We’ve seen a huge increase in interest in Bitcoin and the technology behind it, Blockchain. But like many other exciting technologies, many organizations are unsure how it could be useful for solving problems that matter.
In this first part of our series on Blockchain, we introduce a few key scenarios to illustrate how Blockchain can offer tangible value to businesses in the real world.
What is Blockchain?
A blockchain is like the digital version of a scarf knitted by your grandmother. She uses one ball of yarn, and the result is continuous. Each stitch depends on the one just before it. It’s impossible to remove part of the fabric, or to substitute a swatch, without leaving some trace: a few telling knots, or a change in the knit. – Nathan Heller, The New Yorker, “Estonia, The Digital Republic”
Blockchain technology allows any group of agents – individual people, business units, companies – to create and share an immutable, consistent record of events.
In its most famous incarnation, Bitcoin, Blockchain allows a global community of anonymous participants to ensure the validity of monetary transactions without the need for any central authority. The distributed network makes sure that the scarf is always knit from a “single ball of yarn,” preventing cheats from gaming the system.
But monetary exchange is only one use case for this powerful technology – let’s examine how it can improve the way organizations do business.
Use Case: Automated Supply Chain
Imagine this: a bicycle manufacturer, Contoso Corporation, buys parts from its suppliers and makes bicycles that it sells to retailers across the globe. Contoso needs to track each piece of inventory from the suppliers, through its manufacturing process, and on to the retailers. Knowing the precise location of each piece of inventory allows Contoso to anticipate needs, reduce inventory costs, and operate with maximal efficiency.
Contoso and its partners, both suppliers and retailers, have set up an enterprise Blockchain to streamline their management of inventory to the benefit of each participant.
When Contoso starts to run low on rubber tires, IoT sensors detect this condition and commit an order for replacements to the Blockchain network. Authorized suppliers (and not anyone else) receive these orders and ship the needed parts to Contoso without any need for human involvement: the network pre-defines “Smart Contracts” which ensure that suppliers receive payment when verified goods are delivered to Contoso.
In addition to automating the supply chain, the solution also allows participants to have more reliable, complete information about the state of each piece of inventory.
Contoso doesn’t need to conduct costly reconciliation processes to understand where each piece of inventory is: each participant has a complete, mutually verified record of everything that has taken place.
But supply chains are only one of a multitude of scenarios where a distributed consensus network can improve how we do business.
More Use Cases:
Legal Documents: in fields like law and accounting, it’s often necessary to keep a secure audit trail for records and documents: firms need to know when documents were created or altered, what changes were made, and by whom. Blockchain networks allow organizations to keep secure, unalterable records that greatly improve the efficiency and robustness of auditing procedures.
Software Development: tools like GitHub have become essential for developers to track and manage each step of the development process. Blockchain systems can be used in a similar way to securely track and manage code, ensuring that code has not been tampered with or observed by any outside agents. This can be a crucial requirement for cybersecurity applications.
Healthcare: patients can keep secure, encrypted records of all medical events in a blockchain. Patients can share specific info with providers easily, and bad actors can neither see nor modify these important records.
Personal Finance: anyone who has applied for a mortgage knows that assembling the required documents can be frustrating. Blockchain could allow users to securely track financial data and make that information selectively available to banks. In addition, banks could use anonymized financial data on the Blockchain to make more accurate risk assessments.
Voting: the efficiency of electronic voting is often countermanded by concerns about security – how do we ensure that electronic voting records can be trusted? Blockchain networks can ensure that bad actors cannot alter or delete verified votes.
If you’re interested in learning more about how blockchain can be applied to business, join us for a free in-person event, The Buzz Around Blockchain, in Reston, VA on May 2. Register here.