BLOCKCHAIN – THE NEXT OF EVERYTHING

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Blockchain - The next of everything

Introduction

With the modernization of lifestyle in the 21st century, Technology has evolved continuously and its acceptance has been increased in day to day life ranging from operating devices through remote control to voice-based commands. In industry, Augmented Reality (AR) and Internet of Things (IoT) are two main buzzwords of last decade, but now the time has come for “Blockchain Technology” – The revolutionary technology impacting different industries miraculously which was introduced in the markets with its very first modern application Bitcoin. Bitcoin is a form of digital currency (cryptocurrency) that can be used in the place of money for trading and the underlying technology behind the success of cryptocurrencies is termed as Blockchain. The first successful and popular application of the same came into being in the year 2009 by Satoshi Nakamoto in the form of Bitcoin.

Structured supply chain transformation is coming as a result of Industry 4.0 technologies including the Internet Of Things (IoT), Artificial Intelligence (AI), 3D printing and Augmented and Virtual Reality (AR/VR). Importantly, Blockchain is another emerging technology that ties together all of these pieces and makes possible the digital transformation of entire ecosystems. The Economist described the same as the most important advance in recordkeeping since the invention of the double-entry bookkeeping system in 1494.

Blockchain is becoming a standard in the business world, and it supports different players as they rethink enterprises, ecosystems, and economies. Leading companies use blockchain to build trust, transparency, and data synchronization across ecosystems — and to create new business models. All of these are key elements of a well-functioning supply chain, hence Supply Chain has been the top use case in this first stage of blockchain adoption.

What is Blockchain?

Blockchain is a data structure that holds the transactional records with security, transparency, and decentralization. It is a chain of immutable blocks and not controlled by a single authority. It is an append-only, decentralized and distributed ledger technology that is operated by a peer-to-peer network mechanism that records and validates data by retroactively referencing a list of previous records using hash functions.

It is completely open to any and everyone on the network. Once the information is stored in the block than it is very difficult to change or alter the same as every block has a common history and available to all the network participants. Hence, to make any change in the same change has to be done in all block across the chain. Each transaction in the blockchain is secured with a digital signature that proves its authenticity and ensures data stored in a blockchain is tamper-proof. This way, the chances of the fraudulent activity or duplication of transactions are eliminated without the need of the third-party. Blockchain allows all the network participants to reach an agreement, commonly known as consensus.

Blockchain is an internet-based technology that can publicly validate, record and distribute transactions in immutable, encrypted ledgers. It was invented to support transactions in bitcoin, a digital cryptocurrency that operates independently from a central bank. In essence, blockchain technology provides the platform for creating and distributing the ledger, or record, of every bitcoin transaction to millions of owners linked to networks in all parts of the world. Because the transactions and ledgers are encrypted, blockchain technology offers more security than the banking model, and its instantaneous transmission via the internet eliminates banks’ two- to three-day clearing process and accompanying costs for transferring money from one account to another.

More Than Just Records

Although different blockchains have different methods of validation (through consensus mechanisms), the characteristics of blockchain involve a much wider list of uses other than the simple entry of data. Bitcoin, a by-product of blockchain, is the most commonly used reference point for demonstrating the facilitation of payment transactions. Ethereum, a framework that is considered the 2.0 of blockchain, is regularly leveraged for its ability to create smart contracts — a digital contract that’s highly programmable and self-executes provided set terms and conditions have been met, thus resulting in a transaction.

Besides blockchains ability to automate transactions and verify information, we can safely define as valid (without the need for centralized approval), blockchain also can integrate into other technologies and software, which provides the biggest selling factor to its value.

A blockchain is a tamper-evident, shared a digital ledger that records transactions in a public or private peer-to-peer network. Distributed to all member nodes in the network, the ledger permanently records, in a sequential chain of cryptographic hash-linked blocks, the history of asset exchanges that take place between the peers in the network.

All the confirmed and validated transaction blocks are linked and chained from the beginning of the chain to the most current block, hence the name blockchain. The blockchain thus acts as a single source of truth, and members in a blockchain network can view only those transactions that are relevant to them.

