Enterprise design principles

As stated previously, blockchain technology promises to be the foundation for a secure transaction network that induces trust and security in industries that are plagued with systemic issues around trust and accountability. It aims to generate market and cost efficiencies.

In the past few years, as blockchain technology has come to maturity, we've focused on how enterprises and businesses can use the technology to relieve pain points and herald new business models. Organizations that have begun to see blockchain's potential are now beginning to reshape business networks that are burdened by the systemic costs of archaic processes, paperwork, and technology.

Business drivers and evolution

In the recent past, organizations would run internal business systems and IT infrastructure out to the internet to harness the collaborative potential of interconnected and accessible systems. Blockchain technology is taking this to the next level, offering true digital interaction facilitated by trusted business networks. In the internet era, successful enterprises adopted and adapted to technological challenges, whereas in the blockchain era, business, rather than technology, is the driver for proliferation.

While blockchain technology is interesting on its own, there are a lot of other mechanics of a business network that ought to be evaluated as well, including:

• Consensus models: Which trust system is most fitting for your business network?
• Control and governance: What entities are permitted to do what? Who will own the investigative process if there's a system anomaly?
• Digital asset generation: Who creates an asset in the system? Who governs it?
• Authority for issuance: In a system that's truly decentralized, the notion of authority does not hold together. So, in a blockchain network, who would be responsible for governance, culpability, and eventually regulations?
• Security considerations: How will the network address enterprise security, including new security challenges imposed by a shared business network?

We imagine a purpose-built blockchain network that's focused on a plurality of business domains—for example, mortgages, payments, exchanges, clearing, and the settlement of specific asset types. In an enterprise context, we visualize a centralized network in which like-minded business entities share in a consensus consortium. There are several practical reasons to back this idea of a centralized network, including the following:

• The use of domain-specific business language, which leads to the construction, management, and governance of smart contracts as proxy business representations
• A defined asset type, which leads to governance, management, and valuation (for exchange, fungibility, and so on) of the digital representation of assets
• Appropriate regulation, given that every industry and business network is regulated separately, and therefore the burden of adhering to regulations and other related costs can be shared in the business network
• Other related business functions such as analysis, analytics, market data, and so forth

We've now covered the business drivers for enterprise blockchain, so next, let's consider what can ensure the sustainability and longevity of a blockchain network.

Ensuring the sustainability of blockchain-based business networks

Blockchain-based business networks are continuing to evolve and grow, and as they do, there will be no turning back on core issues such as trust models, data visibility, and exploiting a network for competitive advantage.

Focusing on sustainability can seem paradoxical because it promotes open collaborative innovation, while at the same time locking down constructs such as consensus or trust systems and the governance systems for managing assets, smart contracts, and overall interaction in a multi-party transaction network. Blockchain system design needs to take all of this into consideration.

A business network with a successful system design needs to align well with the blockchain tenets of trade, trust, and ownership enabling transactionality in a multi-party scenario. Without building on these core tenets, business networks may not realize the promise of blockchain technology in a sustainable way.

There are seven design principles to support and sustain growth in a blockchain business network:

1. The network participants need to have control of their business.
2. The network has to be extensible so that participants have the flexibility to join or leave the network.
3. The network must be permissioned but also protected, to safeguard competitive data while facilitating peer-to-peer transactions.
4. The network should allow open access and global collaboration for shared innovation.
5. The network must be scalable for both transaction processing and encrypted data processing.
6. The network has to be able to accommodate enterprise security and address new security challenges.
7. The network needs to coexist with established systems of record and transaction systems in the enterprise.

In the next section, we'll focus on design principles.

Design principles that drive blockchain adoption

In any enterprise, blockchain adoption is driven by three principles: the business blueprint, the technology blueprint, and enterprise integration. The following are indispensable things to consider when choosing a blockchain framework according to these three principles:

• Business blueprint: Blockchain promises to create a business network of value based on trust. To do this, it's vital to understand how various blockchain frameworks handle network interaction patterns, inefficiencies, and vulnerabilities.
• Technology blueprint: If technology is to align with business imperatives, organizations need to make appropriate technology and architecture choices for their needs. Transactions per second (TPS), enterprise integration, external system integration, and regulatory and compliance requirements may all be taken under advisement here. These decisions are part of the technical due diligence necessary to budget properly for blockchain adoption.
• Enterprise integration: Integrating blockchain into the enterprise systems, especially an adjacent system, is an important business and technology consideration (because downstream transaction systems affect critical business systems), as well as a cost point. Based on my experience, if organizations don't focus on adjacent system integration early in the planning, it can impede adoption, because it has a significant cost impact on blockchain projects.

In the following sections, we'll cover these design considerations in a bit more detail.