermore, you will be more informed when approaching external suppliers who can help you with technical solutions which can cater for your needs.
As you can see from this article series, there are many different permutations which can exist when building a Blockchain solution. If you would like to discuss this in more detail, please contact me. I would be delighted to hear from you.
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