At its heart, a blockchain is simply a digital ledger that automatically creates and stores batches of records. But the true power and value of the technology lies in the fact that every one of those records is automatically validated by other users — enabling businesses to build clear, transparent, tamper-proof audit trails for any kind of transaction they please.
What is it?
Blockchain is a form of digital record-keeping, which uses cryptography to create a secure tamper-proof ledger. The ‘chain’ element of blockchain refers to the fact that every record in the ledger also contains details of the record that came before it — linking everything together, in an order that cannot be changed. This helps to prevent fraud, and gives you a complete, unbroken audit trail for business processes like supply chain operations, and financial transactions.
Blockchain technology can be applied to virtually any kind of business process that involves the movement and exchange of resources. For example, Walmart has trialed a food safety system that uses blockchain to verify the origin and safety of its products. And automobile manufacturers have created blockchain POCs that use the technology to build detailed vehicle history records that can’t be altered by owners or sellers.
What’s in for you?
Blockchain technology is making complete transaction visibility and accurate record keeping easier and more achievable than ever before. By providing a clear and reliable unbroken record of transactions, it helps to improve security and reduce fraud and loss, while also simplifying regulatory compliance.
Plus, because blockchain captures and records transaction details automatically, it also has the potential to significantly reduce transaction processing and management costs.
What are the trade offs?
The main challenge with blockchain is its complexity. While conceptually simple, implementing blockchain and applying it to existing business processes requires a great deal of technical expertise.
Blockchain can also significantly limit who you can trade with, and how you trade with them. To successfully trade via blockchain, both parties need to be signed up and using the same platform — slowing the process of onboarding new partners and suppliers, or ruling some trade options out altogether.
How is it being used?
The most well-known use for blockchain is in cryptocurrency. Many cryptocurrencies, such as Bitcoin use blockchain as their transaction-recording technology.
There are also a few other significant applications in the works — though widespread adoption could still be a few years away.
In healthcare, some organizations are using blockchain to create more secure stores of patient health records, which is particularly useful as telemedicine becomes more popular and sensitive data is increasingly used outside a hospital’s network.
Food suppliers are embedding blockchain into their supply chain to help track the provenance of products such as meat, from the farm to the store or restaurant. It can help prove if ingredients are organic or free range, and quickly track the sources of contaminated goods.