Understanding blockchain

Blockchain is the underlying technology that enables the digital currency Bitcoin and others, but it can do much more. In fact, blockchains make it possible to do four important things simultaneously:

Blockchain is the underlying technology that enables the digital currency Bitcoin and others, but it can do much more. Blockchains make it possible to do four important things simultaneously:

  1. Create permanent, immutable, signed and time-stamped records of identity, ownership, transactions or contractual commitments.
  2. Permit two or more entities — people, businesses, governmental agencies, nonprofits, regulators and others — to share that information without having to keep accurate records themselves or pay a third-party service to do so.
  3. Provide complete transparency for authorized users to see data and update it easily.
  4. Benefit from thus-far unhackable security. (In the nine years since its inception, hundreds of billions of dollars of blockchain transactions have occurred; despite the concerted efforts of the world’s most cunning digital criminals, the users have never been hacked)

Blockchain technology is producing extraordinary results in the supply chain, transportation, and logistics.

  1. Walmart is using blockchain to track shipments of seafood and pork from China to its retail store shelves down to the second.
  2. Maersk’s use of blockchain is demonstrating that the administrative costs of shipping flowers from East Africa to the Netherlands can be drastically reduced.
  3. In international trade, blockchain is making it possible to process paperwork, transfer ownership, and pay sellers and freight carriers in a matter of minutes. Wine is traced from the Napa Valley to China. Diamonds are monitored from South African mines to retails store shelves to eliminate the scourge of blood diamonds. Health care providers verify that pharmaceuticals have been kept at the proper temperatures throughout the shipping process.

In the next five to ten years, global, autonomous supply chains will encompass parts, materials, products, services, information, and funds that flow between and among organizations without any unnecessary human intervention. This will happen according to goals, objectives, and rules established and agreed upon by the stakeholders and documented with smart contracts that are stored permanently and immutably with blockchain. These will not be simply blockchain-based records of a traditional contract created with a word processor; they will be dynamic computer programs that can enforce their provisions.

What is Distributed Ledger?

A distributed ledger is a type of database that is shared, replicated, and synchronized among the members of a decentralized network. The distributed ledger records the transactions, such as the exchange of assets or data, among the participants in the network. Participants in the network govern and agree by consensus on the updates to the records in the ledger. No central authority or third-party mediators, such as a financial institution or clearinghouse, is involved. Every record in the distributed ledger has a timestamp and unique cryptographic signature, thus making the ledger an auditable, immutable history of all transactions in the network.

The role of business ledgers

In today’s connected and integrated world, an economic transaction takes place in business networks that span national, geographic, and jurisdictional boundaries. Business networks typically come together at marketplaces where the participants, such as producers, consumers, suppliers, partners, market makers/enablers, and other stakeholders own, control, and exercise their rights, privileges, and entitlements on objects of value known as assets.

Assets can be tangible and physical, such as cars or homes, or intangible and virtual, such as deeds, patents, and stock certificates. Asset ownership and transfers are transactions that create value in a business network.

Transactions typically involve various participants like buyers, sellers, and intermediaries (such as banks, auditors, or notaries) whose business agreements and contracts are recorded in ledgers. A business typically uses multiple ledgers to keep track of asset ownership and asset transfers between participants in its various lines of business. Ledgers are the systems of record for a business’s economic activities and interests.

Problems with current business ledgers

Current business ledgers in use today are deficient in many ways. They are inefficient, costly, and subject to misuse and tampering. Lack of transparency, as well as susceptibility to corruption and fraud, lead to disputes. Having to resolve disputes and possibly reverse transactions or provide insurance for transactions is costly. These risks and uncertainties contribute to missed business opportunities.

Furthermore, out-of-sync copies of business ledgers on each network participant’s systems lead to faulty business decisions made on temporary, incorrect data. At best, the ability to make a fully informed decision is delayed while differing copies of the ledgers are reconciled.

Hyperledger

Hyperledger is an open-source effort to advance cross-industry blockchain technologies for business use. It’s a global collaboration, hosted by The Linux Foundation®, including leaders in finance, banking, Internet of Things, supply chain, manufacturing, and technology. These 183+ diverse members and nine ongoing projects, including Hyperledger Fabric, work in concert to create an open, standardized, and enterprise-grade distributed ledger framework and codebase. The Hyperledger Fabric framework supports distributed ledger solutions on permission-based networks, where the members are known to each other, for a wide range of industries. Its modular architecture maximizes the confidentiality, resilience, and flexibility of blockchain solutions.

Enterprise blockchain requirements

Blockchain is a truly disruptive technology that can transform business networks. Industrial-grade blockchain technologies should have the following characteristics:

  • A shared, permission-based ledger is the append-only system of record (SOR) and a single source of truth. It is visible to the authenticated members in the business network channels
  • A consensus protocol agreed to by all participating members of the business network ensures that the ledger is updated only with network-verified transactions.
  • Cryptography ensures tamper-proof security, authentication, and integrity of transactions.
  • Chaincode (also called smart contracts) encapsulates participant terms of agreement for the business that takes place on the network; chain code is stored on the validating peer nodes in the blockchain.

