When Should You Use Ethereum (or Blockchain)?

When Should You Use Ethereum (or Blockchain)?#

Ethereum is a platform that enables open access to digital money and data for anyone with an internet connection. To ensure that you are using the Ethereum blockchain for the right use case, there are a few factors to guide your decision-making. These factors include:

  • the number of participants in your system

  • the geographical distribution of users of your system

  • your performance requirements

The Ethereum blockchain becomes a viable option when you want to manage and secure digital relationships or a shared system of record. If the system of record involves parties that don't normally trust each other, then a distributed network like blockchain can be a strong option for protecting the shared system of record. This is because whenever changes are made to the records, the party that is making the change has to sign off.

The Ethereum blockchain because a strong solution for system of records that are used by users from around the world. The information would be stored on the Ethereum blockchain which is accessible by anyone that has internet.

One thing to be weary of is the current limitations of the Ethereum blockchain. The Ethereum blockchain users an algorithm called Proof of Work. Proof of Work is a system that uses a large amount of effort to validate information. This makes the Ethereum blockchain slow and not highly scalable (for now). The developers that are working on improving the Ethereum blockchain are looking into alternative algorithms (e.g. Proof of Stake) to tackle some of the speed and scalability issues.

Along with these factors, blockchain is best applied in the following circumstances:

  1. There is a need for a common database between users that do not trust each other

  2. Multiple users can update the database (not necessarily from the same organization)

  3. There are currently trusted third parties involved in the process that facilitate interactions between multiple parties (services may include: escrow, data providers, licensing authorities, background verification, etc.)

  4. Cryptography is being used to protect data

  5. There are uniform rules governing the users in the system

  6. Decision-making in the system is transparent

  7. There is a need for an immutable log of facts

Furthermore, blockchain should not be used:

  • when dealing with confidential data

  • with large amounts of data

  • when external services are used to gather data

  • when the rules of the system change frequently

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