No doubt you’ve at least heard about blockchain, the distributed digital ledger technology that lets participants add and view blocks of transaction records, but not delete or change them without being detected.
Most of us know blockchain as the foundation of Bitcoin and other digital currencies. But blockchain is starting to enter the business mainstream as the trusted ledger for farm-to-table vegetable tracking, real estate transfers, digital identity management, financial transactions and all manner of contracts. Blockchain can be used for public transactions as well as for private business, inside a company or within an industry group.
What makes the technology so powerful is that there’s no central repository for this ever-growing sequential chain of transaction records, clumped together into blocks. Because that repository is replicated in each participant’s blockchain node, there is no single source of failure, and no insider threat within a single organization can impact its integrity.
“Blockchain lets you conduct transactions securely without requiring an intermediary, and records are secure and immutable,” says Mark Rakhmilevich, product management director at Oracle. “It also can eliminate offline reconciliations that can take hours, days or even weeks.”
And while the chain itself should be open for validation by any participant, some chains can be implemented with some form of access control to limit viewing of specific data fields. That way, participants can be permitted to view relevant data, but not everything in the chain.
A customer, for instance, might be able to verify that a contractor has a valid business license and see the firm’s registered address and list of complaints—but not see the names of other customers. The state licensing board, on the other hand, may be allowed to access the customer list or see which jobs are currently in progress.
Business Models and Use Cases
Blockchain is well-suited for managing transactions between companies or organizations that may not know each other well and where there’s no implicit or explicit trust, Rakhmilevich explains. “Blockchain works because it’s peer-to-peer…and it provides an easy-to-track history, which can serve as an audit trail,” he says.
What’s more, blockchain smart contracts are ideal for automating manual or semi-automated processes prone to errors or fraud. “Blockchain can help when there might be challenges in proving that the data has not been tampered with or when verifying the source of a particular update or transaction is important,” Rakhmilevich says.
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Blockchain has uses in many industries, including banking, securities, government, retail, healthcare, manufacturing and transportation. Take healthcare: Blockchain can provide immutable records on clinical trials. Think about all the data being collected and flowing to the pharmaceutical companies and regulators, all available instantly and from verified participants.
Blockchain could also be used to address the scourge of counterfeit drugs, a huge problem in the developing world, by tracking those drugs from manufacture all the way through distribution.
Hyperledger: a Common Ground
Many technology leaders and startups offer software or services for creating and using blockchain. When their customers want to participate in a shared blockchain application, such as to enable that farm-to-table vegetable tracking or for logistics that use multiple trucking, shipping and rail lines, there must be a common platform.
Creating and evolving that common platform is the goal of Hyperledger, a blockchain-focused industry initiative founded in 2016 by 30 companies and managed by the Linux Foundation. As of February, 197 organizations, some of them direct competitors, were involved with Hyperledger, with implementations built on different cloud services or using different programming languages.
The benefit of using Hyperledger Fabric, a permissioned blockchain platform, as a starting point for blockchain solutions is that those solutions can talk to each other. For example, if one trading partner is using Oracle Blockchain Cloud Service to manage transactions and another is using a Hyperledger Fabric–compliant blockchain service from IBM or SAP, their systems should be able to transact directly—a critical consideration.
Where to start? With a solid, standards-based platform, such as one that is built on Hyperledger Fabric.
Companies see a number of challenges in implementing blockchain in a production environment. “They are looking for enterprise-grade platforms, and they want to be able to check off all the right features: performance, resilience, scalability and security,” Rakhmilevich says.
Perhaps the biggest enterprise challenge is integration—tying blockchain services into your systems of record, whether it’s financial, inventory or logistics. Organizations can’t afford to build one-off integrations with each of their core back-end systems.
There’s also backward-compatibility to consider. Most blockchain services are very new and are constantly evolving. Businesses can’t keep reintegrating blockchain with every release.
Even with those challenges, the technology is making a real difference to real organizations. It makes it possible for businesses to raise cash quickly by demonstrating that they have actual, verifiable outstanding invoices. It can help supermarkets verify that perishable groceries were shipped in refrigerated containers, with data from Internet of Things sensors showing that the temperature stayed within a certain range. Blockchain can even make it easy for schools to publish diplomas and student records, vastly reducing the effort needed for employers to verify academic credentials, while also reducing the possibility of fraud.
Blockchain is real. It’s here. And the possibilities are limited only by an organization’s imagination.
Alan Zeichick is principal analyst at Camden Associates, a tech consultancy in Phoenix, Arizona, specializing in software development, enterprise networking, and cybersecurity. Follow him @zeichick.
(Illustration by Pedro Murteira)
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