When there is no need for blockchain
Sputnik DLT has analysed seven submissions to Block Advice and shares the cases when technology is not applicable for business purposes.

If only two parties are involved

Blockchain is unnecessary if only two parties are involved in a process. Immutability of data does not mean the protection from dishonesty: you need a special mechanism or a third-party review to prevent the addition of invalid records to the ledger.

One of the submissions described tracking delivery status on blockchain. There is no added value to the customer since they already trust the merchant: a basic CRM system would be cheaper and easier to implement.

Another submission was related to the supply chain: suppliers and the buyers usually go to independent labs to check the quality of the shipment. The idea was to let the parties upload the test results to blockchain themselves. Smart contact would identify inconsistencies and alert the parties.

There is one issue, though: it is unclear what to do if the records are inconsistent. Smart contract is unable to find the party to blame. This means that parties would still have to go to the lab, even though the integrity of the shipment may have broken.

Parties could delegate some decisions to the algorithm, which could automatically collect a fee if the shipment is delayed or the transit conditions are violated. Conditions could be fixed in a smart contract and compliance could be monitored by the sensors in containers.

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The third submission described a marketplace for apartment and premise rentals. The idea was that the history of the records in an immutable ledger would help lessees and lessors trust each other.

It is unclear who resolves conflicts. Airbnb or Booking use moderators, but the point of decentralisation gets lost. If other members of the network do that, there might not be enough trust from all the parties involved.

Blockchain could be used to automate routine activities: smart contract could pay the electricity or water bills based on sensor data. Another application is proving facts in trials. Adding the message hash and timestamp on blockchain could prove that the notification was sent in time.

If the market trusts the government

Blockchain builds trust among market players: the same function is performed by governments. If existing laws already provide a system to regulate something, there is no need to keep same records on blockchain.

We were contacted by the developers of blockchain for client data exchange between financial institutions. Central Bank of Russia is already testing a similar platform. Blockchain could ensure that competitors trust each other, but they also already trust the regulator.

Another proposal was related to theatre tickets reselling in Uzbekistan. The case is suitable for blockchain application, because the process involves a lot of parties: event managers, ticket agents, ticket marketplaces and buyers.

There is a similar problem: the government has already announced its plans to launch the 'Unified Electronic Ticket System in Cultural and Art Facilities' and will finish the drafting of the concept within the next two months. Companies could tailor the system to their needs, but it will be not cost-effective to use two ledgers in parallel.

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Product labelling is a great application for blockchain. Buyers can check that the product is authentic, and the manufacturers protect their brand. No one has control over the data in blockchain and no one can fake supply chain data, but everyone can track goods to their origin.

In Russia this is implemented by government-approved company Chestny Znak» (True label). Though centralised data storage allows fabrication of data, the system is promoted by government to unify the auditing process.

If the market trusts big players

Music streaming market is growing rapidly: people subscribe to music libraries instead of buying albums or tracks. There are clear market leaders: «Big 3» record labels and streaming services like Apple Music and Spotify.

One of the ideas proposed using distributed ledger as a proof of author's rights. Artists get paid whenever anyone listens or downloads their songs, and the market becomes truly transparent for all users.

Startups like Ujo have tried to implement the idea. Artists would benefit from those projects, but why would listeners get a new app, if the existing ones are fine?

You could integrate the ledger with the existing streaming services, but they would not want their competitors to have the same libraries. The ledger could also be sold to labels in order to protect tracks from piracy, but intermediaries would still be present and the point of decentralisation would be lost.

The final submission was related to blockchain in loyalty programs. Blockchain could increase buyers' trust and prevent double-spending.

Loyalty programs are built on trust to the issuer. In Russia merchants happily connect to Sberbank (the largest bank in Russia) program, because they know that the bank will not issue any extra points. Clients are sure that their points will not get lost, because they have been clients of the bank for a long time.

The only way to compete with a player like this is to create programs that are more profitable for both companies and clients. Blockchain technology can not really help yet, since it cannot attract people by itself.

And more

Block Advice helped us to discover some promising projects, which were left out from the article. We are still looking for submissions: send us a brief description of your project and get a short analysis next week.

Let's help each other. You get a free evaluation, and we discover pains of the businesses. In a few weeks we will come back with more insights. Just a reminder: we never reveal any confidential information about companies that contact us.

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