Blockchain ― Technology to Replace Trust and Revolutionize Business
Almost daily I come across articles about Blockchain. Curiosity has got the better of me and I have started to investigate what Blockchain is really all about. Blockchain in general is a database. More specifically, Blockchain is a Distributed Database that has the capability to store permanent and tamper-proof data. The term used is “immutable.” Blockchain, then, is a distributed immutable database.
Developed originally as the technology foundation of the crypto-currency, BitCoin, the underlying architecture of blockchain is a network of computers, each known as a node. Each node maintains an exact copy of the database. This results in a distributed system that reduces the risk of data loss as long as at least one node holds the database. Using this model a transaction can be encrypted and sent over the network.
Transactions Using Blockchain
When a transaction is created, it is duplicated across all nodes in the network. Transactions are bundled into a block before they are validated by other nodes. Once the network reaches consensus on the authenticity of a block, it is added to an existing chain of blocks. The block stores the validated transactions together with an encrypted key and a reference to the previous block. Stored transactions cannot be altered in anyway, as this would invalidate all the other keys in the chain. Plus, the chain is replicated across all the nodes so even if it were possible to alter all the blocks in one chain to cover up a fraudulent change, the remaining nodes make it impossible for any change to go unnoticed. Thus, we have a distributed, immutable database.
The Blockchain eliminates the need for trusted intermediaries to validate transactions. Whilst we have described Blockchain as a distributed ledger or database for logging transactions, it can serve a purpose much greater than that. It may do it more justice to say Blockchain creates a form of Digital trust between business partners. Trust between partners is of paramount importance while conducting business activities. This is the reason why B2B transactions typically have a third party, such as a bank, handling their monetary transactions for services rendered or goods supplied. Blockchain has the potential to eliminate third party players entirely and serve as a backbone for business activity at low cost and maximum trust.
Some technology enthusiasts might say that Blockchain is still in its infancy and at an experimental stage. This might be true, but a lot of companies are betting heavily on Blockchain. Companies are looking at various possibilities for how to exploit Blockchain, not least the Procurement software industry.
For example: Blockchain could be the underlying technology behind Smart Contracts - traditional contracts and official documents written in software programming code, with the ability to self-execute as and when needed based on certain conditions being satisfied. Such contracts could be used by Procurement at every stage in a Source to Pay process.
Blockchain is an exciting, potentially disruptive technology that could tear apart industries and fundamentally change the role of trusted third parties. Internet, Social Networking and Cloud Computing have revolutionized the world and Blockchain is likely to be one of the technologies in line to continue that revolution.
To date the possibilities for blockchain remain just that, possibilities. But for how much longer?
Technological advancements have drastically changed the way we work.