Blockchain technology has the potential to transform how business is done and disrupt entire industries as it unfolds.

This article aims to provide a simple explanation and real world examples of blockchain in action.

Blockchain is a distributed record of transactions or other data, maintained by a network of computers on the internet without the need for approval from a central authority. The blockchain creates a shared record of data that is virtually tamper-proof.

Blockchain’s distributed record of transactions is called a distributed ledger.  In some cases a distributed ledger offers many benefits compared to the traditional centralized ledger.  However, there are many cases where the centralized ledger is superior.

What are scenarios that favor a blockchain approach?  Here are four- when a “single version of the truth” is needed by multiple parties; when transparency is desired by non-trusting parties; transfers of digital property; and cases when lock tight security is required.

Blockchain is in its early, formative years.  The first commercial examples of blockchain began to surface in 2017-2018. Experts predict full blockchain adoption will occur during the 2020-2022 period, with adoption varying by industry.  By 2027 blockchain is expected to be a pervasive technology.  The World Economic Forum predicts 10% of the global GDP will be stored on blockchains in 2027.

What is the architecture of a blockchain and how does it operate? (Note: provide graphic)

All members have a copy of a shared database. When a member wants to send an asset to another member, a data “block” is created to represent the transaction.

The block is shared with the group yet remains cryptographically private. The network recognizes the block because its secret digital signature is linked to a public signature.

Once a block is confirmed, all members add the block to their copies of the database.

Complex math ensures a consensus among database copies which prevents tampering.

One area that blockchain can revolutionize is the back office operations of companies. Currently the absence of a common record is a very costly problem which results in the need for back office teams to perform extensive reconciliation and back checking.

The health care, financial services and supply chain industries are businesses with extensive duplication of information and large back office operations.  Blockchain’s distributed ledger provides a common record which virtually eliminates the need for reconciliation.

The absence of a common record also creates a lack of trust.  Errors and fraud drive this lack of trust.  Consequently, expensive systems of reconciliation are built.  The transparency provided by a blockchain solution will win the trust of all parties and provide significant efficiency gains and cost savings.

DHL, the global logistics company, created a blockchain prototype to track pharmaceuticals across a supply chain.  The ledger tracking these medicines may be shared with stakeholders including manufacturers, warehouses, distributors, pharmacies, hospitals and doctors.

As many as one million lives are lost each year due to counterfeit medications.  It is estimated that up to 30% of pharmaceutical products sold in emerging markets are counterfeit.  By utilizing the irrefutability within blockchain technologies DHL can make great strides to reduce tampering, reducing the risk of counterfeits and saving lives.

Using blockchain’s common, indelible and secure ledger, the supply chain industry can achieve higher safety standards from the factory to the patient at much lower cost.

Here is a sampling of other blockchain opportunities that could reduce cost and complexity-

  • Property title ownership transfer
  • Post-trade clearing and settlement
  • Cross border payments
  • Store and transfer ownership of goods and track them through a supply chain
  • Digital media rights management
  • Digital identity (passports, health records, citizenship, etc.)
  • Fraud detection
  • Image authentication
  • Regulatory compliance

What are some of the drawbacks of blockchain?  Blockchain is relatively young and there is much fragmentation in the technical community. There is currently a lack of universal standards and interoperability.  Most current blockchains are not yet able to scale their transactions per second to the levels required for very large adoption.  Once something is recorded in the blockchain it is usually there forever even if there is a mistake.

These items are being addressed by a large worldwide community of open source software developers working collectively to improve blockchain and make it a force for the future.

 

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The attention and hype for bitcoin and blockchain technology has exploded.

Blockchain is the technology platform that enables bitcoin to operate. It has great potential for many other uses than crypto currencies. We plan to bring attention to these other uses of blockchain here.

In our opinion, blockchain can be somewhat confusing. One reason is it’s a new perspective which takes time for the brain to comprehend. A second reason is that many of the writings about blockchain are fairly technical in nature and difficult for a non-technical person to understand. Our goal is to simplify
blockchain for our readers. So let’s begin by defining blockchain –

Blockchain is a distributed record of transactions or other data, maintained by a network of computers on the internet without the need for approval from a central authority. The blockchain creates a shared record of data that is virtually tamper-proof.

What are the implications? In the words of Marc Andreesen, Internet Hall-of-Famer, “The practical consequence… is for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone
knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequence of this breakthrough is hard to overstate.”

The term distributed ledger is often used when defining blockchain. What is it? A distributed ledger is an umbrella term for technologies, including blockchain, where computers certify transactions in a shared record.

Blockchain has huge potential to bring cost savings, significantly improved security, transparency and faster transactions for members of a blockchain community.

Blockchain will impact many important industries including Financial Services, Insurance, Logistics and Supply Chain, Healthcare, Real Estate and Government. Blockchain initiatives are underway at major organizations including Walmart, Visa, FedEx, Unilever, Kroger, J.P. Morgan and Microsoft.

Our second article will describe details about the blockchain initiatives at these organizations and the benefits they plan to receive. Click the button below to access the article.

Don Tapscott’s short TED Talk, “How the Blockchain is Changing Money and Business” provides an outstanding primer on blockchain and its potential for major impact in our world. You will find it to be a worthwhile 18 minute investment of your time.

For a deeper dive into the advantages and disadvantages of blockchain and a non-technical description of blockchain applications currently underway, click the button below. (Button or link to article #2.)