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Blockchain technology can be considered as one of the main drivers to achieve a substantial cost savings. According to a Santander FinTech study, distributed ledger technology could reduce financial services infrastructure cost between US$15 billion and $20 billion per annum by 2022.
The typical organization loses five percent of revenues to fraud each year, according to a study by the Association of Certified Fraud Examiners.
The decentralized systems that can be built with blockchain are exciting and applicable across cybersecurity topics -- with promising areas like addressing hardware sourcing supply-chain problems, and software supply-chain problems.
Businesses are already increasing the efficiency, security, and transparency of their brands by integrating blockchain technology into their existing production and shipping processes.
Cryptocurrencies are only one of the applications of blockchain technology. Global experts and innovators continue to discover greater potential, and a plethora of uses, for the technology originally known for underpinning cryptocurrencies; and the industry is still very young.
Blockchain is proliferating, and evermore organizations are exploring how to incorporate blockchain into existing strategies, as well as the exciting potential of its use in various industries.
Enterprises are interested in these blockchain capabilities primarily to:
These capabilities can be sub-divided into horizontal applications across industries and industry specific use cases for specific verticals. Some of these use cases are highlighted below and will be covered in greater depth in a subsequent article.
Horizontal applications include: supply chain management, product provenance & authenticity, process verification & audit, system interoperability & data sharing, and product life-cycle data store.
Vertical specific applications include: transaction settlement (finance & insurance), cross-border trades (finance), food provenance and authenticity (health/safety), biometrics monitoring (health), Personal Health Record (PHR: health), and virtual clinical trials (pharma/health).
The requirements for enterprise blockchains are different from those developed for consumers and consumer applications. Enterprises are very concerned about the privacy and security of their data. They are also very protective of the intellectual property in their business processes. Most enterprises do not want their transactions and business processes to be visible to anyone but authorized users. It is this same rationale that led most enterprises to adopt private and then hybrid cloud architectures, rather than public cloud solutions. As a result, most enterprises are not keen to adopt the well-known public blockchain solutions.
Let’s review public blockchain. Most public blockchains (like Bitcoin or Ethereum) store data so that it is easily accessible to anyone. Such transparency is one of the benefits of a public blockchain. So for example, within the Bitcoin blockchain, given a transaction ID it is possible for anyone to see that Person A (Alice) sent a certain amount of Bitcoin to Person B (Bob). Additionally, if I’m running a node, I can see and use the business logic that runs both consensus as well as the transactions within the Bitcoin network.
Running a public blockchain within an enterprise, however, is more problematic. Doing so could enable a company’s competitors to track all of its business activities as well as understand the business processes used in its operations. Since smart contracts code the logic of a business process, it can include pricing, discounting, bundles, frequency of transactions, dependencies, etc. This information is the intellectual property of a business and a non-starter for public consumption.
As a result, enterprise blockchains employ two important concepts not found in most public chains: permissioning and private transactions. A permissioned blockchain is one in which the nodes are run only by ‘trusted’ participants and only authorized users can take part in transactions. Private transactions are typically run through corresponding private smart contracts that hide the business logic from all but authorized users. Enterprise blockchains use different approaches from cryptography to access control to ensure that private transactions are visible to only authorized parties.
Many industry groups have created consortia to work together on blockchain technology frameworks and projects. Private transactions and permissioning enable competing groups to work together without the fear that competitors can gain access to company secrets. For those who have worked with B2B enterprise software, these considerations should be quite familiar. Some of the key groups and consortia that are active today include:
Blockchain consensus protocols are a trade-off between speed, energy and security. The most secure protocols (i.e. Proof of Work) are energy intensive and very slow (<10 transactions per second). In a private chain or permissioned public chain, the network selects the groups that will run the nodes. Since these groups are vetted or selected from a pool of trusted entities, they create ‘trusted’ nodes. Trust is therefore much less of a concern than in a public blockchain where the groups that run the nodes are anonymous. As a result, enterprise blockchains can afford to use much less secure consensus protocols to maximize speed of transactions while reducing energy consumed.
On public chains using Proof of Work (PoW) consensus, all of the nodes run the same computations in a competition in order to validate the transactions. Regardless of the number of nodes, they all function like a single computer. On the other hand, in permissioned chains subsets of the nodes can run less intensive consensus protocols, which enables parallel processing of the consensus.
The combination of trusted nodes, parallel processing, and less demanding consensus protocols (typically Byzantine Fault Tolerant [BFT]) leads to higher performing networks. Permissioned chains or permissioned distributed ledgers are therefore typically more “performant” than public chains.
Enterprise blockchain is a quiet revolution. There are thousands of projects and hundreds of enterprises evaluating and deploying blockchain solutions today. The platforms are ready, the specifications are clear, and the projects are primed for launch. iKW Solutions is ready to implement blockchain technologies to create value for it's clients.
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