There has been a great deal of hype and discussion surrounding Blockchain over the last several years, and it has primarily been centered around the use of Blockchain as an underlying technology to support cryptocurrencies like Bitcoin. However, Blockchain is a lot more than that.
With that mindset, we look at Blockchain as an enabler for Business. The key questions to address are “What factors of Blockchain make it a viable platform for business benefit?” and “What are the key use cases and benefits to business?”
Core Attributes of Blockchain
Blockchain is a technology invention that can unlock a massive business paradigm shift like how mobile technology and the web created vast shifts in capabilities for businesses. It would have been difficult for Uber to be successful without the ubiquitous availability of smart phones connected to the internet!
The core attributes of Blockchain that made it a great platform for cryptocurrencies also make it a great platform for business. They include: a distributed shared ledger, immutable cryptographically secure data, replication and redundancy, and consensus.
- A Distributed Shared Ledger on a Blockchain provides a way for all parties on that Blockchain to participate in a common series of transactions. Blockchains at the core allow business partners or individuals to transact assets across the network to greatly improve efficiency.
- Immutable cryptographically secure data on a Blockchain ensures that records are secure and trustworthy. Immutability enforces that records on the ledger can only be ADDED and never changed. These records are all chained together in a way that provides a complete recording of who owns what and how things were transacted. This also ensures that there is only one version of the truth for the ledger and that partners don’t have different versions of a transaction. Advanced cryptography of the storage ensures that it’s tamper proof and can be trusted to be safe and secure.
- Replication and Redundancy on a Blockchain provides robust fault tolerance and tamper proofing on a network. In Blockchain, each node has a full copy of the ledger ensuring that if anyone one node was ever compromised, that node could be eliminated and replicated back from the other nodes.
- Consensus on a Blockchain provides a mechanism to validate transactions on the network to ensure a very high level of trust. With consensus on a Blockchain, every transaction that is executed has the validation from the network. This has the power to eliminate massive amounts of time to audit and validate transactions between businesses.
Business Benefits of Blockchain
The Blockchain for business provides breakthrough benefits for organizations that have business models relying on an eco-system with other organizations that have shared business processes.
Some of the example use cases that can benefit greatly benefit include the following:
- Supply Chain Management
- Financial Trade Finance and Mortgage Processing
- Insurance Claims Processing
- Audit and Compliance
The key benefits realized include the following:
- Blockchains create new business opportunities. Blockchain networks can be a tremendous catalyst to create new business opportunities. These opportunities can be in the form of transaction revenue in Blockchains created to run business networks such as Supply Chain networks or they can be in the form of net new business ventures such as democratizing the way people invest in real estate or other assets.
- Blockchains save time. Because transactions that occur are on a shared ledger that are replicated at each node, everyone is updated in real time as they occur. This reduces the often-cumbersome processes of interacting with other trading partners from days to minutes.
- Blockchains reduce cost. Having a common platform and shared ledger reduces the need for each trading partner to develop their own ledger and business logic on their own reducing development time and complexity greatly. A shared ledger greatly improves the accuracy of information for all partners on the blockchain network greatly reducing costs associated with the common back and forth process of resolving disputes and audits of information. Intermediary parties performing audits or other transfer activities can be taken out of the network with blockchain reducing overhead and costs.
- Blockchains reduce risk. The nature of the replicated ledger across all nodes in a blockchain network greatly reduces the risk of loss or tampering of information of each of the partners in the network. All transactions are automatically replicated throughout the network ensuring that everyone always has the latest accurate information.
- Blockchains increase trust. Each part on a Blockchain for business network is permissioned and authenticated for their role in the business process. There are transactors and there are validators on the network. The trust between parties is increased on the blockchain through the validation of transactions by the designated parties on the network. In addition, the logic on the shared ledger allows for a higher level of visibility on the ledger for certain transactions.
Permissioned vs Public Blockchains
At a broad level, there are two approaches when it comes to building Blockchain solutions for business. The first is a Public Blockchain which is the same concept used by cryptocurrencies. In this Blockchain, all users of the Blockchain are anonymous so you can perform transactions with anyone in the world without ever knowing who the counter party of the transaction is. All you need to know is their hash.
With a role-based access control, Permissioned blockchains allow specific set of actions to be performed only by select identifiable participants. All activities such as permissioning and profile management of participating entities in the blockchain is controlled by the access-control layer. However, un-permissioned or public blockchain networks don’t have a control layer.