In addition to these attributes, enterprise blockchain technology needs to meet key industry requirements such as performance, verified identities, and private and confidential transactions. Hyperledger Fabric has been architected to meet these needs. It is also designed with a pluggable consensus model, allowing businesses to select an optimal algorithm for their networks.

Types of Blockchains

Though Blockchain has evolved to many levels since inception, following are two broad categories

  1. Public Blockchain
  2. Private Blockchains

Common Attributes of Blockchains:

  • Both Public and Private blockchain have peer-to-peer decentralized networks.
  • All the participants of the network maintain a copy of the shared ledger with them.
  • The network maintains copies of the ledger and synchronizes the latest update with the help of consensus.
  • The rules for immutability and safety of the ledger are decided and applied on the network to avoid malicious attacks.

Now that we know the similar elements of both these blockchains, let’s learn about each of them in detail and the differences between them.

Public Blockchain – As the name suggests, a public blockchain is a permissionless ledger and can be accessed by any and everyone. Anyone with access to the internet is eligible to download and access it. Moreover, one can also check the overall history of the blockchain along with making any transactions through it. Public blockchains usually reward their network participants for performing the mining process and maintaining the immutability of the ledger. An example of the public blockchain is the Bitcoin Blockchain.
Public blockchains allow communities worldwide to exchange information openly and securely. However, an obvious disadvantage of this type of blockchain is that it can be compromised if the rules around it are not executed strictly. Moreover, the rules decided and applied initially have very little scope of modification in the later stages.

A blockchain network can be either permission-based or permissionless. Permissionless networks are open to any participants, and transactions are verified against the pre-existing rules of the network. Any participant can view transactions on the ledger, even if participants are anonymous. Bitcoin is the most familiar example of a blockchain network that is permissionless and public.

Private Blockchain – Contrary to the public blockchain, private blockchains are the ones which are shared only among the trusted participants. The overall control of the network is in the hands of the owners. Moreover, the rules of a private blockchain can be changed according to different levels of permissions, exposure, number of members, authorization etc.

Private blockchains can run independently or can be integrated with other blockchains too. These are usually used by enterprises and organizations. Therefore, the level of trust required amongst the participants is higher in private blockchains.

Permissioned networks, on the other hand, are usually private and are limited to participants within a given business network. On permission-based blockchains, participants are allowed to view only the transactions relevant to them. Hyperledger is a collaborative effort, hosted by the Linux Foundation, to support the development of permission-based blockchains for business.

In essence, blockchains come in two dominant types. “Permissionless” distributed ledgers, such as bitcoin, reside in the public domain, while “permission-based” ledgers are centralized and governed by “actors,” “nodes,” or “miners,” and are held outside the public domain. This distinction has important consequences in the supply-chain context.

Blockchain Basics

Blocks and blockchain networks

A blockchain is a type of a distributed ledger that is shared across a business network. Business transactions are permanently recorded in sequential, append-only, tamper-evident blocks to the ledger. All the confirmed and validated transaction blocks are hash-linked from the genesis block to the most current block, hence the name blockchain.

A blockchain is thus a historical record of all the transactions that have taken place since the beginning of the blockchain in the network. The blockchain serves as a single source of truth for the network.

Distributed ledgers

A distributed ledger is a type of database, or system of record, that is shared, replicated, and synchronized among the members of a network. The distributed ledger records the transactions, such as the exchange of assets or data, among the participants in the network. This shared ledger eliminates the time and expense of reconciling disparate ledgers.

Benefits of distributed ledgers

Explore the problems and solutions to legacy ledgers in this introduction to distributed ledgers.

Participants in the network govern and agree by consensus on the updates to the records in the ledger. No central, third-party mediator, such as a bank or government, is involved. Every record in the distributed ledger has a timestamp and unique cryptographic signature, thus making the ledger an auditable history of all transactions in the network.

One implementation of distributed ledger technology is the open-source Hyperledger Fabric blockchain, which is one of several open-source projects hosted by The Linux Foundation.

Participants

A blockchain network for business is a collectively owned peer-to-peer network that is operated by a group of identifiable and verifiable participants. Participants may be individuals or institutions, such as a business, university, or hospital, for example.

