8 Aug 2016 - Blockchain // By Productive Edge Team

Blockchain and the Enterprise

At Productive Edge Labs, our mission is to identify opportunities to leverage leading-edge technology to provide measurable business value to our customers. To this end, our lab engineers are continuously engaged in proof-of-concept projects and pilot programs to evaluate the merits of new technologies and determine their applicability to the needs of our clients.

Blockchain technology has been a key focus area of the PE Lab team, and we've been working closely with other leaders in the space to evaluate the viability of Blockchain technology for enterprise use cases.

Blockchain building blocks

If you read technology news these days, particularly in the financial services domain, you’re likely to encounter blockchain. Originating as the technology underpinning the popular and often controversial digital cryptocurrency Bitcoin, blockchain has more recently begun to transcend its applications for cryptocurrency into use cases with the potential to disrupt how institutions and enterprises fundamentally operate.

At its core, a blockchain is a distributed database in which transactions are replicated to a large number of computers (or "nodes") that are connected to each other on a peer-to-peer network.  Every set (or “block”) of transactions in the database is cryptographically linked to the previous block, so that the validity of each block is dependent on the validity of the previous one, thus creating a “chain”.  The nodes of the network all work together as a consensus system that must agree upon and validate each new set of transactions added to the chain, thereby making the transactional history of the data virtually immutable. Such an assurance of historical data integrity is one of the core value propositions of blockchain technology, but that’s only scratching the surface.


While blockchain’s immutability is of great value by itself - particularly to a system like Bitcoin, for which the transactional authenticity of the cryptocurrency’s general ledger is essential - the distributed nature of the system is at least as noteworthy.  In the Bitcoin context, an implication of the distributed network is that there are no central banks, governments or other regulatory bodies that control the production, distribution or exchange of Bitcoin.  Likewise, there is no singular entity acting as a central point of trust or truth for the transactional history, and there is no singular data store where the historical transaction data resides.  The data is fully distributed across the network, and the network acts collectively as the source of truth.  The result is that the system is fully decentralized, which can provide significant benefits.

By contrast, in systems where participants are reliant on a central intermediary to facilitate transactions between parties or to manage their data - whether that intermediary is a bank, a government body, a legal entity, an insurance agency, or even a major retailer - there is inherent risk and vulnerability.  Firstly, the central entity has implicit control to be able to manipulate or gouge its constituents - for example, by charging exorbitant transaction fees.  Additionally, there is the risk that someone internal to the entity may maliciously adulterate the data or otherwise affect the interactions of the participating parties for his or her own personal gain.  Finally, there is the risk that external forces - whether hackers, natural disasters or any other force majeure - could in some way damage or destroy the intermediary or the data it maintains, thereby bringing down the whole system.

The decentralized nature of blockchain, and its potential to alleviate the costs and risks associated with centralized systems, is another core value proposition of the technology.

Smart contracts and disintermediation

It didn’t take long for bright computer scientists to realize that data is not the only digital asset that could reside on and benefit from blockchain technology.  With the launch of the Ethereum platform in 2015, the world was introduced to the concept of the “smart contract”.  Smart contracts are computer programs that model and facilitate the execution of a contract between parties, typically for the exchange of some value, without the need for any human or third party intervention.  The computer code for an Ethereum smart contract is deployed to the Ethereum blockchain, where it relies on systematic data inputs to determine whether the stipulations of a given contract have been met - and if they have, it automatically invokes the outcome of the contract terms.  In this sense, the system becomes trustless, because the smart contract code executes automatically and autonomously, so there is no requirement to trust the behavior of a person or entity to ensure that an action is carried out as promised.  Likewise, because the smart contract is deployed to the blockchain, its code and all of the transactions it facilitates are replicated across the blockchain network, where they benefit from the same type of immutability, consensus validation and decentralization as the Bitcoin general ledger.  

The idea of the smart contract is groundbreaking, bringing with it the potential to disintermediate many entities that provide services that could instead be modeled as contracts on a blockchain.  Many organizations are looking at how smart contracts can be used to replace complex business processes and facilitate automated value exchange across a spectrum of use cases, from the payouts of gambling winnings to the payment of insurance claims.  However, it should be said that there is a lot of hype around the possible uses of smart contracts, so a practical lens must be applied when evaluating use cases for viability.

Enterprise impact

The finance industry has been galvanized by the idea that costly transactional services currently provided by banks and other financial bodies - from equity trade settlements, to repo clearing processes, to simple wire transfers - could be replaced by blockchain technology.  Our Productive Edge team has been busy exploring the implications to enterprises beyond the finance domain.  We see three major categories of impacts:

  • Transactional Recordkeeping - Use cases that deal with tracking information through its lifecycle - from title tracking, to proof of insurance, to provenance of food and manufacturing - can benefit from the properties of a blockchain distributed ledger, and the related services can have a significant impact to our enterprise clients.  Our PE engineers are working on POCs to demonstrate how blockchain-based solutions can become reliable and trustworthy “sources of truth” for information that is currently maintained by central intermediaries.
  • Decentralized Apps (Dapps) and Decentralized Autonomous Organizations (DAOs) - Leveraging smart contracts to model fundamental business processes and create distributed applications - and ultimately, distributed organizations - that can run entirely on their own via code , without any human intervention.  These use cases typically involve the transactional exchange of value between parties.  They are also often more complex and require careful assessment to determine whether they are viable candidates for blockchain technology.  Our Productive Edge engineers are helping our enterprise clients cut through the hype to determine whether specific smart contract solutions represent a realistic opportunity or even a potential threat to their business. 
  • Modeling New Value Concepts - I’ll discuss this in an upcoming blog article...

A conceptual example

Our Productive Edge Lab team recently implemented a POC for a smart contract-driven taxi service (let’s call it “Scuber”) that facilitates the exchange of a cab ride for an agreed upon fare, without the need for any intermediary service.  The solution works as follows:

  • Rider funds their Scuber smart contract on the blockchain with fare money
  • Riber uses a native iOS/Android mobile app to specify their intended GPS target destination coordinates and their driver’s blockchain address, which feed as inputs into the smart contract
  • Upon successful delivery of the rider to their intended target destination, as verified by the GPS on the rider’s and driver’s mobile devices and a Bluetooth peer-to-peer handshake between both devices, the fare amount is released from the rider’s account to the driver’s account

This use case provides a conceptual example of how a smart contract can systematically ensure the execution of a contract commitment without the need to trust an intermediary.  

Assessing viability

While blockchain has many exciting potential applications, it’s important for companies to conduct a proper assessment of the benefits and trade-offs of the technology for their situation, or everything can start to look like a proverbial nail to the blockchain hammer.  There are a lot of factors to consider in determining whether blockchain is the right fit for a particular use case, and they go beyond whether the situation might benefit from the core value propositions of the technology.  It’s also important to assess whether a specific blockchain solution will scale effectively, how it will procure its input data, whether it will meet certain legal and regulatory requirements, whether it should leverage a public or private chain, and several other considerations.  

Productive Edge blockchain services

If you are contemplating blockchain for your business, our Productive Edge team can help you assess whether the technology is the right fit for your situation - and if it is, we can help you implement the best possible solution.  To learn more about Productive Edge Labs and the work we are doing with blockchain technology, contact services@productiveedge.com.

Blockchain and the Enterprise