In the current business model, each party keeps a record of all the transactions between all parties that they interact. This process is expensive as it needs huge effort and makes the data redundant. Blockchain is a system that keeps records of information in a way that is difficult to manipulate or hack.
Blockchain provides a trusted and distributed ledger with a shared business process and parties. This ledger is distributed across the entire network of a computer system on blockchain. It allows any participant in the business network to see the one system of record or ledger. This concept makes businesses more efficient to transfer goods and services. Each block in the chain contains many transactions. If any new transaction executes on the blockchain, those transaction records are added to the ledger of all the participant’s ledger that takes part in this transaction.
There is a decentralized database called Distributed Ledger Technology(DLT) which is managed by multiple participants. Blockchain is a type of DLT whose transactions have an immutable cryptographic method.
Blockchain Use Cases
Blockchain is used in many verticals. This section gives one of the important verticals where Blockchain is being used
Financial Sector
- Trade Finance
- Mortgages
- Cross Currency Payments
Public Sector
- Asset Registration
- Citizen Identification
- Medical Records
- Medicine Supply
Retail Sector
- Supply Chain
- Loyalty Programs
- Information Sharing (Supplier/Retailer)
Insurance Sector
- Medical claims Processing
Medical claims processing is a complex process as it involves multiple parties like clearing houses and Insurance Providers.
- Risk Provenance
- Asset Usage History
- Claims File
Manufacturing Sector
- Supply Chain
- Product Parts
- Maintenance Tracking
Blockchain Components
There are four main components that should be considered for having blockchain for business.
Smart Contract
Business terms are embedded in the transaction database and executed with transactions. It contains the business logic for the blockchain.
It is the business rules implied by the contract which is embedded in the Blockchain and executed with the transaction. The contract is verifiable and signed when distributed across the network.
It is written with the help of a programming language so that it can be used as an application. When the proper conditions are met, contracts will execute.
An example can be a contractual condition under which corporate Bond transfer occurs
Shared Ledger
It should have an append-only distributed system of the record shared across the business network.
It is shared among participants who have their own copy through replication. Records are given permission so that participants can see the appropriate transactions. It is the shared system of the records in Blockchain
Privacy
It is a way of controlling confidentiality within the blockchain so that participants can see only the parts of the ledger that they are supposed to see. Likewise, it should ensure appropriate visibility of the transaction. The transaction should be secured, authenticated, and verifiable using a cryptography technique. Ledger is shared among the participants but requires privacy to do that.
Participants need appropriate confidentiality between subsets of participants.
Participants don’t need the identity linked to a transaction.
Trust
Transactions should be endorsed by the relevant participants. The ledger is a trusted source of information in which participants can endorse transactions. Once the business network decides what to endorse, it is added to the ledger with appropriate confidentiality.
To maintain trust, assets will have a verifiable audit trail such that transactions cannot be modified, inserted, or deleted. All the transactions are archived through consensus, provenance, immutability, and finality.
Components Needed in Blockchain for Business
To use blockchain concepts in a business model, we need business networks, wealth, and markets.
Business Networks: It benefits from Connectivity
- Participants are customers, suppliers, banks, and partners
- Cross geography and regulatory boundary
Wealth: It is generated by the flow of goods and services across the business networks in transactions and contracts
Markets: They are the main part of this whole process
- Public Market (Automobile, Vegetables, Fruits)
- Private Market (Supply chain financing, bonds)
Assets in BlockChain Business
An asset is anything that can be owned or controlled to produce any monetary value.
Asset Types
- Tangible Asset
- Intangible Asset
Ledgers Used in Blockchain
Ledger is a system of business records that keeps track of activities that happen in business.
The transaction: It is an asset that is transferred onto or off the business ledger.
Contract: It is a condition through which a transaction will occur
Benefits of Blockchain in Business
- Efficient Time-saving Transaction time
- Reduction in Cost
Overhead and intermediaries cost gets reduced. These costs are mainly internal and external auditing costs.
- Reduction in Risk
It reduces tampering, fraud, and cybercrime within the business network.
- Increase in Trust
Trust is increased through shared processes and record-keeping, as all the relevant parties can observe the transaction in real time. All the business transactions are shared through a distributed ledger so that all the participants can observe them.
Hyperledger Composer
It is an open-source set of tools designed to make building blockchain applications easier. It allows users to model the business networks, assets, and transactions that are required for blockchain applications, and to implement those transactions by using simple JavaScript functions. The blockchain applications run on instances of Linux Foundation Hyperledger Fabric (www.hyperledger.org).