While malicious users can be annoyances and create short-term harm, blockchain networks can perform hard forks to combat them. Whether damages done (money lost) would be reversed would be up to the developers and users of the blockchain network. In addition to there being malicious users of the network, the administrators of the infrastructure for permissioned blockchain networks may also act maliciously. For example, an infrastructure administrator may be able (depending upon the exact configuration) to take over block production, exclude certain users from performing transactions, rewrite block history, double spend coin, delete resources, or re-route or block network connections. 7.7 No Trust Another common misinterpretation comes from people hearing that there is no “trusted third party” in a blockchain and assuming blockchain networks are “trustless” environments. While there is no trusted third party certifying transactions in permissionless blockchain networks (in permissioned systems it is less clear, as administrators of those systems act as an administrator of trust by granting users admission and permissions), there is still a great deal of trust needed to work within a blockchain network: •

There is trust in the cryptographic technologies utilized. For example, cryptographic algorithms or implementations can have flaws. • There is trust in the correct and bug free operation of smart contracts, which might have unintended loopholes and flaws. • There is trust in the developers of the software to produce software that is as bug-free as possible. • There is trust that most users of the blockchain are not colluding in secret. If a single group or individual can control more than 50 percent of all block creation power, it is possible to subvert a permissionless blockchain network. However, generally obtaining the necessary computational power is prohibitively expensive. • For blockchain network users not running a full node, there is trust that nodes are accepting and processing transactions fairly.

7.8 Resource Usage Blockchain technology has enabled a worldwide network where every transaction is verified and the blockchain is kept in sync amongst a multitude of users. For blockchain networks utilizing proof of work, there are many publishing nodes expending large amounts of processing time and, more importantly, consuming a lot of electricity. A proof of work method is an effective solution for “hard to solve, easy to verify” proofs; however, it generally requires significant resource usage. Because of their different applications, and trust models, many permissioned blockchain technologies do not use a resource intensive proof, but rather they utilize different mechanisms to achieve consensus. The proof of work consensus model is designed for the case where there is little to no trust amongst users of the system.

It ensures that publishing nodes cannot game the system10 by 10 Use the rules and procedures meant to protect the system to manipulate the system for a desired result. NISTIR 8202 BLOCKCHAIN TECHNOLOGY OVERVIEW 39 This publication is available free of charge from: https://doi.org/10.6028/NIST.IR.8202 always being able to solve the puzzles and thereby control the blockchain and the transactions added to it. However, a major concern surrounding the proof of work consensus model is its use of energy in solving the puzzles. The amount of energy used is often not trivial; for example, some estimate that currently the Bitcoin blockchain network uses around the same amount of electricity as the entire country of Ireland [25]. It has also been speculated that the Bitcoin blockchain network will consume as much electricity as the entire country of Denmark by 2020 [26][27][28]. Software and hardware will continue to improve, resulting in more efficient puzzle solving (reducing the amount of electricity utilized) [29].

However, blockchain networks are also still growing, resulting in harder puzzle difficulty. An additional strain on resources occurs whenever a new full node is created; the node must obtain (usually through downloading) most of or all the blockchain data (Bitcoin’s blockchain data is over 175 gigabytes and growing as of this writing) [30]. This process uses a lot of network bandwidth. 7.9 Inadequate Block Publishing Rewards A potential limitation is the risk of inadequate rewards for publishing a block. The combination of increased competition, increased computational resources needed to have meaningful contributions to pools of publishing nodes, and highly volatile market prices in the cryptocurrency market creates the risk that the expected return for any given cryptocurrency may be less than the power costs needed to run publishing node software.

Thus, the expected return for other cryptocurrencies may be more attractive. Cryptocurrencies that are not able to consistently and adequately reward publishing nodes risk delays in publishing blocks and processing transactions. These delays could therefore reduce confidence in the cryptocurrency, reducing its market value further. It could then become increasingly less attractive for publishing nodes to contribute to that cryptocurrency’s publishing efforts. Even worse, such weakened cryptocurrencies open themselves up to being attacked by nodes with large amounts of resources that may maliciously alter the blockchain or deny service to users attempting to submit transactions. 7.10 Public Key Infrastructure and Identity