Assets, transactions, and channels

Anything that can be owned or controlled to produce value is an asset. Assets can be tangible (such as a car or farm-fresh produces) or intangible (such as a mortgage or patent). A transaction is an asset transfer onto or off of the ledger.

In a Hyperledger Fabric blockchain, a channel is a private “subnet” of communication between two or more specific network members, for the purpose of conducting private and confidential transactions. If two participants form a channel, then those participants — and no others — must be authenticated and authorized to transact on that channel and share copies of the ledger for that channel. Thanks to channels, the network members who need private and confidential transactions can coexist on the same blockchain network with their business competitors and other restricted members.

Consensus

Pluggable consensus

Hyperledger Fabric is a blockchain framework implementation and one of the Hyperledger projects hosted by The Linux Foundation. It allows components, such as consensus and membership services, to be plug-and-play.

The consensus is the collaborative process that the members of a blockchain business network use to agree that a transaction is valid and to keep the ledger consistently synchronized. Consensus mechanisms lower the risk of fraudulent transactions because tampering with transactions added to the ledger would have to occur across many places at the same time.

To reach consensus, participants agree to the transaction and validate it before it is permanently recorded in the ledger. Participants can also establish rules to verify transactions. No one, not even a system administrator, can delete a transaction that has been added to the ledger. A trusted network of participants reduces the costs of establishing consensus, relative to the higher costs present in permissionless blockchains.

In a business blockchain, a wide variety of consensus mechanisms are available to choose from. Where trust is high, a simple majority voting may suffice, or the network may choose to use a more sophisticated method.

Smart contracts and chain code

Smart contracts govern interactions with the ledger, and they can allow network participants to execute certain aspects of transactions automatically. For example, a smart contract could stipulate the cost of shipping an item that changes depending on when it arrives. With the terms agreed to by both parties and written to the ledger, the appropriate funds change hands automatically when the item is received.

In the context of Hyperledger Fabric, smart contracts are written into chain code, and the terms are considered essentially synonymous.

How Blockchain Works?

How Blockchain Works?

In a nutshell, here’s how blockchain allows transactions to take place:

  1. A blockchain network makes use of public and private keys in order to form a digital signature ensuring security and consent.
  2. Once the authentication is ensured through these keys, the need for authorization arises.
  3. Blockchain allows participants of the network to perform mathematical verifications and reach a consensus to agree on any particular value.
  4. While making a transfer, the sender uses their private key and announces the transaction information over the network. A block is created containing information such as digital signature, timestamp, and the receiver’s public key.
  5. This block of information is broadcasted through the network and the validation process starts.
  6. Miners all over the network start solving the mathematical puzzle related to the transaction in order to process it. Solving this puzzle requires the miners to invest their computing power.
  7. Upon solving the puzzle first, the miner receives rewards in the form of bitcoins. Such kind of problems is referred to as proof-of-work mathematical problems.
  8. Once the majority of nodes in the network come to a consensus and agree to a common solution, the block is time-stamped and added to the existing blockchain. This block can contain anything from money to data to messages.
  9. After the new block is added to the chain, the existing copies of the blockchain are updated for all the nodes on the network.

Blockchain Features

The following features make the revolutionary technology of blockchain stand out:

  • Decentralised: Blockchains are decentralized in nature meaning that no single person or group holds the authority of the overall network. While everybody in the network has a copy of the distributed ledger with them, no one can modify it on his or her own. This unique feature of blockchain allows transparency and security while giving power to users.
  • Peer-to-Peer Network: With the use of Blockchain, the interaction between two parties through a peer-to-peer model is easily accomplished without the requirement of any third party. Blockchain uses P2P protocol which allows all the network participants to hold an identical copy of transactions, enabling approval through a machine consensus. For example, if you wish to make any transaction from one part of the world to another, you can do that with blockchain all by yourself within a few seconds. Moreover, any interruptions or extra charges will not be deducted in the transfer.
  • Immutable: The immutability property of a blockchain refers to the fact that any data once written on the blockchain cannot be changed. To understand immutability, consider sending email as an example. Once you send an email to a bunch of people, you cannot take it back. In order to find a way around, you’ll have to ask all the recipients to delete your email which is pretty tedious. This is how immutability works.
    Once the data has been processed, it cannot be altered or changed. In case of the blockchain, if you try to change the data of one block, you’ll have to change the entire blockchain following it as each block stores the hash of its preceding block. Change in one hash will lead to change in all the following hashes. It is extremely complicated for someone to change all the hashes as it requires a lot of computational power to do so. Hence, the data stored in a blockchain is non-susceptible to alterations or hacker attacks due to immutability.
  • Tamper-Proof: With the property of immutability embedded in blockchains, it becomes easier to detect tampering of any data. Blockchains are considered tamper-proof as any change in even one single block can be detected and addressed smoothly. There are two key ways of detecting tampering namely, hashes and blocks.
    As described earlier, each hash function associated with a block is unique. You can consider it as a fingerprint of a block. Any change in the data will lead to a change in the hash function. Since the hash function of one block is linked to next block, in order for a hacker to make any changes, he/she will have to change hashes of all the blocks after that block which is quite difficult to do.

