Blockchain is a digital ledger that enables multiple parties to reach an agreement on the authenticity of a transaction in a decentralized manner.
As businesses today become more complex, data and transactions are increasingly managed across untrusted parties. Blockchain technology can help increase trust and simplify operations for enterprises though a more transparent and secure approach to transactional relationships.
Blockchain technology works by enabling a shared set of computing systems owned by different parties to collectively reach an agreement on the authenticity of a transaction between parties. These outcomes are then permanently recorded across a shared database structure known as a blockchain which is cryptographically secured.
Bitcoin is a specific application of blockchain in digital currencies. The Bitcoin network is a public blockchain network that is open to anyone who wants to participate. Bitcoin transactions are executed using a computationally intensive mathematical protocol called Proof of Work, also known as mining. Most enterprise applications of blockchain use private blockchain networks and do not require any cryptocurrencies or mining in order to execute transactions.
The true benefit of blockchain is its ability to automate trust in the enterprise. This allows consumers, enterprises, and governments to automate how they manage transactional relationships. The Economist refers to this capability as the “trust machine” that will fundamentally transform how we do business. Trust automation can streamline business processes and simplify how assets are exchanged across a business value chain.
Siloed information across global supply chains today can limit visibility into a product’s journey, making it difficult to identify a product’s provenance. This creates issues around counterfeiting, health, and safety.
Global trade and commerce today involve multiple intermediaries such as banks, brokerages, and third parties, thus leading to increased costs of doing business.
Today’s increasingly centralized architectures across applications, users, and devices offer hackers a single point to attack to gain access and control.
Public blockchains are open, and anyone can join the blockchain network. Public blockchain networks typically have a large number of participants, and executing transactions requires significant amount of computational processing, referred to as mining, in order to ensure the validity of transactions among untrusted parties. Due to computational complexity and the number of nodes participating, public blockchains are typically highly energy-intensive and slow.
Private blockchain requires permissions to join the network, which can be determined by the network originator or a consortium of participants or some other pre-defined criteria. Executing transactions in private blockchains is significantly faster since less computationally-intensive resources are required to ensure the validity of transactions among trusted parties. Most enterprises prefer to control who participates in the blockchain network, resulting in much higher transaction throughput and scalability.