When hearing that blockchain technology incorporates a public key infrastructure, some people immediately believe it intrinsically supports identity. This is not the case, as there may not be a one-to-one relationship of private key pairs to users (a user can have multiple private keys), nor is there a one-to-one relationship between blockchain addresses and public keys (multiple addresses can be derived from a single public key). Digital signatures are often used to prove identity in the cybersecurity world, and this can lead to confusion about the potential application of a blockchain to identity management. A blockchain’s transaction signature verification process links transactions to the owners of private keys but provides no facility for associating real-world identities with these owners. In some cases, it is possible to connect real-world identities with private keys, but these connections are VALID

8. Determining the Appropriate Use of Blockchain Technology

Blockchain technology remains relatively new, and many organizations are exploring ways to integrate it into their operations. A common driver of this exploration is the fear of missing out on a transformative technology. As a result, organizations often approach the issue from the perspective of: “We want to use blockchain—where can we apply it?”

This approach frequently leads to frustration, as blockchain technology is not universally applicable. A more effective strategy is to first understand the characteristics, strengths, and limitations of blockchain systems. Organizations should then evaluate whether specific existing or proposed systems align with the blockchain paradigm.

8.1 Characteristics of Suitable Blockchain Applications

Blockchain technology may be appropriate for systems or activities that require one or more of the following characteristics:

Multiple participants, especially when operating across organizational boundaries
Geographically distributed participants
Reduced reliance on a trusted third party
Transactional workflows, such as the transfer of digital assets or information
A globally scarce digital identifier, such as digital art, digital land, or digital property
A decentralized naming service or ordered registry
A cryptographically secure system of ownership
Reduction or elimination of manual reconciliation and dispute resolution processes
Real-time monitoring between regulators and regulated entities
Full provenance and complete transactional history shared among participants

When these characteristics are absent, alternative technologies may be more efficient, scalable, and cost-effective than blockchain solutions.

8.2 Government and Industry Guidance

Recognizing the complexity of blockchain adoption decisions, several agencies and organizations have developed frameworks and guidance documents to assist decision-makers in determining whether blockchain is appropriate for a particular use case.

8.2.1 Department of Homeland Security (DHS)

The United States Department of Homeland Security (DHS), through its Science & Technology Directorate, has conducted research into blockchain technology and developed a decision-making flowchart. This flowchart assists organizations in evaluating whether blockchain is suitable for a specific development initiative.

The DHS framework encourages organizations to assess key factors such as trust assumptions, data-sharing requirements, and the need for decentralization before pursuing blockchain implementation.

8.2.2 ACT-IAC

The American Council for Technology and Industry Advisory Council (ACT-IAC) is a public–private partnership that facilitates collaboration between government and industry experts.

ACT-IAC has developed:

A Blockchain Technology Primer, providing a high-level overview of blockchain concepts and terminology.
A Blockchain Playbook, which offers a structured set of weighted questions to help organizations systematically evaluate potential blockchain applications.

These resources aim to guide decision-makers in assessing both technical feasibility and organizational readiness.

8.2.3 Academic Perspectives

Two computer scientists at Eidgenössische Technische Hochschule Zürich (ETH Zürich) authored a whitepaper titled “Do You Need a Blockchain?” The paper provides background information, outlines blockchain properties, and critically evaluates several proposed use cases.

An interactive website based on the paper’s flowchart logic was later created to assist users in navigating the decision process. While such tools can provide useful initial guidance, their conclusions depend heavily on assumptions embedded in the decision criteria and implementation logic.

8.3 Critical Considerations

Despite the abundance of whitepapers and online decision tools, there is no universal formula for determining whether blockchain is appropriate. Each organization must carefully evaluate:

The specific problem being addressed
The trust relationships among participants
Regulatory and compliance requirements
Performance, scalability, and cost considerations
Governance and long-term sustainability

In many cases, traditional centralized or distributed database systems may provide equivalent or superior functionality without the added complexity of blockchain infrastructure.

8.4 Conclusion

Blockchain technology offers powerful capabilities for decentralized trust, transparency, and immutable recordkeeping. However, its implementation should be driven by clearly defined requirements rather than technological enthusiasm.

Organizations are best served by first identifying business or operational challenges, then determining whether the distinctive characteristics of blockchain—such as distributed consensus, cryptographic verification, and decentralized governance—provide meaningful advantages over conventional solutions.

A disciplined, requirement-driven approach ensures that blockchain technology is applied where it adds genuine value rather than where it merely reflects technological trends.