Blockchain Features that Enhance Supply Chain Goals

Let’s take look at some highlight points that make blockchain such a valuable candidate for enterprise solutions, mainly with regards to supply chain management.

  • Immutable & Secure — Because blockchain is appended only, this means data recorded on a ledger cannot be erased, changed or falsified once it’s entered. This prevents unresolved disputes between trust-less parties and makes data secure so that it cannot be easily tampered with.
  • Live Tracking & Provenience of Assets — Improve product tractability & provenance throughout the extended supply chain with Blockchain, information from the blockchain-based supply chain is secure, reliable and inclusive. A survey conducted by Chain Business Insights of global supply chain professionals (published May 2017) finds that 43% intend to introduce blockchain/Distributed Ledger Technology (DLT) into their supply chains over the coming year, and another 20% within the next two years.
  • Decentralized — blockchain platforms are decentralized! This means that it is self-regulated and doesn’t rely on a central point of governance. Enterprises can rely on trust-less interactions knowing validation is required before finalizing various business transactions.
  • Automated — Because consensus mechanisms are self-governed, and smart contracts follow the same principle, blockchain itself is capable of automating transactions that take place within supply chain processes.
  • Easy Integration with other Technologies — Another notable feature of blockchain that appeals to supply chain enterprise systems is the ability to integrate into existing technologies. Blockchain as a working pair with technologies such as AI, Big Data, IoT devices, etc. can be enhanced which optimizes the operations required to complete processes through automation and securely storing retrievable data.

Applications of Blockchain in Supply Chain

The following examples are now in use or can be implemented today using existing technology.

Automotive Supplier Payments

Blockchain allows the transfer of funds anywhere in the world without the need for traditional banking transactions, as transactions are made directly between payer and payee. It is also secure and rapid; taking minutes, compared to days for automated clearing house payments, for example.

Bitcoin transfers specifically also incur lower fees. Australian vehicle manufacturer Tomcar uses Bitcoin to pay some of its suppliers. Currently, three partners in Israel and Taiwan accept payment from Tomcar using Bitcoin.

 Tomcar’s supplier agreements use standard terms. The advantage is in the cost savings. On the other hand, the firm is careful to avoid hanging onto too much Bitcoin. While Bitcoin is international by nature, some national governments see it as a way for companies to invest. Companies may, therefore, be subject to taxation on Bitcoin holdings.

Meat Traceability

Companies can use distributed ledger systems (blockchains) to record product status at each stage of production. The records are permanent and immutable. They make it possible to trace each product to its source. Global retailer Walmart uses blockchain to track sales of pork in China. Its system lets the company see where each piece of meat comes from, each processing and storage step in the supply chain, and the products’ sell-by date. In the event of a product recall, the company can also see which batches are affected and who bought them.

Electric Power Micro-grids

This example shows how entities of any size can use blockchain. In other words, blockchain is not just for the big players. Smart contracts are being used to redistribute excess power from solar panels. The Transactive Grid is an application running on blockchain to monitor and redistribute energy in a neighbourhood micro-grid. The program automates the buying and selling of green energy to save costs and pollution. The process uses the Ethereum blockchain platform, designed specifically for building and executing smart contracts.

RFID-driven Contract Bids and Execution

RFID tags are commonly used in the supply chain to store information about products. IT systems can read the tags automatically and then process them. Therefore, the logic goes; why not use them for smart contracts in logistics?

The possible setup could be as follows. RFID tags for cartons or pallets store information on delivery location and date. Logistics partners run applications to look for these tags and bid for a delivery contract. The partner offering optimal price and service gets the business. A smart contract then tracks the status and final delivery performance.

 Cold Chain Monitoring

Food and pharmaceutical products often have specialised storage needs. Moreover, enterprises see the value in sharing warehouses and distribution centres instead of each one paying for its own. Sensors on sensitive products can record temperature, humidity, vibration, and other environmental conditions.

