Business case remains the real challenge in Blockchain: Rohas Nagpal of Primechain Technologies

As banks explore the feasibility of blockchain solutions, the potentially disruptive technology has evoked more questions and assumptions on its workings.

Talking to BusinessLine , Rohas Nagpal, Chief Blockchain Architect of Primechain Technologies, noted that the initial challenge of implementing the technology lies with identifying a suitable problem.

“The real challenge lies in finding a business case and knowing why blockchain could be a better way to achieve the result,” especially in terms of reducing cost, improving efficiency and ensuring security.

Pune-based Primechain Technologies is building blockchain solutions for KYC, smart contracts and other applications for the Bankchain project initiated by SBI in February this year.

On the implementation side, businesses make decisions regarding aspects such as consensus mechanism that define how the blockchain operates.

How blockchain works

As a distributed ledger, blockchain adds new blocks to the chain of previous blocks of transactions through a consensus mechanism. Proof-of-work is one of several such methods.

“Whether you’re trying to use blockchain (with proof-of-work) or a distributed ledger (with another consensus mechanisms) depends on what you’re trying to achieve and with whom you’re trying to achieve it.”

In simple terms, a proof-of-work (PoW) based system expends computational power to produce a value which is an output of a mathematical operation. The value should satisfy the pre-defined condition in the blockchain algorithm. Once the condition is met, the transaction block is added to the ledger.

However, it’s too early to compare and contrast the efficacy of proof-of-work over other consensus mechanism, according to Nagpal. “There are platforms which can switch the type of consensus mechanism too but it’s too early in the lifecycle of blockchain to say the good ways of doing it (choosing algorithmic methods).”

PoW protocol results in high-latency (slowing down processes) and requires high processing power. For instance, When this protocol is tied to email messages, the high processing power required to perform computation are said to act as a deterrent to sending bulk spam emails.

For technology companies building blockchain solutions, decisions on security aspects also revolve around how to configure the base operating system and blockchain solution, he added.

Nagpal observes that despite the hype, blockchain “in itself is not enough” because it is part of a system: which involves an operating system, security aspects of the operating system, establishing a network of nodes on which you can build a blockchain instance. Applications that utilise blockchain are built on top of the instance and communicates with the user and the blockchain.

On smart contracts

As self-executing codes, smart contracts are dependent on authentic sources of data points. Hence, they’re restricted to cases where such data are available.

Suppose, he said, you had an insurance that compensates you every time your flight delays. In such a case, the insurance company needs an authorised source to give time of flight landings against which smart contracts can verify the condition of delayed arrivals and pay the user the adequate compensation.

Secondly, as smart contracts are new, there are very few who can proficiently write a robust contract, he adds.

Limitations

Even as companies are exploring blockchain in alternative use cases such as fighting music piracy and counterfeit products, Nagpal said claims that blockchain can end music piracy could be a stretch since the scope of the problems extends well beyond what is under the control of blockchain systems.

“Music piracy is a very different issue. Let’s say, you produce music and deliver through blockchain. But, at the end of the day, it will have to play through a speaker. What if I record the song and put it up as an mp3?”

He adds that, currently, blockchains can handle application that hinge upon data storage, verification of digital signatures, asset management and implementation of smart contracts.

The legal question

Blockchain’s workings has sparked legal debates such as if smart contracts can be considered a contract or if the technology can entirely do away with legal intervention.

But provisions to settle disputes (should they arise) are not defined when it comes to blockchain solutions.

Blockchain is unlike a conventional technology, say eCommerce, where the company owning the platform also has responsibilities to deal with certain complaints, said Nagpal.

“There’re different entities coming together and all of them probably have the same level of control” over the technology.

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