The tech industry is alive with the buzz of Blockchain, but what is it, what’s all the fuss about, and is it the next big thing? In this article we explain Blockchain and what the current practical applications are.

We question the mainstream application of Blockchain and how useful it will be to the majority of businesses.  We also highlight other alternatives already available.

What is Blockchain?

The first thing people think of when they hear Blockchain is the cryptocurrency Bitcoin.  Although they are closely related, the two aren’t the same.  When Bitcoin was released as open source code, Blockchain was wrapped up together with it in the same solution. And since Bitcoin was the first application of Blockchain, people often inadvertently used “Bitcoin” to mean Blockchain.

 

The technology that sits behind Bitcoin is Blockchain and this can have many more applications than Bitcoin.

 

Blockchain works on the idea of a public ledger where information is recorded, and once something is recorded on the ledger it cannot be removed or amended. The ledger then represents a single source of truth that sits behind every step in the process or chain. A record, such as a transaction cannot be changed, instead a compensating transaction is written, which is the opposite of the transaction, resulting in the ledger recording both transactions.

 

The ledger is stored in multiple locations called nodes each with the same priority.  This means that there is no master copy.  The Blockchain ledger then becomes immune to failures where a copy of the ledger is unavailable or is corrupted.

Practical applications of Blockchain

Organisations are always looking for better ways to store information to ensure the information is accurate and up to date. Blockchain can offer this as a secure solution and two obvious practical applications are supply chain management and financial services.

Supply chain management

Blockchain can be applied to effectively manage a supply chain.  You can use the ledger approach to update and record every step a product goes through in the production process. For example, take a car manufacturer.  Assume the car goes through a simple process of adding parts, painting, transportation and retailing. At each step the record for that particular car will get updated with a time stamped entry into the ledger letting you know the car was painted blue and has all its parts or it is now on sale in Glasgow.

 

For businesses with complex or highly regulated supply chains such as aerospace or pharmaceutical, Blockchain would allow for incontrovertible tracking and provenance of parts and ingredients throughout manufacturing and production processes.

Financial services

Across financial services there are a couple of key applications.  The main application being payment gateways. Having a single source of truth for transactions is paramount for financial institutions to ensure they have an accurate and up to date record of financial balances. For example, to ensure you can’t spend the same money twice, sell the same asset or carry out the same trade. Now as you might be thinking, haven’t banks been able to do this before Blockchain? The short answer is yes, there are other technologies that work in a very similar way, with Blockchain being the latest development.

Is Blockchain for you?

Blockchain offers organisations a new way of securing transactions and for controlled or complicated supply chains it can provide an alternative solution.

 

However, it is unlikely that most businesses won’t benefit directly from Blockchain, due to a range of more cost effective solutions and currently Blockchain is an expensive resource to work with. We predict that Blockchain will become integrated into things like database software and other systems.  Businesses will therefore inadvertently use the technology but this will likely be for companies like Microsoft to deal with and not for the majority of businesses to worry about.

 

Before Blockchain, organisations opted for applications based on traditional databases with audit trail capability with logs of any updates and who updated it are kept. These systems have been in use for many years and most of the time will offer a more cost effective alternative.

 

The future

As a Microsoft Partner, we are closely monitoring their work to make Blockchain technology available through Azure. Microsoft is partnering with Blockchain providers to make this available through their platform in Q2 2018 and this will be called their Coco framework.