These readings can then be stored on a blockchain. They are permanent and tamper-proof. If a storage condition deviates from what is agreed, each member of the blockchain will see it. A smart contract can trigger a response to correct the situation. For instance, depending on the size of the deviation, the action may be to adjust the storage. However, it could also extend to changing “use-by” dates, declaring products unfit, or applying penalties.

 Blockchain and Internet of Things

Other ambitious ideas come from using blockchain and the IoT. One suggestion is for smart contracts to manage rentals of driverless cars. A smart contract could check for rental payments. If there has been no payment or the rental agreement reaches the end of its term, the smart contract could lock the car and tell it to drive itself back to the hire company’s premises.

Blockchain Applications and Business Cases

Blockchain applications

A blockchain application requires three interdependent components: the user-facing application, the smart contract, and the ledger.

The top layer is the user-facing application that meets the needs of the network participants. The application lets users invoke smart contracts that trigger transactions in the business network. The smart contract encapsulates the business logic of the network: assets, ownership, and transfers. Each invocation of a smart contract creates a transaction in the network and updates the ledger. The ledger holds the current value of smart contract data and is distributed across the network.

Blockchain use cases

Blockchain technology is a powerful game-changer for many industries because it organizes activities with less friction and more efficiency. And it does so at a greater scale among collaborative participants. Blockchain is already helping reshape industries in domains as varied as finance, healthcare, and government. Here’s just a sampling of its infinite possibilities:

  • Internet of Things Freight transportation: Move freight with multiple transportation companies, ensuring transparency and timely delivery Component tracking and compliance: Store provenance records for original and replacement parts for fleet maintenance Log operational maintenance data: Store operational and maintenance records for sharing among business partners or for regulatory purposes
  • Identity management Build a trusted digital identity
  • Supply chain Improve traceability, transparency, and efficiency in the food safety network
  • Financial services Know Your Customer: Access to trusted up-to-date information on customers improves the accuracy of customer services in financial institutions Clearing and settlement: Real-time point-to-point transfer of funds between financial institutions accelerates settlement. Other possible applications are Letters of credit, Corporate debts and bonds, Trading platforms, Payment remittance, Repurchase agreements, and Foreign exchange
  • Healthcare Electronic medical records Virus banks Doctor-vendor RFP services and assurance contracts Blockchain health research commons Blockchain health notaries
  • Insurance Claims processing P2P insurance Ownership titles Sales and underwriting
  • Government tender processes Voting Taxes
  • Gaming
  • Music

And the list goes on! Check out these and many other industries and use cases that are benefiting from blockchain technology.

Though Bitcoins and cryptocurrencies are the first popular application of Blockchain technology, they are not the only ones. The nature of Blockchain technology has led businesses, industries, and entrepreneurs from all around the world to explore the technology’s potential and make revolutionary changes in different sectors. While the basic idea of trustworthy records and giving the power in the hands of users has enormous potential, it sure has raised a lot of hype in the markets too. The magic of this technology sure has the power to transform industries given the usage is planned and executable in actual senses. Following are some the actual implementation use cases.

Smart contracts

Different businesses deal with each other in order to exchange services or products. All the give and take terms and conditions are signed by the involved parties in the form of agreements or contracts. However, these paper-based contracts are prone to errors and frauds which challenges the trust factor between both the parties and raises risks. Blockchain brings forward an amazing solution to this problem through Smart Contracts.
Smart contracts perform similar functions as paper-based agreements. The differentiating factor about smart contracts is that these are digital as well as self-executable in nature. Self-executable meaning that when certain conditions in the code of these contracts are met, they are automatically deployed. Ethereum, an open-source blockchain platform has introduced smart contracts in the Blockchain ecosystem. Smart contracts can be used for different situations or industries such as financial agreements, health insurances, real estate property documents, crowdfunding etc.
For example, Blockchain smart contracts can be used in healthcare to manage drug supply.
Once the name and quantity of a drug are shipped from a manufacturing company to be delivered ahead to the pharmacist, a smart contract with all the valid data like the information of the drug, the quantity of supply etc. can be created. This smart contract will be responsible for managing the entries throughout the entire supply chain between different intermediaries. Since the smart contract works on certain defined conditions, no one can alter them or make any changes in the contract thus, ensuring trust and authenticity of the drugs.

