Print.IT - issue 49

PRINT.IT 27 www.printitmag.co.uk Most people associate blockchain with cryptocurrencies such as Bitcoin – it is what many are built on. However, blockchain is now being billed as a technology that will improve visibility, productivity and security for business. In fact, some go so far as to say that its system for record-keeping, transparency and verification could replace the role of trust in our society. So, what is blockchain and why is it important for business? The first step towards understanding blockchain for business is to put aside any thought of cryptocurrencies. Invented to support Bitcoin, blockchain is a digital version of a classic ledger book. However, this new digital ledger has the capability to record and, most importantly, secure many different kinds of transaction. Blockchains can also hold rules about what kinds of transaction to accept and execute more rules in order to interact with other blockchains to form ‘smart contracts’. The most important and disruptive feature of blockchain is that it is a distributed ledger – multiple parties have a copy of the entire ledger. This means that many kinds of business transaction can be decentralised, eliminating the cost, complexity and time involved in using trusted intermediaries. Smart contracts provide new ways to automate complex, multi-party business transactions, which reduces costs and increases the velocity of business. Blockchains are ideal for recording custody chains for goods, like fine art, to prevent forgeries. The same is true for commodities to ensure sustainability of farmed products or conflict-free sourcing of raw materials. A global realisation has emerged that blockchains can bring new efficiencies to commerce and profoundly change how the world conducts business and interacts with Governments. Major IT providers like IBM, Microsoft and Infosys are collaborating with banks and other financial institutions in a race to develop commercial blockchain platforms. The advent of blockchain is fuelling a huge number of startup companies focused on specific industries and consumer applications, and Governments are considering how blockchain can make tax reporting easier while reducing fraud. How blockchain works? A blockchain is a ledger holding a list of transactions or events people want to track. What makes blockchains so appealing is that they are very secure and multiple parties can possess reliably synchronised copies. Blockchains are ‘append-only’ data structures, which means that entries can only be added at the end of the list. Once added, entries are immutable and cannot be changed or deleted without corrupting the chain. Each entry in a blockchain is digitally signed by whomever creates the entry, and the entire blockchain is also digitally signed to make tampering easily detectable. Blockchains are a reliable and authoritative record of events, financial or otherwise. No single person or company controls access to the data because any participant can have their own copy. Transactions are guaranteed never to change and their source cannot be repudiated. A blockchain can consist of many replicas of the same data, which enables each party to have an up-to-date copy of the data. A new block appended to one replica is eventually copied to every other replica. Along with financial transactions, blockchains can hold code that’s triggered automatically when new blocks are added to the chain. This practice is called a smart contract, because these code blocks are typically used to enforce rules or execute actions dictated by legal contracts. For example, a rule to release payment when, and only if, all goods ordered have been signed as delivered can be encoded into the blockchain rather than relying on a user to monitor the order and send payment. Smart contracts can also be used to propagate data from one blockchain to another (beyond any replicas), thus creating a business ecosystem automated and secured by a collection of blockchains. Types of blockchain Corroborating the accuracy of a blockchain without a central authority that bears responsibility (and also usually controls the single system of record) requires all replicas in the blockchain to formulate a consensus about which entries are valid or invalid. This is tricky to accomplish for widely distributed replicas and the consensus process can take a long time. This is one reason why there are two kinds of blockchains— unpermissioned and permissioned. Unpermissioned blockchains (aka permissionless) have no owner per se, and entries can be created by anyone. Bitcoin used an unpermissioned blockchain because all participants have identical copies and every user can access the complete transaction history. All replicas in an unpermissioned blockchain participate in the consensus process. Blockchain is the technology everyone is talking about. But what is it exactly and why should businesses take note? Erik Johnsson, chief architect at Epicor Software, explains the basics Blockbuster or slow burn? Invented to support Bitcoin, blockchain is a digital version of a classic ledger book Continued... Erik Johnsson, chief architect, Epicor Software BUSINESS PROCESSES