May 11, 2017 | Written by: Scott Crowder
Categorized: Blockchain | Cognitive computing
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You’re probably hearing a good deal of hype these days around blockchain and how it is the technology behind the bitcoin cryptocurrency. But is blockchain technology something you should have on your radar? The answer is an emphatic “yes.” Not only is this technology advancing rapidly, but blockchain also offers a new way of implementing transparent transaction environments that are shared, replicated and permissioned. The benefits of blockchain are many, including saving time, eliminating high costs, reducing risk and increasing trust.
However, don’t think of blockchain as a technology tied to bitcoin or any other cryptocurrency. Blockchain provides a platform that can assist with permissioned access to private transactions with security-rich reconciliation of digital records regarding just about anything in real time.
A basis for building a business transaction network
At its core, blockchain is a distributed database, but from there it serves as an innovative foundation for building an enterprise-quality business transaction network. Executives can have greater control over who they transact with while preserving the privacy of terms and conditions between parties. In this environment, dependable transactions become possible for enterprises without the need for a centralized certifying authority.
What does this disruption mean for your business? It allows your transactions to be processed cost-effectively. Blockchain also offers a way to truly innovate. Already, organizations are creating applications designed for blockchain implementation.
For example, Everledger has built a blockchain that provides an immutable digital ledger documenting the unique properties of diamonds. Blockchain assists with the creation of a digital incarnation of a physical asset—such as a diamond—by using metadata to create a unique thumbprint for each asset. This thumbprint serves as a permanent record that follows the asset throughout the transaction’s lifecycle. For Everledger, their use of blockchain ensures the ethical trade of diamonds, helping to prevent fraud and theft.
The concepts behind blockchain
The idea behind blockchain isn’t really complex. All you need to know are three basic concepts: business network, asset and ledger.
- Business networks are familiar to all of us. Your company thrives because it’s part of an ecosystem of interconnected businesses that form a complex supply chain. Participants such as banks, distributors, inspectors, insurers, manufacturers, suppliers and retailers engage in a series of interrelated processes. Blockchain affords a great opportunity to radically reduce the friction and increase the transparency and efficiency among these participants. It also allows collaboration between parties.
- Assets are anything that can be owned or controlled to produce value. They are often physical, but they can also take a less physical form such as loans, reports and insurance policies. Almost any asset can go through a digitization process to become an asset on a digital ledger. For example, the Everledger blockchain uses 40 metadata points to create the digital thumbprint for each diamond. After an asset is digitized, it’s ready for blockchain. “Everledger takes current industry certification (4Cs — cut, clarity, carat and color) and adds 40+ pieces of additional meta data and high-res photography which is then linked to the laser inscription found on the girdle of the stone, says Everledger CEO Leanne Kemp. “We then take all this information and write it into the blockchain, creating a permanent digital thumbprint of the diamond.”
- A ledger is the system of record for each organization that enables coordinating and encrypting transactions simultaneously to permissioned participants. In many industries today, transactions are governed by multiparty contracts that dictate relationships and obligations among participants. A shared electronic ledger can enable each participant to quickly reconcile its view of the truth with that of all the others as transactions flow.
An open blockchain for business – with robust security
To ensure that blockchain transactions can take place in an enterprise-scale environment, IBM joined other companies in 2015 to reimagine blockchain for business. We cofounded the Hyperledger™ Project, an open community managed by the Linux Foundation with a governance model to define blockchain for enterprise software that business cares about. IBM contributed code that became the Hyperledger Fabric™, the operating system layer that was recently released in Version 1.0 (beta) and ready for production workloads.
Hyperledger Fabric encrypts transactions and contracts and then makes them simultaneously available to permissioned participants. Each organization receives a cryptographic membership card that represents its identity within the blockchain network. Participants have permissioned access to see the transactions and contracts on the ledger that pertain to their organization. And transactions can take place across geographical and regulatory boundaries at potentially subsecond speeds, which can translate into time and cost savings.
IBM’s High Security Network for Business, underpinned by IBM LinuxONE, offers the most secure blockchain collaboration, protecting data from outsiders as well as addressing insider threats. Unlike traditional methods of securing transactions, embedded security within the LinuxONE platform protects a blockchain transaction wherever it goes. It is scalable and can be applied across industries and into the cloud.
Blockchain is a transformative technology, and we’re using it to innovate with a straight line to business concerns and outcomes. Learn more about how blockchain technology from IBM can provide enterprise-level security for your business networks by clicking here.
For more information, join the IBM Blockchain Ecosystem to access technical resources and community expertise around Hyperledger and enterprise blockchain development so you can get started on your blockchain transformation.