Blockchain explained

Blockchain in a nutshell: Building enterprise solutions

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sunset constructionIn the last few years, many large enterprises have been evaluating permissioned blockchain technologies by conducting limited proof of technologies (PoT) and some of them have gone on to production rollouts of minimum viable products (MVPs). These implementations have been primarily in the area banking, financial services, supply chain and credential management domains. To use the crawl, walk, run analogy, enterprises are moving from crawl to walk mode with solutions based on permissioned blockchain technologies.

As blockchain technologies mature and adoption increases, it is important to understand the differentiating foundational technology capabilities offered by blockchain such that newer usage possibilities can be uncovered across broad industry domains.

To understand the full potential of enterprise blockchain technologies, it is important to understand what (is blockchain), why (blockchain for a specific industry or domain) and how (to develop solutions using blockchain technologies). In this post, we will address the question, “what is blockchain?” What are the foundational technical capabilities that make it unique?

How can IBM Blockchain solutions change the way you do business?

Peeling back the layers of a blockchain solution

Permissioned blockchain at its core uses distributed ledger technology (DLT) — a peer-to-peer network consisting of replicated data without the need for a central administrator. When an event needs to be recorded in the blockchain, each node runs through the transaction and if the required nodes agree on the outcome (consensus), then each node records the transaction data into its copy of the ledger.

The Linux Foundation’s Hyperledger Fabric is the market leading permissioned blockchain technology. Let’s look under the hood to learn more about the key technical components playing a role in enterprise blockchain adoption.

1. Consensus: Ensures agreement before blocks creation

Consensus is the process which ensures shared ledgers are updated only after the transaction is validated by all the relevant participants involved. A consensus mechanism also needs to ensure the transactions are updated in the same order at all the participant nodes.

2. Replication: Ensures synchronization of ledger for all participants

In a blockchain network, once blocks are approved, they are created across all participants in that channel. This ensures there are no accidental (or intentional) data tampering.

The decentralized setup also provides greater transparency among parties in a business network. All the participants will be able to agree to a single shared “trusted reality” of the transactions adding to the overall trust in the network.

3. Immutability: Ensures traceability

Once written onto the blockchain network the transaction cannot be altered or deleted in any manner. This aspect of data handling allows businesses to have better view of end-to-end transactions and reduce friction via automation and/or process re-engineering. This immutability and access to extended transaction trusted data assists in a faster response to compliance and audit queries.

Immutability also increases trust in data communicated to stakeholders and increases confidence in the process. It also helps in simplifying end-to-end business process via automation and/or process simplification. For example, in a blockchain network involving health insurance, the step of manually approving a claim could be automated through smart contracts which could vastly improve customer experience.

The immutability of blockchain networks results in provenance and complete traceability of the asset in the network. As the asset moves through its lifecycle in a business network, data corresponding to each state is recorded in the blockchain. This information cannot be changed once written onto a blockchain so it gives an indelible record for users to access. This unalterable record allows for a trusted provenance of the asset.

A good example of this is IBM Food Trust, in which the journey of produce can be traced from a farm to a grocery store by simply scanning the bar code on produce.

4. Security: Securing identity and data

Data security is fundamental to permissioned blockchain networks where only authorized entities are allowed to create blocks and access them. Once blocks are created, they cannot be alterned or deleted. Further, permissioned blockchain networks create and store all of the transaction data in a manner that is accessible only to the authorized peers.

Blockchain supports data security and sharing among participants at a granular level to avoid data leakages. Hyperleger Fabric allows private communications between network participants through the use of channel and private data collection. This can be used in cases where specific network members would like to conduct private and confidential transactions between them. An example of this is when a wholesale supplier wants to keep certain transactions with a retailer private.

The high level of security and privacy that blockchain provides protects businesses from data leakage and ensures better compliance with various regulations.

Taking the next steps in blockchain for enterprise

Enterprise blockchain technologies provide transformative capabilities that help enterprises build solutions to increase levels of trust and transparency in transactions between organizations. The key first step to enterprise adoption would be in identifying areas of friction in interactions and reducing them through automation with blockchain solutions.

This lays out a foundation for organizations to become cognitive enterprises by making trusted data available from their ecosystems. With this trusted data, enterprises can develop newer insights and uncover additional opportunities.

The next stage in adoption of blockchain technologies is forming or joining trusted platforms that open up exponential business opportunities in terms of buyers, suppliers and markets.

The value of a blockchain solution grows as the interaction between participants increase. Hence it is important that businesses come together to expand the network to fully realize the value of enterprise blockchain technologies.

How to get started with IBM Blockchain now

IBM Fellow, CTO - IBM Blockchain Services

Naren Krishnan

IT Architect at IBM Global Services

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