Enspir(ation) Blog

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Blockchain 101: What You Need to Know

Companies need to know what goes on beyond the four walls of their businesses in order to gain greater insight to their full supply chain. They need technology that will enable them to understand the total process that runs their supply chains. Thus, Blockchain becomes a very interesting idea for organizations. It promotes trust among companies by bringing transparency into the supply chains, therefore making it “trustless”.

What is a Blockchain?
First, let us define what a Blockchain is. It is a transaction database that contains a continuously growing list of data shared by all nodes participating in the system. Every block contains a hash of previous blocks, creating a chain of blocks. Each block is guaranteed to come chronologically after the previous block and is computationally impossible to modify as every block after it would have to be regenerated.

Blockchain is the main innovation and technology behind Bitcoin. It is most widely used in the currency’s public ledger of cryptocurrencies. Based on a Bitcoin protocol, it contains every transaction executed in the currency. It contains all information about the addresses and their balances. That is because every computer connected to the Bitcoin system gets a copy of the blockchain. It is automatically downloaded upon signing up to the network.      

Decentralization
A block chain is open but secure. It is auditable and runs without a centralized operator. It is the only place that Bitcoins can exist in the form of unspent outputs of transaction. Unlike traditional payment systems like PayPal, it does not require a centralized database.  Since transactions are made by software applications, the nodes validate the transactions, add them to their copy of the ledger and broadcast them to other nodes.

The blockchain provides transparency a traditional centralized approach cannot. It can allow companies to make informed purchases by increasing visibility. It makes the authenticity and transparency of products and services less difficult by ensuring safe and verifiable transfer of digital property across expansive networks. In a word, blockchains may very well change the game of the complex global supply chains.

Time will tell.  Organizations are conservative, but we are already seeing adoption of the technology across the financial sectors worldwide.   Supply chain professionals should start considering the value of an open public ledger when considering new b2b commerce networks.

Blockchain: Changing the Way We Do Business

Blockchain, the technology behind bitcoin, promises to improve efficiency in numerous processes and create new business opportunities. It is a backend database with a distributed ledger and an exchange network for transferring value between trading partners. It doesn’t require a middleman to validate transactions. While it is still on the early stages, it could affect customers and the society by creating openness and providing a new level of freedom and empowerment.

In terms of thinking and activity, financial services is the most popular industry that the blockchain threatens to disrupt because it impacts everything that a bank does – money, contracts and movement of assets. Other industries that the technology is set to change include:

  • Healthcare
    Its application to healthcare would be on medical records. The blockchain could verify if a specific procedure has taken place, share data and ensure encryption, and authorize others to access parts or your whole medical records.
  • Government
    The blockchain has an embedded trust component so you don’t have to go somewhere to prove your identity. For instance, you need to make a transaction with the land registry, motor vehicle registration or property ownership. You don’t have to be somewhere to make that transaction.
  • Real Estate
    Blockchain gives a good historical record of anything, including time stamps, service or ownership. With the technology, you don’t have to erase the previous state to make room for the new one. You just add a line below like a ledger. The blockchain can store the history of who owned a particular house since the time it was built, and that record cannot be tampered with.

How will it change the way we do business? In this era of Big Data and Internet of Things, assigning a digital signature to each data can be useful. Recording and verifying each stage of the business process help improve the reliability and quality of products and services. It will affect not just your bottom line but also the top line – creating new revenues, growth and services. By allowing customers to check everything on the blockchain, they will have a new level of freedom, too.

The blockchain is about trust, transparency and the truth. It enables greater visibility by allowing you to know what has happened, when it happened and how true it is. In the future, services and applications will use the technology and we will use it to verify records and authenticity.

Blockchain Disrupts Business Models

Most companies wait for a certain technology to mature before investing on it. That’s why fin-tech companies have their eyes on the blockchain. They are investing huge amounts of time and money on its development. The technology is believed to disrupt business models by making financial services more efficient. Soon, companies will be able to execute financial transactions in entirely new – and secure – ways.

What is exactly a blockchain? It is a geeky term for a digital ledger or bank vault that participants can access and make changes with. It is popularly known as the technology that underpins the Bitcoin, providing indelible record of its transactions with high levels of cryptographic security. It has many features that fin-tech companies find compelling:

  • It’s decentralized. It doesn’t have a single point of failure.
  • It’s secure. It utilizes cryptography to validate all transactions.
  • It’s has an immutable history. It has a write-once, spend-only attribute.
  • It’s efficient. You can exchange information fast and easy.
  • It’s transparent. Everything is documented in the blockchain.

The blockchain technology has the potential to streamline and accelerate business processes. It can also reduce or eliminate the roles of intermediaries, and increase cybersecurity as well. While it has some challenges, it will be extremely powerful and will change how businesses operate. Instead of relying on a third-part clearing house, financial companies can use the technology to execute and verify transactions safely and discretely among themselves.

However, financial companies face a number of challenges in using the blockchain:

  • The main roadblock is that the industry is heavily regulated. This means that many of its transactions have to be regulated by a third-party and must be transparent.
  • There is also the question of privacy. It can be difficult to satisfy participants who want to conduct safe transactions without an intermediary, but do not trust one another.
  • Lastly, there is the issue of Due to high volumes of financial transactions, the system can slow down or stop – even for just a second. This limits adoption in cases where speed and volume are important.

Despite these limitations, the blockchain is becoming a significant part of the financial services industry. Today, it is being used by banks to streamline and automate their back-office operations. It is also spreading to other industries, such as the healthcare, IoT, real estate, insurance, cloud storage and supply chain management. Hopefully, it will transform the inefficient ways of conducting transactions. A lot will depend on which consensus mechanisms will be adopted. Some transactions may find this technology beneficial. Others may not. It is up to companies which works best for them.

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