Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.

An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

Why is blockchain important?

Business runs on information. The faster information is received and the more accurate it is, the better. Blockchain is ideal for delivering that information because it provides immediate, shared, and observable information that is stored on an immutable ledger that only permissioned network members can access. A blockchain network can track orders, payments, accounts, production and much more. And because members share a single view of the truth, you can see all details of a transaction end to end, giving you greater confidence, and new efficiencies and opportunities.

Key elements of a blockchain:

Distributed ledger technology:

All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that’s typical of traditional business networks.

Immutable records:

No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.

Smart contracts:

To speed transactions, a set of rules that are called a smart contract is stored on the blockchain and run automatically. A smart contract defines conditions for corporate bond transfers, include terms for travel insurance to be paid and much more.

Benefits of blockchain:

What needs to change: Operations often waste effort on duplicate record keeping and third-party validations. Record-keeping systems can be vulnerable to fraud and cyberattacks. Limited transparency can slow data verification. And with the arrival of IoT, transaction volumes have exploded. All of this slows business, drains the bottom line, and means that we need a better way. Enter blockchain.

Greater trust:

With blockchain, as a member of a members-only network, you can rest assured that you are receiving accurate and timely data. And that your confidential blockchain records are shared only with network members to whom you granted access.

Greater security:

Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.

More efficiencies:

With a distributed ledger that is shared among members of a network, time-wasting record reconciliations are eliminated. And to speed transactions, a set of rules that are called a smart contract can be stored on the blockchain and run automatically.

Types of blockchain networks:

There are several ways to build a blockchain network. They can be public, private, permissioned, or built by a consortium.

Public blockchain networks:

A public blockchain is one that anyone can join and participate in, such as Bitcoin. Drawbacks might include the substantial computational power that is required, little or no privacy for transactions, and weak security. These are important considerations for enterprise use cases of blockchain.

Private blockchain networks:

A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-peer network. However, one organization governs the network, controlling who is allowed to participate, run a consensus protocol and maintain the shared ledger. Depending on the use case, this can significantly boost trust and confidence between participants. A private blockchain can be run behind a corporate firewall and even be hosted on premises.

Permissioned blockchain networks:

Businesses who set up a private blockchain will generally set up a permissioned blockchain network. It is important to note that public blockchain networks can also be permissioned. This places restrictions on who is allowed to participate in the network and in what transactions. Participants need to obtain an invitation or permission to join.

Consortium blockchains:

Multiple organizations can share the responsibilities of maintaining a blockchain. These preselected organizations determine who submit transactions or access the data. A consortium blockchain is ideal for business when all participants need to be permissioned and have a shared responsibility for the blockchain.