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What Is Blockchain And Why Is It Important For My Business?

Blockchain

In the past couple of years blockchain has been a frequent talking point in the business journals and financial news shows. Often it is because of the virtual cryptocurrency Bitcoin, which has risen, crashed, and risen in value more often than a theme park roller coaster. But what is blockchain technology and why should business leaders be more aware of the opportunities it may offer to their company?

In 2016 Don and Alex Tapscott published Blockchain Revolution, a book that both explained and defined blockchain and the possibilities it offers. In the book they said: “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

So in short, blockchain is a ledger that cannot be adjusted. It always maintains a record of every change. Records cannot be edited or deleted, only new ones can be added. A typical step-by-step blockchain transaction might run like this:

  1. A transaction is requested - perhaps a payment from one person to another
  2. The requested transaction is sent to a P2P network of computers known as nodes. The nodes can all talk to each other and all are aware of all requests.
  3. The nodes validate the user status and the requested transaction
  4. Once validated the transaction is added permanently to the blockchain in a permanent way that can never be changed.
  5. The transaction is validated and completed.

The important things to remember here are:

  1. The blockchain records every request and action. It cannot be edited or changed. Every action always created a new block of data for the blockchain.
  2. The nodes are distributed widely meaning there is a publicly accessible version of the blockchain always available and visible - even if one part of the network dies.
  3. The blockchain is constantly being reconciled to ensure that all transactions are correctly recorded. With such a diverse and distributed database it is almost impossible for a hacker to infiltrate and corrupt - only one part of the system could be corrupted at a time and it would be immediately noticed and corrected during reconciliation.
As a distributed database of transactions Blockchain is hard to beat. It is simple, very hard to corrupt or infiltrate, self-correcting, and transparent. Clearly in systems or processes where trust and transparency are important, Blockchain works well.

As Bitcoin has demonstrated, blockchain works well for financial transactions, but there are many other industries exploring how the blockchain concept can improve their processes. DHL has been building a system that tracks drugs from manufacturing to consumption - cutting costs and improving trust and security in the drug production process. Food producers and retailers including Dole, Nestlé and Walmart have been using blockchain to track food production from the farm to the fork. The United Nations has been exploring blockchain solutions to the problems of child trafficking and jewelers are using blockchain to ensure that the diamonds used in their jewelry is conflict-free.

In any business environment where transparency is important and traceability of transactions essential then blockchain can be a useful solution. Have you considered where it could be applied inside your business yet?

Source: Sam Chong

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Ram Sonagara works at Transparency Market Research. TMR is a market intelligence company providing global business research reports and consulting services.