Bitcoin ledger system

Meanwhile, IBM is working on a similar effort to create a safer food supply chain. It has founded the IBM Food Trust and entered into a partnership with Walmart to use blockchain for tracing fresh produce and other food products. These kinds of applications require minimal sharing of information: Purchase orders, invoices, and payments do not need to be included on the same blockchain.

As a result, companies that are wary of sharing competitive data are more willing to participate on the platform. The benefits are clear. If a company discovers a faulty product, the blockchain enables the firm and its supply chain partners to trace the product, identify all suppliers involved with it, identify production and shipment batches associated with it, and efficiently recall it. If a product is perishable as fresh produce and certain drugs are , the blockchain lets participating companies monitor quality automatically: A refrigerated container equipped with an internet of things IoT device to monitor the temperature can record any unsafe fluctuations on the blockchain.

And if there are concerns about the authenticity of a product that a retailer returns, the blockchain can allay them, because counterfeit goods would lack a verification history on the blockchain. Companies across industries are therefore exploring this application of blockchain—motivated either by regulations requiring them to demonstrate the provenance of their products or by downstream customers seeking the capability to trace component inventory.

Increasing efficiency and speed and reducing disruptions. Emerson, a multinational manufacturing and engineering company, has a complex supply chain. It involves thousands of components across many suppliers, customers, and locations. Michael Train, the president of Emerson, told us that such supply chains often have to contend with long, unpredictable lead times and lack of visibility.

As a result, a small delay or disruption in any part of the supply chain can lead to excess inventory and stock-outs in other parts. He believes that blockchain could help overcome these challenges. Jeffrey Milstein About the art: Jeffrey Milstein photographs the colors, patterns, and complexity of large container ports from the air, observing the huge quantity of consumables moving in and out of America.

If the manufacture of product B is held up because of a disruption in the production of component C3, the optimal move is to temporarily allocate inventory of C1 to product A until the disruption is resolved. One solution is for the companies in question to agree to centralize their data on production and inventory-allocation decisions in a common repository. But imagine the level of integration that would entail: All involved companies would have to trust the others with their data and accept centralized decisions, regardless of whether they are partners or competitors.

A more practical solution is for participating companies to share their inventory flows on a blockchain and allow each company to make its own decisions, using common, complete information. Companies would utilize a kanban system to place orders with one another and manage production.

Kanban cards would be assigned to the produced items, and the blockchain would record digital tokens representing the kanban cards. This would enhance the visibility of inventory flows across companies and make lead times more predictable. Emerson is not the only company that thinks blockchain could increase the efficiency and speed of its supply chain. So does Hayward, a multinational manufacturer of swimming pool equipment. Disclosure: Vishal has done a small amount of consulting for Hayward.

If you do, he says, machine time and inventory at various stages can be reliably assigned to customer orders. Blockchain makes this possible by solving the double-spend problem—the erroneous allocation of the same unit of capacity or inventory to two different orders. Walmart Canada has already begun using blockchain with the trucking companies that transport its inventory. Part of the appeal of using blockchain to enhance supply chain efficiency and speed is that these applications, much like those for improving traceability, require participating companies to share only limited data—in this case, just inventory or shipment data.

Moreover, these applications are useful even within large organizations with multiple ERP systems. Improving financing, contracting, and international transactions. When inventory, information, and financial flows are shared among firms through a blockchain, significant gains in supply chain financing, contracting, and doing business internationally are possible. Consider the matter of financing. For example, a company might borrow money from several banks against the same asset, or request a loan for one purpose and then use it for another.

Banks design their processes to control such risks, which increases transaction costs, slows down access to capital, and reduces the capital available to small firms. Such frictions are detrimental not only to banks but also to firms that need cheap working capital. Another activity ripe for improvement is accounts payable management, an elaborate process that involves invoicing, reconciling invoices against purchase orders, keeping track of terms and payments, and conducting reviews and approvals at each step.

Even though ERP systems have automated many of these steps, considerable manual intervention is still needed. And since neither of the transacting firms has complete information, conflicts often arise. A counterfeit can be traced to its source using the blockchain trail. A third area of opportunity is cross-border trade, which involves manual processes, physical documents, many intermediaries, and multiple checks and verifications at ports of entry and exit. Transactions are slow, costly, and plagued by low visibility into the status of shipments.

The retailing and financial services companies we studied are conducting pilot blockchain projects or developing platforms in all three areas. By connecting inventory, information, and financial flows and sharing them with all transacting parties, a blockchain enables companies to reconcile purchase orders, invoices, and payments much more easily and to track the progress of a transaction with counterparties.

When the supplier receives an order, a bank with access to the blockchain can immediately provide the supplier with working capital, and when merchandise is delivered to the buyer, the bank can promptly obtain payments. Since there is a readily available audit trail and reconciliations can be automated, using smart applications that rely on the blockchain data, conflicts between the bank and the borrowing firm are eliminated.

Creating a Workable Technology The companies we studied have found that using blockchain in supply chain management will require the creation of new rules, because the needs of supply chains differ from those of cryptocurrency networks in important ways. The blockchain protocol for the Bitcoin network is a marvelous system that simultaneously achieves several goals.

It provides a remarkably secure, irrevocable record of financial transactions, minimizes the double-spend problem, and provides proof of ownership of a digital coin. And it does so without relying on a centralized authority and while allowing participants to remain anonymous and enter and exit the network freely. To achieve all this, however, the Bitcoin network sacrifices speed, consumes a large amount of energy to mine bitcoins, and has some vulnerability to hacking.

Supply chains do not need to make the same trade-offs because they operate in a different way and have different characteristics. Known participants. Supply chains require private blockchains among known parties, not open blockchains among anonymous users.

