How to Perform Blockchain Master Data Management?

Interested in how you can take master data management to the next level with blockchain technology? This is a very interesting topic that we will cover here.

In this article

1. Why Should Blockchain Matter Vis-à-Vis Master Data Management (MDM)?
2. How Can Blockchain Help Implement Master Data Management Program?
3. Important Considerations for Using Blockchain to Power a Master Data Management Solution
4. Frequently Asked Questions on Master Data Management

Why Should Blockchain Matter Vis-à-Vis Master Data Management (MDM)?

Why would you consider blockchain as a solution to MDM implementation challenges? Before I answer this question, let‘s quickly understand what blockchain is. This promising technology has the following features:

• It‘s a decentralized, peer-to-peer (P2P) network, and anyone can join a public blockchain network whereas private blockchains allow only trusted parties to join.
• Computers on this network are called ’nodes‘, and each node has a complete transaction history. Since each node is a complete ledger, blockchain is often referred to as the “Distributed Ledger Technology” (DLT). A cybercriminal can‘t shut this network down by taking over one computer.
• Blockchain networks use digital signatures, data encryption, cryptographic hash functions, and consensus algorithms to protect the integrity of data.
• Data and transactions are transparent, and the audit trail is immutable.
• Starting with Ethereum, blockchain technology offers smart contracts. These are transparent, tamper-proof pieces of code that execute autonomously, and their execution is irreversible.

Given these characteristics, blockchain can improve security, transparency, and efficiency, as I have explained in “How to build your own blockchain using Node.js”.

Let’s recollect what master data is. Master data refers to data about business entities that provide context for business transactions. For example, customer information such as names, phone numbers, and addresses is master data.

Master data management includes the technology, tools, and processes used within an organization to coordinate the critical master data. In the context of MDM, the security and transparency offered by blockchain can help.

How Can Blockchain Help Implement Master Data Management Program?

There are various ways in which blockchain improves MDM, e.g.:

1. Decentralization of blockchain can improve enterprise data management

I have written about how organizations collect, store, and process crucial enterprise data in multiple systems like CRM, ERP, etc. This often poses challenges to MDM implementation since we typically view MDM from a centralized paradigm.

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However, it‘s an inescapable reality in large enterprises that data collection and storing of it will happen at multiple touchpoints. Given that, MDM should also adopt decentralization since that mirrors the enterprise reality.

Blockchain with its decentralization can accelerate this shift where individual business functions will act as nodes. When they collect data, the blockchain protocol can ensure that master data is available on all nodes. You can read more about blockchain-powered decentralized MDM in “Blockchain — new dimensions to master data management”.

2. Blockchain can help in reconciling data in an MDM solution

A robust MDM solution must enable enterprises to reconcile master data effectively. It‘s hard to achieve though, due to the following reasons:

• The MDM solution needs automated controls for multi-point reconciliation.
• You must deploy these tools across multiple sources of data, and these automated tools would then feed your MDM system.
• These tools will need to produce dynamic data reconciliation reports, subsequently, the subject matter experts and the MDM architects in your team need to review these reports.
• Reconciliation exercises including the required adjustments follow.

Blockchain with its distributed ledger and consensus algorithms can help significantly with data reconciliation. As I have explained above, you need to design the blockchain MDM solution such that your diverse source systems are nodes on the decentralized network.

Subsequently, the consensus algorithms in the blockchain protocol take over. Consensus algorithms work towards maintaining data integrity, and by their very design, they maintain the same data across all nodes on the blockchain network.

This saves a significant amount of time and effort, as you can read in “Master data belongs on the blockchain”.

3. Blockchain can improve your confidence in your master data

As a business leader in your enterprise, a key concern for you is whether your master data has been corrupted. This is one area where a blockchain-powered MDM solution can help significantly, due to the following reasons:

• Users in a blockchain network must transact using their digital signatures, and these are very hard to compromise.
• Data encryption, cryptographic hash functions, and consensus algorithms make it hard for hackers to tamper with the data.
• You will likely use an enterprise blockchain framework like Hyperledger Fabric to power your MDM solution, and such blockchain networks allow only trusted parties to join.
• Enterprise blockchain frameworks like Fabric also provide advanced security solutions, and an example is its Hardware Security Model (HSM) to secure digital signatures. You can read more about this in “Pros and Cons of Hyperledger Fabric”.

No technology is fully immune to hacking, however, blockchain does a great job of dissuading cybercriminals by raising the costs of attacks significantly.

You can read “Can blockchain technology be hacked?” to learn how blockchain provides a high degree of security against cyber-attackers.

4. Improved transparency in an MDM system, thanks to blockchain!

The transparency of data collection, enrichment, etc. is a key requirement of any robust MDM solution. However, silos and multiple movements of data from one system to another in an enterprise make it hard to maintain an audit trail.

A blockchain-powered MDM solution, with its distributed ledger and immutability of transactions, can provide audit trails for every MDM operation. According to experts, this is a key advantage since it improves the confidence of the stakeholders in the system.

5. Blockchain can improve the efficiency of a Master Data Management solution and reduce costs

The distributed ledger of blockchain can make it easier to share master data among stakeholders. Since blockchain is a decentralized network, server management costs reduce, and this is another advantage of using blockchain.

Important Considerations for Using Blockchain to Power a Master Data Management Solution

Before you implement a blockchain-powered MDM solution, you need to consider several important factors, e.g.:

1. Blockchain bloat

Blockchain requires every node to store the entire transactional data history, therefore, as the network grows so does the volume of data in every node. While this built-in redundancy guards against hackers taking the network down by attacking one node, over time it also results in “blockchain bloat”.

As I write this, experts are working on several solutions to address this, e.g., sharding, ephemeral blockchains, and zero-knowledge proofs. You can read about them in “Can Blockchain Bloat Ever Be Solved?”.

2. Planning a blockchain project

Planning a blockchain project requires significant expertise since you need to plan for several aspects. These could include which blockchain framework to use, which development tools to use, etc., and you can read about them in “Planning for Blockchain Software Development”.

3. Choosing the right blockchain network host

You would likely use an enterprise blockchain framework, therefore, you will need to choose a blockchain network host. There are several Blockchain-as-a-Service (BaaS) platforms, e.g., Blockchain on AWS, SAP Cloud Platform BaaS, Microsoft Azure BaaS, and IBM Blockchain Platform.

Our guide “What Are the Best Blockchain Network Hosts in 2024?” can help you to choose one.

Planning to take your master data management programs to the next level with blockchain?

While blockchain can add significant value to your MDM solution for business processes, implementing a blockchain-powered MDM can be hard. MDM is a specialized technology, moreover, blockchain skills are niche. I recommend that you engage a reputed software development company for such a project.

Our guide “How to find the best software development company?” can help you to find one.

If you are still looking for expert blockchain developers, give DevTeam.Space a try by partnering with our experienced software developers trained in the latest technologies. Leave your initial blockchain development specifications through this form and one of our competent managers will contact you for further details.

Frequently Asked Questions on Master Data Management