Blockchain: your permanent record of business

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We consider it a natural process that online transactions are getting smoother and faster day by day. Be it a purchase from your favorite webshop, an Airbnb booking or registering for a music streaming service, we want them to be quick, with as little friction in the process as possible. However as the digital economy is getting more global and complex, eliminating friction from our everyday online transactions seems to be a continuous fight.

Say you are running a coffee shop in Ljubljana offering delicate flavors from all around the world and want to connect with a new coffee supplier in Brazil. The two businesses use different banks, logistics companies, and currencies – they might also be subject to different government and industry regulation. So your seemingly simple transaction is actually a lengthy chain of interactions among a number of intermediaries, where each party maintains its own systems of record. The result is a complex, inefficient process that’s costly and time consuming.

But what if everyone involved in the transaction is using blockchain technology? The entire process could be handled within a single, transparent system shared among all parties, minimizing the potential for human error or fraud.

So what are the main features Blockchain can offer in such cases? Blockchain is built upon advanced cryptographic technology, making it a secure and fail-safe technology for the digital age. It is built on consensus between members of a business network, and updates the status of the contract in real time so that business transactions are completed much faster than before.
It creates a permanent and transparent record of transactions and thus can avoid many of the issues and obstacles to transacting business globally.

So, Blockchain technology comprises of four main capabilities, that can lead to increased efficiency, and cost reduction across a business network. These are: shared ledger; smart contract; privacy; and consensus.

Shared ledger is THE shared system of record. It is shared among participants and they have their own copy through replication. Shared ledger is permissioned so that participants see only the appropriate transactions.

Smart contracts enables the business rules defined by the contract to be embedded in the blockchain and executed with the transaction. The smart contract is verifiable, signed and encoded in programming language. For example: it defines contractual conditions under which payment will occur in terms of our successful coffee purchase from the Brazilian supplier.
Although a ledger is shared, participants requires privacy. The participants need transactions to be authenticated, private and for identities not to be linked to a transaction.

In Blockchain, strong cryptography controls who can see what. It enables the user registration process to build a trusted network, with access permission granted via certification management.
Achieving consensus among partners to build distributed trusted services has become a key feature for blockchain networks. A consensus agreed by all relevant participating members of the business network ensures that the ledger is updated only with network-verified transactions.

IBM is a member of Hyperledger, a Linux Foundation project1. The Hyperledger Fabric framework is an implementation of blockchain technology that is intended as a foundation for developing blockchain applications or solutions. It offers a modular architecture allowing components, such as consensus and membership services, to be plug-and-play. It leverages container technology to host smart contracts called “chaincode” that comprise the application logic of the system.
The next release of Hyperledger Fabric (V1) will support a greater number of shared ledgers and improve performance of blockchain networks. It will introduce new services to remove the single point of failure and single point of trust.
Hyperledger Fabric V1 is available currently in beta for testing, deployed as a software as a service offering on IBM Bluemix2.

Blockchain can help businesses in any sector or industry to speed up transactions. IBM is currently working with more than 400 clients to pioneer this technology for businesses and organizations from finance, through healthcare to retail and even shipping and distribution.

Global logistics leader, Maersk, found in 2014 that a simple shipment of refrigerated goods from East Africa to Europe can come into contact with nearly 30 people and organizations, generating more than 200 different interactions, and a four-inch stack of paper along the way. These hand-offs from one party to another lead to missing and sometime incomplete information, especially because it is compiled and handled through highly manual processes. Together IBM and Maersk are using blockchain to advance global supply chains and help eliminate many of the manual processes, also reducing fraud and waste.

Everledger is using blockchain to track diamonds, Walmart piloting the use of blockchain for food safety in China to help trace the origins of food, and Crédit Mutuel Arkéa is using blockchain to verify customer identity. In addition, Sberbank, Russia’s largest bank and a member of the Hyperledger Project, has chosen IBM to build a blockchain solution to enhance remote services for financial institutions.

But those are just examples of some of the existing problems that blockchain can help solve. In the future there’s a great potential for blockchain to be combined with Internet of Things technologies too. For instance, a refrigerator equipped with sensors and connected to the Internet could use blockchain to manage automated interactions with the external world– from ordering and paying for food to arranging for its own software upgrades and tracking its warranty.

Blockchain is fostering innovation and opportunities across many different industries and use cases multiple- especially in the banking sector, energy and utilities, public administration, and among the start up community. In public administration, for example, blockchain ensures greater transparency of public administration and processes, lowers the costs of service delivery, and promotes the digitalization of processes, which ultimately helps increase the satisfaction of citizens.


1* Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration, hosted by The Linux Foundation, including leaders in finance, banking, IoT, supply chain, manufacturing and technology. Link:



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