Today, blockchain is driving a paradigm shift in the way businesses are thinking. Blockchain’s potential to transform many processes across most industries has been noticed by enterprise, government, and education leaders across the globe. Gartner predicts that blockchain will generate an annual business value of over US$176 billion by 2025 and in excess of US$3.1 trillion by 2030.
Where can blockchain be used for business? Does it replace our ERP system? Is there an easy way to identify blockchain for business use cases? This blockchain article explores some of the basic questions asked by leaders looking to apply blockchain to their businesses.
What is blockchain?
From a technical point of view, blockchain is a distributed ledger technology where every transaction (block of data) is stored across every network computer. Each block is added after reaching consensus among all the network members. More precisely, each block is appended only with a hash of the previous block and a timestamp. This combination gives blockchain platforms four core characteristics of immutability (tamper-proof), decentralization (peer to peer), consensus (integrity) and finality (transparency).
From a business point of view, blockchain is a trust protocol. The data is a single source of truth across members without the presence of a centralized official copy, eliminating the need for remediation we often see with today’s business processes. The immutability and transparency ensure provenance and traceability of changes. The decentralized nature enables a peer-to-peer sharing economy. Most importantly, smart contracts ensure immutable logic (a business contract), which is executed without human interaction as per the conditions and trigger agreed between the parties. Together blockchain enables trust by minimizing the amount of trust required from any one member in the network.
Can blockchain replace ERP systems?
The short answer is No. Blockchain shines well when there are multiple parties involved and there is a lack of trust among them. Most ERP environments are within an enterprise, where trust is not an issue so blockchain isn’t a full replacement.
However, the scenario changes drastically when enterprise ERPs start to integrate with organizations (partners, vendors, customers) outside the trust boundary of their supply chain. The untrusted data coming in from the supply chain can damage supply chain visibility, inventory projections, and trade relations. Blockchain is known for its potential to unite a large supply chain network using a decentralized network. Instead of each party in a supply chain network having their own version of data, the blockchain ensures single source of truth across all participants.
Industry is emerging in such a way that ERPs and blockchain will work together to strengthen the integrity and efficiency of supply chains. Trusted blockchain data will feed into the enterprise-specific ERP system for greater business insights. Similarly, production data from the ERP system will enrich the blockchain with information needed for the supply chain ecosystem.
Where can blockchain be used for business?
The blockchain use cases for business are immense particularly with removing the overhead costs associated with maintaining trust known as trust tax. The blockchain use cases fundamentally provide three opportunity pillars:
- Integration of trusted data reduces need for reconciliation of data;
- Process automation with smart contracts facilitates automation and improves efficiency;
- New business models with p2p economy removes intermediaries and presents new revenue opportunities.
Based on the above pillars, the following are business patterns where blockchain shines:
- Asset Track & Trace: Tracking physical or virtual assets and attributes throughout the asset lifecycle for real-time visibility; Using shared data across enterprises in a supply chain for greater transparency including provenance, quality, compliance and usage. Example – IBM Food Trust.
- Asset Digitization: Effective use of digital tokens to make assets more accessible and attractive to buyers. Token based economies will accelerate transfer of value and increase the divisibility of assets providing flexibility with these assets. Example – Token based real estate asset trading.
- Compliance Simplification: Providing auditors with access to multi-tier transaction information in real-time eliminating the need to produce data after the fact. Example – security issues of EHR health records with transparency and improving collaboration.
- Dispute Resolution: Using a single contract implementation and shared data set across parties involved to reduce disputes and speed resolution when they occur. Example – IBM Contract Resources Procurement
- Process Simplification: Eliminating the need to produce and validate summaries of prior activity (e.g. invoices, statements) by leveraging smart contracts and automating settlement using shared trusted data. This improves collaboration across supply chains and reduces friction. Example – IBM TradeLens
- Remove Intermediary: Using “virtual intermediary” to provide trust and establish peer-to-peer markets. Eliminating intermediaries can reduce transaction fees and other associated bureaucracies by using innovative business models. Example – IBM World Wire
- Data Monetization: Data creators maximize value by maintaining selective recording of the data and control who can use the data. It may use tokens to charge micropayments per use. It may allow consumers to control the use of data with GDPR level of privacy. Example – with permission, patients’ data is be recorded in permissioned blockchain environment and shared with research organizations.
- Identity Management: Businesses or individuals manage data about themselves. Granularly control sharing with optional compensation or providing means of proving identity without requirement to share private information. Example: Trust Your Supplier providers trusted digital identity of suppliers to join a buyers’ network.
Chainyard™ is a leader in developing digital transformation solutions for enterprises with a niche focus on blockchain. The team brings years of experience in building, testing, securing, and operating complex distributed systems using multi-faceted digital transformation services including Blockchain, Digital Customer Experience, Cloud, DevOps, Artificial Intelligence, Automation, and Cybersecurity. Chainyard is Linux Foundation member, Hyperledger Certified Service Provider, infrastructure member of OpenIDL, IBM Silver Business Partner, and ConsenSys Development Partner. Chainyard developed and operates the Trust Your Supplier blockchain network. This production blockchain network provides a trusted digital passport for suppliers to facilitate onboarding with new customers.
Gigo Joseph is working as Vice President of Blockchain services at Chainyard. He is recognized for building complex software solutions from ideation to end-of-life using global delivery models. Mr. Joseph holds an undergraduate degree from prestigious NIT Calicut India, MS from DePaul University Chicago, and MBA from Northern Illinois State University, USA. He holds many patents in information technology. Mr. Joseph was a board member in multiple organizations including educational institutions, a motivational speaker, and a part-time policy maker for the state government.