Government Elections

No matter how to secure government elections are made, the chances of frauds through anti-social elements always persists. The current voting system relies on manual processing and trust. Even if security breaches and frauds are eliminated, the chances of manual errors cannot be ignored. In such cases, the best solution is to automate the overall process with the help of smart contracts.
Blockchain smart contracts provide a modern system through which these common issues can be easily eliminated. Entries in the smart contracts will allow transparency and security while maintaining the privacy of the voters thus, enabling fair elections. India’s digital Electronic Voting Machine (EVM) based Election along with Voter Verifiable Paper Audit Trail (VVPAT) technology which in turn help Election commission to get results within a day with complete secrecy and transparency. It is an example of the same.

Identity management

The world is getting more digitized with every passing day. Consider financial transactions happening online for instance, you can easily login with your credentials and security pin in order to access your funds. However, in this case, no one can ensure the identity of the person taking out the money. If your username and password are hacked by someone, there’s no way to secure your money.
The need of the hour is to have a system that manages individual identification on the web. The distributed ledger technology used in blockchains offers you advanced methods of public-private encryption using which, you can prove your identity and digitize your documents. This unique secure identity can work as a saviour for you while conducting any financial transactions or any online interactions on a shared economy. Moreover, the gap between different government bodies and private organizations can be filled through a universal online identity solution that blockchain can provide. i.e. Online banking transaction with multiple security options like One Time Password (OTP) and Numbers Grid in Debit cards along with UserID and password is more secure system. But, distributed ledger means when money withdraws intimation goes to an actual user in his/her phone and email for reference. Hence, if it is fraud or another person who is operating your card, you can immediately report to the bank.

Intellectual Property Protection

Digital content or information can easily be reproduced and distributed with the aid of the internet. Due to this, people from all around the world hold the power to copy, replicate and use it without giving credits to the actual producer of the content. There are copyright laws to protect such issues but in the current scenario, these laws aren’t appropriately defined according to common global standards. Meaning that any law which is valid in the US might not stand true in Australia.
Even if there’s any copyright applied to any intellectual property, people easily lose control over their data and suffer on financial terms. With the aid of Blockchain technology, all the copyrights can be stored in the form of smart contracts which will enable automation in businesses along with the increase in online sale thus, eliminating the redistribution risk.
Blockchain for IP registry will help the authors, owners or users to get clarity of copyright. Once they register their work online, they’ll own the evidence which will be tamper-proof. As blockchain is immutable in nature, any entry once stored on the Blockchain cannot be changed or modified. The owner of the work will have the overall authority over the ownership as well as the distribution of the content.

Business Benefits of Blockchain

In legacy business networks, all participants maintain their own ledgers with duplication and discrepancies that result in disputes, increased settlement times, and the need for intermediaries with their associated overhead costs. However, by using blockchain-based shared ledgers, where transactions cannot be altered once validated by consensus and written to the ledger, businesses can save time and costs while reducing risks.

Blockchain consensus mechanisms provide the benefits of a consolidated, consistent dataset with reduced errors, near-real-time reference data, and the flexibility for participants to change the descriptions of the assets they own.

Because no one participating member owns the source of origin for the information contained in the shared ledger, blockchain technologies lead to increased trust and integrity in the flow of transaction information among the participating members.

Immutability mechanisms of blockchain technologies lead to lowered cost of the audit and regulatory compliance with improved transparency. And because contracts being executed on business networks using blockchain technologies are automated and final, businesses benefit from increased speed of execution, reduced costs, and less risk, all of which enables businesses to build new revenue streams to interact with clients.

Platform strategies for blockchain

The buzz right now in business is about blockchain. It’s a disruptive technology — and for good reason: If you aren’t disrupting your industry, you are most likely being disrupted. The financial, supply chain and distribution segments are leading this charge into adopting what began in the crypto-currencies with bitcoin and is now becoming the default technology upon which to build a secure and trusted application environment. A solid infrastructure layer, including storage, is a critical element to that environment. Blockchain technology is still in its infancy, particularly with enterprise adoption, and as with any new technology, adoption has its challenges.

Network speed and bandwidth

Since blockchain data is shared amongst all participants in the network, this can lead to performance issues based on the speed of the underlying network, the amount of data stored in the blockchain, and the number of participating blockchain nodes (participants in the transaction). Since a quorum of participants (determined by the peers) must approve the transaction — and all peers have a copy of the blockchain — the underlying network must have adequate bandwidth and speed to sustain the needed flow of blockchain transactions, messages, and data.

Instead of all participants receiving a complete copy of the entire blockchain each time it is changed, a preferred method would be to send only the changed blocks. Another performance-related issue is the requirement that all participants must approve all transactions. This can set up the old two-phase commit issue that was common with distributed databases where a transaction is held up because a participant hasn’t approved a transaction.

