Blockchain is a decentralized database that stores a registry of transactions (and assets) across a peer to peer network. Transactions in the network are secured through cryptography, time stamped and stored in blocks of data that are verified across participating nodes. Each block is chained to previous blocks back to the “genesis” or first block of data and this creates a permanent, immutable history of events that is replicated and stored on each participating node. It is very hard to change this history, since there is no central authority or control for the network.
Structure and characteristics of blockchain:
Digital: All the information on Blockchain is digitized, eliminating the need for manual documentation.
Distributed ledger: Indistinguishable copies of all information are shared on the Blockchain. Participants independently validate information without a centralized authority. Even if one node fails, the remaining nodes continue to operate, ensuring no disruption
Chronological and time-stamped : information pertaining to a transaction and also links to the previous block in the same transaction. These connected blocks form a chronological chain providing a trail of the underlying transaction
Cryptographically sealed: Blocks created are cryptographically sealed in the chain. This means that it become impossible to delete, edit or copy already created blocks and put it on network, thereby creating true digital assets and ensuring a high level of robustness and trust. Furthermore, the decentralized storage in a blockchain is known to be very failure-resistant. Even in the event of the failure of a large number of network participants, the blockchain remains available, eliminating the single point of failure. Data stored in a blockchain is immutable.
Consensus-based: A transaction on blockchain can be executed only if all the parties on the network unanimously approve it. However, consensus based rules can be altered to suit various circumstances.
Different types of blockchain are described below:
Public blockchain are open-source. Anyone can be part of this type of Blockchain i.e. anyone can participate in the transaction facilitated by the Blockchain. Everyone can see what blocks are getting added and thereby anyone can participate in the consensus process.
Permissioned or closed-loop Blockchain The difference in a permissioned blockchain compared to the public blockchain is that the right to validate the transaction is provided to only few pre-selected nodes. The right to read may be public, or restricted to the participants.
Write permissions are restricted to one organization. Major applications include database management, auditing i.e. areas speci c to a single entity where there is no requirement to provide the right to read or validate to public.
Impact of implementing a Blockchain based solution
Time sensitivity: Blockchain enables the near real-time settlement of recorded transactions, reducing risk and providing an enhanced customer experience
Intermediary: Blockchain’s distributed ledger technology facilitates disintermediation, thereby reducing costs and lowering latency
Transparency: The hash/ pointers of the records written on the Blockchain are immutable and irreversible, not allowing modifications and eliminating risk of fraud
Authentication: Smart contracts allow business validations and automated reconciliation for straight through processing
Trust: Smart contracts allow codification of business rules, validations and reconciliation, thereby reducing manual processing
Few examples of potential application of Blockchain in various business areas are mentioned below:
Banking and payments:
Cross border remittances, corporate payments, and inter-bank cross border transactions can be benefited to a large extent, including lower costs, fewer errors, quicker settlements etc. through deployment of blockchain.
Supply chain management
Visibility, traceability and transparency of an asset is maintained by a shared ledge that is updated and validated in real time with each network participant and thereby optimizing business transactions and trading relationships.
By ensuring that data is coming from right sources and nothing is intercepted in between using blockchain can reduce the possibility of hacking.
Through blockchain, both insurer and insured would be able to manage claim in a transparent and responsive way through smart contracts. This would help the organizations to reduce losses on false/ fraudulent claims and increase the settlement process speedily for genuine cases.
Blockchain in health care can benefit by providing single longitudinal patient health records in terms of disease registry, lab results, treatments etc. It would also health care organizations to better monitor the supply chain and quality of the products and instruments in its entire life cycle.
Blockchain based smart contracts can streamline the property transactions by removing 3rd parties and enabling self-executing actions when conditions are met and thereby bringing more transparent.
By recording the details of a candidate like education, certification courses, professional achievements on a distributed ledger where it can be verified and recorded permanently for future.
- Awareness and understanding: Lack of awareness and understanding about the technology is one of the major hindrance to adopt Blockchain.
- Culture: Since this will lead to a complete shift from the way business is done, there will be resistance to adopt the change. It will require significant transformational change from the top management to make sure that the change is effective.
- Ecosystem: Identifying the right platform, vendor and partner for PoC at the right cost is needed to be understood clearly to assess the impact and return on the investment.
- Regulation & Governance: Regulations and governance are needed to catch up with the advanced technology to tackle inefficiencies and securities of all concerned stakeholders.
- Security and privacy: Since no technology is completely secure as argued by some critics, it is to be carefully understood before driving public acceptance of blockchain.