So that members of a supply chain can ascertain the source and quality of their inventory, each unit of it must be firmly coupled with the identity of its particular owner at every step along the way. Consequently, only known parties can be allowed to participate in such a blockchain, which means that companies must receive permission to join the system.

Moreover, permission must be granted selectively. When companies post transactions on a blockchain, that data can be accessed by any participant. As the volume of data swells, it could potentially be misused to gather competitive intelligence, trade stocks, or predict market movements. For security reasons, therefore, the blockchain participants need to be vetted and approved. Building a trusted group of partners with which to share data on a blockchain will entail overcoming several challenges.

One is the need for a governance mechanism to determine the rules of the system, such as who can be invited to join the network, what data is shared, how it is encrypted, who has access, how disputes will be resolved, and what the scope is for the use of IoT and smart contracts. Another challenge is figuring out how to address the impact that blockchain could have on pricing and inventory-allocation decisions by making information about the quantity or age of products in the supply chain more transparent.

For these reasons, the companies that we studied were focusing on narrow applications such as the traceability of drugs and food products and the management of accounts payable—applications that are supported by well-defined use cases or regulatory requirements. Firms limit the types of information recorded on the blockchain to reduce the risk to data privacy and make the system more readily acceptable to supply chain partners.

Simpler consensus protocols. Blockchain requires a consensus protocol—some mechanism for maintaining a single version of the history of transactions that is agreed to by everyone. Since cryptocurrency networks are peer-to-peer without a central authority, they use a complex method called proof of work. It ensures that all transactions on the network are accepted by the majority of participants, but unfortunately, it also limits the speed at which new blocks can be added.

Consequently, it is too slow to handle the speed and volume of transactions in supply chains. Consider the pharmaceutical industry, where 4 billion salable units enter the drug supply chain every year in the United States. Each unit is handled three to five times, on average. That translates to roughly 33 million to 55 million transactions a day, on average. The Bitcoin network, in contrast, allows only about , transactions a day.

Fortunately, if a blockchain is permissioned and private, the proof-of-work method is not necessary to establish consensus. Simpler methods can be used to determine who has the right to add the next block to the blockchain. One such method is a round-robin protocol, where the right to add a block rotates among the participants in a fixed order. Since all participants are known, a malicious actor would be discovered if it used its turn to modify the chain in a harmful or illegitimate way.

Security of physical assets. Many governments were quick to jump into crypto, but few have a staunch set of codified laws regarding it. Additionally, crypto is incredibly volatile due to speculators. Lack of stability has caused some people to get very rich, while a majority have still lost thousands of dollars. Whether or not digital currencies are the future remains to be seen.

What Is a Blockchain Platform? While a blockchain network describes the distributed ledger infrastructure, a blockchain platform describes a medium where users can interact with a blockchain and its network. Blockchain platforms are created to be scalable and act as extensions from an existing blockchain infrastructure, allowing information exchange and services to be powered directly from this framework. An example of a blockchain platform includes Ethereum, a software platform which houses the Etherium, or ether, cryptocurrency.

With the Ethereum platform, users can also create programmable tokens and smart contracts which are built directly upon the Ethereum blockchain infrastructure. Beyond Bitcoin: Ethereum Blockchain Originally created for Bitcoin to operate on, blockchain has long been associated with cryptocurrency, but the technology's transparency and security has seen growing adoption in a number of areas, much of which can be traced back to the development of the Ethereum blockchain. In late , Russian-Canadian developer Vitalik Buterin published a white paper that proposed a platform combining traditional blockchain functionality with one key difference: the execution of computer code.

Thus, the Ethereum Project was born. Today, the Ethereum blockchain lets developers create sophisticated programs that can communicate with one another through the blockchain itself. Tokens Ethereum programmers can create tokens to represent any kind of digital asset, track its ownership and execute its functionality according to a set of programming instructions.

In the past couple of years, non-fungible tokens NFTs grew in popularity. NFTs are unique blockchain-based tokens that store digital media like a video, music or art. Each NFT has the ability to verify authenticity, past history and sole ownership of the piece of digital media. NFTs have become wildly popular because they offer a new wave of digital creators the ability to buy and sell their creations, while getting proper credit and a fair share of profits.

Newfound uses for blockchain have broadened the potential of the ledger technology to permeate other sectors like media, government and identity security. Thousands of companies are currently researching and developing products and ecosystems that run entirely on the burgeoning technology.

Blockchain is challenging the current status quo of innovation by letting companies experiment with groundbreaking technology like peer-to-peer energy distribution or decentralized forms for news media. Much like the definition of blockchain, the uses for the ledger system will only evolve as technology evolves. Smart Contracts What is a smart contract? These are digital, programmed contracts that automatically enact or document relevant events when specific terms of agreement are met.

Each contract is directly controlled through lines of code stored across a blockchain network. So once a contract is executed, agreement transactions become trackable and unchangeable. Though fundamental to the Ethereum platform, smart contracts can also be created and used on blockchain platforms like Bitcoin, Cardano, EOS.

IO and Tezos. Blockchain Applications for Industries As mentioned, blockchain technology is being used far beyond just its roots in cryptocurrency — almost every modern industry is being morphed by the technology in some way.

Alongside banking and finance, blockchain is revolutionizing healthcare, record-keeping, smart contracts, supply chains and even voting. While the capabilities of such technology continue to grow, all the possible applications of blockchain are very much yet to be discovered. Blockchain History Image: Shutterstock History of Blockchain Although blockchain is a relatively new technology, it already boasts a rich and interesting history.

The following is a brief timeline of some of the most important and notable events in the development of blockchain. Blockchain Evolution The first concept of blockchain dates back to , when the idea of a cryptographically secured chain of records, or blocks, was introduced by Stuart Haber and Wakefield Scott Stornetta.

Two decades later the technology gained traction and widespread use.

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