Blockchain – an Introduction
It doesn’t take more than a casual review of the latest technology news to encounter some sort of reference to blockchain. Called “the first native digital medium for peer to peer value exchange,” blockchain is most widely known as the technology behind the bitcoin, but it carries the potential to completely change the way transactions are performed across a variety of fields and industries around the world.
We at Beck Consulting recognize the potential impact of blockchain upon our clients, be they food organizations working with our vertical bcFood solution, or general Microsoft Dynamics NAV users employing one or more of our ISV offerings. If blockchain is new to you, read on as we explain the importance of this new technology, and what it could mean for your organization.
What is blockchain?
Simple descriptions of blockchain typically involve phrases such as “a decentralized, public database,” which does a good job of adequately summing it up, but requires a bit more explanation.
At its foundation, blockchain is a peer-to-peer network to which a transaction, “or block,” is broadcast. All members of the network must then approve the transaction as valid, at which point it is added to a “chain,” that is, a record of all transactions. Once a block is added to the chain, it is permanent and cannot be modified or removed. In this way, there is an enduring record of every transaction that is submitted through the network. And because this activity occurs through a peer-to-peer network, rather than a centralized location, these permanent records are public in nature.
What are the benefits of blockchain?
To ensure the integrity of the data they contain, blockchain networks are heavily encrypted, and the technology’s fundamental design makes it inherently secure; because the chain exists throughout the network, there is not a centralized point of entry for hackers or data manipulation, significantly reducing the chance for fraud.
Blockchain also carries with it the potential to streamline transactions by effectively eliminating the need for middle parties. Throughout history, people have turned to established “trust foundations” such as banks, other financial institutions, and governments to assist in the completion of transactions and activities. Blockchain, with its requirement that every transaction be approved by all members of the network, is essentially built upon a foundation of trust, eliminating the need to involve a third party in the processing of transactions.
Where can blockchain be used?
Blockchain first gained prominence as the platform that allowed the bitcoin to become a viable form of currency, and to date its biggest influence has been on the financial sector. However, its decentralized design and recording of unalterable, public data brings with it the potential to be beneficial in other fields.
Blockchain is still a relatively new technology, and at this point there is no concrete idea of its potential or limitations. Companies such as IBM and Microsoft are in the process of researching and working with blockchain to get an idea of its capabilities, and it is estimated that banks will invest $400 million in the technology by 2019. Governments are also looking at ways to leverage the technology, as illustrated by the state of Delaware’s Delaware Blockchain Initiative, which promotes the use of blockchain as a means to efficiently govern and manage the more than 300,000 companies that are incorporated within the state.
How does blockchain impact the food industry?
One area in which there is a great deal of excitement over blockchain’s potential impact is that of supply chain operations. It is easy to see how the processing of transactions through a trusted network would help to alleviate the uncertainties and complexities of any supply chain scenario, but the strengths of blockchain lend themselves especially well to food distribution, a tightly-regulated field where full traceability and transparency are of the utmost importance.
The potential role of blockchain in the food space is not mere speculation; Walmart has partnered with IBM and Tsinghua University of Beijing in a serious pursuit of this technology to facilitate food tracking throughout its supply chain. As part of a presentation during an investor event last June, the retail leader indicated that its current experimentation with blockchain has reduced “farm to fork” tracking times from days to minutes or even seconds, facilitated more efficient response times in the case of a recall, and produced “very encouraging” results overall.
In an article first published by CNBC, Jason Kelley, IBM’s global manager for blockchain services, described the potential of blockchain in supply chain environments: “It allows people to exchange value without knowing the identity of each other necessarily, in a secure way on the back end…On the front end, it’s simplicity, transparency and trust. Think of all the cost, time and often waste that happens in the exchange of value — blockchain rids that from the system.”
Is blockchain available to Dynamics users?
Like many other high-profile organizations in the tech field, Microsoft acknowledges blockchain’s potential and wants to establish a presence in this growing technology. Although blockchain has many benefits, Microsoft is somewhat wary about the wholesale implementation of standard protocols in the enterprise space. For example, while maximum transparency may be a benefit in purely public environments, there is a need for some level of confidentiality in an enterprise setting.
To that end, the company recently launched the Coco Framework. An open-source system designed to facilitate the adoption of blockchain, the Coco Framework seeks to promote the high level of security and decentralization for which the technology is known within a confidential network structure.
Blockchain is still in its infancy, and it is easy to dismiss it as another “up and coming” unproven technology that will end up going nowhere. But when we consider the inherent strengths of blockchain, along with its adoption by established industry players such as Microsoft, IBM, and Walmart, it appears increasingly likely that this is one technology that will continue to grow and shape the way in which business is transacted. It will be interesting to keep an eye on blockchain, and see the direction it ultimately takes in the near future.