Blockchain vs. Digitalization: What’s the Difference?

Dec 25, 2018
How often do you come across “Blockchain” buzz-word while checking hi-tech news, innovation trends or promising startups? It seems safe to assume that blockchain more or less frequently appears on your news feed. Unfortunately, despite strong interest in this technology, still many people mix up “blockchain” and “digitalization”. Surely, they have something in common but are not identical. In this post, we’ll try to explain key differences between blockchain and digitalization.

Digitalization is a broad term denoting the migration of company's processes into a digital environment. Digitalization benefits usually include:

  • Business process acceleration thanks to a digital environment
  • Digitizing information
  • Information accessibility to many concurrent users and configurable access control
  • Single environment for all users

Everyone has their own understanding of digitalization. This is why people often mistakenly attribute some digitalization benefits to blockchain, while overlooking the true strengths of blockchain technology. Blockchain is not the same thing as digitalization but just one of its numerous tools.

Blockchain is a chain of blocks storing performed transaction data. Anyone can access it but no one can covertly modify, add, or remove blocks. Unlike conventional databases we got used to, blockchain is strongly protected against intervention. Interaction is only permitted in line with a predefined procedure and when approved by all process participants. Here are Blockchain's distinctive features described in more detail:

  • Deceiving a counterparty or concealing data is impossible. This is important to insurance and healthcare companies, as well as property registrars. Blockchain allows for the communication between parties that do not trust each other too much.
  • Automatic obligation fulfillment monitoring at all phases. This is useful for supply chains and payment companies, since systems relying upon clear and well-defined deadlines, action sequences and quantitative metrics perform brilliantly thanks to an uncompromising nature of blockchain.
  • Changing an agreement without informing other counterparties is impossible. This is useful for procurement and P2P lending companies since data concealing, which used to cause serious damages to buyers, is impossible in the blockchain environment.

Is blockchain overestimated? Can we effectively address challenges using other digitalization tools instead of blockchain? Maybe... Maybe, blockchain will be never understood and will disappear in the digitalization shadow once the blockchain hype fades — we cannot know this for sure. The only thing is certain: blockchain and digitalization are not the same despite rather popular conventional thinking.