By Gopalakrishnan P, Development Leader, Blockchain Solutions, IBM Industry Platforms
Blockchain is probably one of the most discussed technologies of 2017. Thanks to Bitcoin and its intriguing valuations; not just technology enthusiasts, but also people from all walks of life are trying to understand what Blockchain is all about. Popular search engines have registered a massive surge in ‘Blockchain’ as a search key word over the past year.
Let’s try to understand Blockchain and its applicability to enterprise businesses very briefly.
In a nutshell, Blockchain is a distributed ledger that can be used to keep transactions in a system. The Blockchain architecture gives participants the ability to share a ledger that is updated through peer-to-peer replication, every time a transaction occurs. Each participant (node) can receive or send transactions to other nodes, and the data is synchronized across the network as it is transferred. What this means, is that the ledger is owned by everyone who is participating in the transaction, hence any transaction that is happening is visible to all participants. A Blockchain network can be either public or private. The difference between public and private Blockchain is about ‘permission’ to participate in the network, execute the transactions, and maintain the shared ledger. A public Blockchain network is completely open and anyone can join and participate in the network. Whereas a private Blockchain network requires an invitation and must be validated by either the network starter or by a set of rules put in place by the network starter. Enterprise businesses normally would use a private, permissioned Blockchain network. This places restrictions on who is permitted to participate in the network, and perform transactions.
Can Blockchain address the needs of the changing world, that of the digital era? The answer is complicated. To begin with, we need to be clear that Blockchain is not a panacea for all the business problems. If we can identify the right set of problems, where transaction transparency, contractual adherence, trust and audit trail are of paramount importance, Blockchain will fit the bill. Fortunately, almost all kind of businesses have plenty of these kinds of problems to solve. We’ll see some examples panning across industries.
Financial Sector: Probably this is one area where we’ll see many applications of Blockchain coming up in the near future. This could span from Central Banks or other financial institutions issuing digital crypto currencies, to the creation of a distributed KYC (Know Your Customer) ledger or a distributed clearing and settlement solution across banks and financial institutions. Forex trading could be another area where a distributed ledger will allow multiple financial institutions to participate in a seamless, transparent way in currency exchange.
Healthcare: Many challenges faced by the Healthcare industry could be addressed by Blockchain. With many governments across the globe looking at nation-wide healthcare programs, a distributed database of patient information, insurance details, and medical records when accessible to healthcare providers, insurers, and patients would be highly valuable.
Successful adoption of blockchain requires acceptance and willingness by all parties to participate in a distributed ledger network
Other areas could be clinical trial data management, where many participating research institutions, industries, and hospitals can share data in a secured, transparent and trusted way.
Government: Governments can make use of Blockchain in many areas to bring speed, accuracy, transparency, and trust. The health care example above is one. Records management is another area where Governments can find immense use of Blockchain, this could include land records, vehicle registration records, citizen identity records and other such relevant details. Government agency processes that require data to be shared across various agencies will be another area that can experience benefits with the use of Blockchain.
Education and Academia: Verifying academic credentials is a universal need. Currently verifying academic credentials is largely a manual process (heavy on paper documentation and case-by-case checking). With Blockchain, verification procedures can be streamlined, thereby, reducing fraudulent claims of un-earned educational credits. Sony Global Education, for example, has developed a new educational platform in partnership with IBM that uses Blockchain to secure and share student records.
Supply Chain: Supply chains always involve multiple parties. Beyond suppliers and buyers, there are many parties involved in realising a supply chain transaction. These include Carrying and Forwarding agents, transporters, warehouses, taxation agencies and many more. A distributed ledger where each of these agencies can share the required set of documents will immensely reduce the lead time in supply chains and bring in great efficiency at reduced cost. This can also bring in increased visibility across the end-to-end supply chain, enabling everyone involved in the supply chain to see the state of goods in real time. IBM along with the Mahindra Group is reinventing supply chain finance with a Blockchain solution, which will enable Mahindra’s auto division suppliers to easily use their unpaid accounts receivable as collateral for a loan. The Blockchain, which provides perfect visibility into the entire credit process, is expected to provide suppliers faster access to credit while reducing Mahindra’s credit risk.
Manufacturing: Today manufacturing is a complex global operation for many companies. Many parts and components are manufactured in different parts of the world and the final product is assembled at different locations. It is necessary for many manufacturers (like automobile industry) to keep track of what component used in an assembly came from which factory and produced in which batch. A distributed Blockchain network across all manufacturing and assembling locations with shared data will make the traceability and tracking of components and assemblies a much easier and faster job.
IBM is partnering with several industry majors to build the first production-grade platforms for trade and supply chain. Last month, Maersk and IBM announced the intention to establish a joint venture to provide more efficient and secure methods for conducting global trade using Blockchain technology. This will bring the industry together on an open global trade digitization platform that will bring more transparency, visibility and reduced cost to the global trade. Similarly, IBM, Walmart and Nasdaq-listed Chinese retailer JD.com together with Tsinghua University National Engineering Laboratory for E-Commerce Technologies, collaborated and announced a Blockchain Food Safety Alliance to improve food tracking and safety in China which applies Blockchain technology for food traceability.
Successful adoption of Blockchain requires acceptance and willingness by all parties to participate in a distributed ledger network, and this generally requires a level of cultural change across the organisation.
To conclude, while Blockchain is still in its nascence from a wider adoption perspective, it has far reaching consequences in making our business networks fast, robust, trustworthy and transparent, bringing in tremendous amount of overall efficiency to complex networks.