Posted on April 5, 2019 by: Sean Dunn, Back-End Developer
Nowadays it is almost impossible to read or talk about blockchain without someone mentioning cryptocurrencies or thinking the two are the same. The purpose of this post is to show that blockchain is its own technology with many other exciting possibilities. Let’s look at one such possibility: blockchain in a business network.
WHAT IS BLOCKCHAIN?
Essentially, blockchain is a centralized shared ledger. Business networks are often ineffective because each business in the network keeps its own records of transactions between all the entities with which the business interacts. This process is expensive, time-consuming, and prone to fraud and other security risks.
Blockchain offers a solution to these problems. It provides a shared ledger technology that permits any member in the network to see the shared ledger. By using this technology, companies benefit from a far more effective transfer of goods and services.
ADVANTAGES FOR A BUSINESS NETWORK
Blockchain offers several benefits to business. It saves time, eases cost, diminishes risk, and increases trust between partners in the business network.
That being said, there are four central requirements for blockchain to be implemented into a business network. First, all parties must agree to a shared ledger. This ledger would record all transactions across the business network and be shared among all members. Each participant in a transaction would have its own replica protected by permissions. This way only the appropriate participants can see the transaction.
Secondly, the business will need to create a smart contract for the blockchain to operate from. A smart contract is an encoded business contract intended to facilitate, authenticate, and enforce the negotiation or implementation of the contract. Smart contracts allow credible transactions without third-party verification. The transactions performed on a smart contract are auditable and unalterable.
Thirdly, all entities require suitable levels of privacy. While the ledger is shared, you wouldn’t want an asset transfer to be seen by another company. Therefore, only the participants of the transaction should be able to see it. To do this, transactions need to be authenticated and enforced through cryptography.
Lastly, for blockchain to work, the ledger must be trustworthy. To implement that trust, participants are required to endorse transactions. Only when a transaction has been endorsed is it added to the ledger with appropriate privacy permissions. Furthermore, all assets have a verifiable audit trail, and these audits cannot be tampered with.
In conclusion, blockchain provides four main benefits to business networks. It saves time by cutting transaction time from days to minutes. It cuts cost by reducing overhead and cost of third-party intermediaries. It decreases the risk of tampering, fraud, and cybercrime. Finally, it increases trust through a shared ledger enforced by a smart contract and appropriate privacy permissions.