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Blockchain Revolution: Can It Solve Security Problems?

Blockchain Revolution: Can It Solve Security Problems?

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There has been a great discussion about the potential of the blockchain as a distributed ledger and as a secure solution for small and large business transactions. Some visionaries see the technology as revolutionary as the Internet itself, but others are restrained by its legal and compliance frameworks.

The blockchain has a potential to become an important tool in building stable, secure and well-connected enterprise systems. At this point, however, it is yet to be tested in terms of regulatory and compliance requirements. For instance, many hospitals are not ready or unwilling to sign some documents digitally because of HIPAA mandates that may need to be corrected manually.

Blockchain Weaknesses
Although often suggested as the answer to the security problems of the financial industry, recent news point that blockchain is vulnerable to security problems too. Two separate hacks happened in a span of 3 months this year.

  1. Ethereum and DAO
    $55.4 million worth of Ether cryptocurrency were stolen through a smart contract in June. The smart contracts were created by DAO (Decentralized Anonymous Organization), which uses Ether as its primary payment currency. In immediate response to the attack, Ethereum published a public plea to suspend ETH and DAO deposits and withdrawals.
  2. Bitfinex
    $72 million worth of Bitcoins were hacked at the Hong Kong cryptocurrency exchange in August. The bitcoin was stolen from users’ accounts. The company reported the theft immediately and cooperated with top blockchain analytics to track what was stolen.

There is still validity to the idea that the blockchain can solve security problems. The technology itself is very secure. Since there is no central authority in its system, participants exchange transactions over a peer-to-peer network. This means that they keep copies of the file and only agree on changes by consensus. The latest transactions are wrapped in a new block of data to be added to the chain. Alongside that data is a block that contains a cryptographic signature of the previous block and itself, creating an immutable record.

Blockchain for Food Supply Chain
A significant percentage of the global population still has no secure access to plenty amounts of food. Despite this context, recent studies still show that approximately half of the US and about 30% of the world waste food. Thus, many companies have begun to exploit the opportunities offered by the blockchain to tackle complex systemic challenges in the food supply chain.

Retailers demand for perfect products, leading to food waste. They also seek lower prices, resulting to the industrialization of food production processes. Because of the increased cases of foodborne illnesses, many consumers have less trust on food. These challenges created the demand for more information on food production processes. When paired with sensors, the blockchain could make food data more transparent throughout the supply chain and reduce the amount of food wasted.

 Blockchain records information and holds data through a secure and immutable distributed ledger. The distributed nature of the network makes the ledgers resilient, and transparent to all users. Of course, it also has its limits. There are challenges that comes with blending a digital representation and a physical product. But, there is still reason to believe that it could secure an effective food supply chain in the future.

Why Every Start-Up Company Should Consider the Blockchain

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The blockchain has created a buzz around the business industry for over a year now, but nobody seems to truly understand it. In laymen’s term, it is a digital platform for recording and verifying transactions. It allows transactions to be anonymous and secure at the same time. It distributes trust through mass collaboration. Its underlying framework can virtually record everything, making it a true medium for value.

Four main things drive the excitement about the blockchain in an enterprise:

  • Proof of Authenticity
  • Data Notarization
  • Data Aggregation
  • Asset Settlement

These four provide exciting opportunities around reorganization of the backend processes between and within enterprises.

How can the blokchain help start-up enterprises? As a digital ledger, it timestamps transactions by logging into an uninterrupted chain of records and providing proof of all transactions. It is unbreakable and un-hackable. Most of all, it is crowd-sourced. The technology streamlines costly and complex processes such as trade processing, clearing and settlement. Since it cannot be tampered and exploited in any way, it is the perfect solution for transparency issues.

Many start-up companies contract on the open market and create corporations due to high transaction costs. While the Internet reduced cost of search, communication and coordination, the blockchain makes it cheaper for companies to organize capability inside their boundaries. It is a global peer-to-peer platform of transactions, reputation, identity and trust, which promote innovation and shared value creation.

Start-ups should be immensely hopeful about the blockchain. The technology has opened a world of possibilities that enables economic empowerment. It allows them to own their identities and personal data, do transactions, and create and exchange value without intermediaries. It lets them protect their own identity and monetize their own information. It is a dream come true for the entire business industry, addressing transparency issues in one gracefully designed package.  

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Blockchain 101: What You Need to Know

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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.