Security

One of the lynchpins of the blockchain paradigm is that it functions as a secure, decentralized, single point of truth data store. This is only true when the underlying platform, network, and storage all provide adequate security. In addition, the entries in the blockchain are identified by cryptographic hash signatures that track each block with the block that follows, creating a daisy chain of related hash values that will reveal any attempt to tamper with the block contents after they have been added to the blockchain. However, while they do ensure that block contents cannot be manipulated, these hash chains do not guarantee that the data within the block will be secure from data breaches.

At the block level, any blockchain — whether it is Hyperledger, Ethereum, or some other implementation — must be encrypted and kept in a secure environment. With advances in quantum technology, even 256-bit or larger keys may no longer be able to guarantee absolute security. The use of whitelist-based security ensures only authorized access to an asset.

On-chain storage

Because of the immutable nature of the blockchain, storage capacity needs are only expected to grow. Therefore, even a medium-sized blockchain can reach an estimated petabyte within the first three years in operation. Assuming that redundant copies and backup are also needed, it is easy to imagine how storage for primary blockchain needs to be plentiful, scalable, and fast.

Off-chain storage

Off-chain storage is not something that is often discussed in the context of blockchain but is a critical element in the deployment. Given the propensity for the blockchain itself to continue to grow in size, it is not a good practice to store any backing data (such as copies of contracts, pictures of diamonds, or spec sheets for a flywheel) in the primary blockchain. Instead, it is a good habit to place these in off-blockchain storage also known as off-chain storage with a simple hash pointer located within the blockchain.

This off-chain storage requires that either each peer needs to keep a copy of the off-blockchain materials, or a high-speed data link or network should be made available to allow retrieval of the off-blockchain materials from other peers when it is needed.

Storage requirements

While blockchain storage for a medium-transaction-rate blockchain can reach a petabyte over a three-year span, off-chain data can be several times that size, for various reasons such as additional data granularity, unstructured data, and growing networks. The ability to quickly and transparently scale off-chain storage is critical to the performance of the entire blockchain network. All peers in the blockchain that require on-site copies of the off-chain data must agree on the specification and type of off-chain storage to be used since performance is dependent on meeting both main blockchain processing of storage and off-chain storage service-level agreements.

All of this requires systems that have selectable compression, deduplication, sharding, and other space-saving measures, as well as high performance.

Summary

Blockchain is a new disruptive paradigm for many technologies that require a single source of truth. Whether it be Hyperledger, Ethereum, or another blockchain technology, all implementations require proper levels of processing, storage, networking, and security to work optimally.

Other than these few examples, the revolutionary technology of Blockchain holds a high potential of applications in many different industries and sectors. While some industries have already started adopting blockchain in their businesses, many are still exploring the best possible ways to start with.

Blockchain is a new name in the world of technologies but it is definitely the one to last. Even in the early stages, the technology has gained huge popularity starting with their very first application of cryptocurrencies. More areas of applications are being discovered and tested with each passing day. Once the technology is adopted and accepted on a global level, it’ll transform the way we live today.

Blockchain technologies represent a fundamentally new way to transact business. They usher in a robust and smart next generation of applications for the registry and exchange of physical, virtual, tangible, and intangible assets. Thanks to the key concepts of cryptographic security, decentralized consensus, and a shared public ledger with its properly controlled and permission-based visibility, blockchain technologies can profoundly change the way we organize our economic, social, political, and scientific activities.

Blockchain can transform supply chains, industries, and ecosystems. Interestingly, even organisations like banks, that would appear to be losing out to the new technology, can see opportunities to exploit it in the streamlining of their operations.

In-depth transformation of supply chains will not happen overnight. However, supply chains can already start using blockchain in some areas of their operations. Smart contracts can help eliminate costly delays and waste generated by manual handling of paperwork. From there, new doors may open to faster, more intelligent, and more secure processes throughout the entire supply chain.

Thus, Blockchain will be next of Everything – whatever field it be. 

7 COMMENTS

  1. […] Blockchain is a data structure that holds the transactional records with security, transparency, and decentralization. It is a chain of immutable blocks and not controlled by a single authority. It is an append-only, decentralized and distributed ledger technology that is operated by a peer-to-peer network mechanism that records and validates data by retroactively referencing a list of previous records using hash functions. You may find complete details on Blockchain in my previous article “Blockchain – The next of Everything!!!” […]

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