What is a blockchain?
Blockchain is a transparent, open distributed ledger system that can keep track of financial, data, and material transactions.
It is a sequential chain of blocks, where each block holds information about valid previous transactions in order of its timeline. Each block has information in encrypted form. The transactions in the ledger can be viewed and new transactions can be added as blocks to the chain but not without sufficient authorization.
In short, transactions are stored as a block and a copy of the transaction information is held by all the network participants. To add or modify a transaction, authorization from all the participants is necessary.
This makes blockchain architecture immutable, transparent, and highly secure, enabling two parties who do not know each other to transact over the Internet without any third party.
Promise outside Fintech
While the application of blockchain technology is well known in financial services, what is less well known is how blockchains can reduce the cost of peer-to-peer data and resource transfers, removing the need for third parties and middlemen across a variety of industries. Other organizations also stand to benefit through complete trusted visibility in their business network and more efficient transactions.
IBM and Blockchain
IBM is a key contributor to the open source collaborative project, Hyperledger, hosted by the Linux Foundation. Based on their experience, they have created the IBM Blockchain Platform to help enterprises develop, govern, and operate blockchain applications.
This article will examine some blockchain case studies in Asia-Pacific outside of fintech, to see how this technology is improving the efficiency of trusted transactions in the supply chain and food safety sectors.
Blockchain has the potential to completely revolutionize supply chains and all its participants, from manufacturers to fleets, brokers, and shippers, by radically simplifying and accelerating the business operations for all stakeholders.
To illustrate the optimized information flow, let us consider the example of sending a shipment of tulips from Holland to Singapore. This cargo will pass through multiple parties across various modes of transportation before reaching its destination.
It first begins at a farm where a truck will pick up the batch of tulips and transport this to the dock. As all members of this business network can view all the transactions of this shipment process without time consuming reconciliation, the trucking company can be immediately paid when the ledger is updated that the shipment has arrived safely at the dock.
The flowers are then loaded onto a cargo ship bound for Singapore. As tulips require cold temperature storage, the conditions of carriage may include penalties if the temperature of the flowers exceeds preset thresholds. The solution can utilize Internet of Things (IoT) sensors to monitor the flowers in transit. If the cold storage facilities were to breakdown en route, penalties and conditions can be automatically levied and insurance companies notified accordingly. These IoT sensor readings are posted onto the ledger so that all parties know about the conditions of the flowers.
As seen from this example, the solution can track and trace the chain of custody between different modes of transport. What’s more, because everyone in the chain can view and trust the transactions posted, it can reduce the time required for reconciliation to enable faster processes.
To achieve such outcomes in Asia, IBM has announced a Memorandum of Understanding (MOU) to collaborate and create a blockchain-based supply-chain business network solution with Pacific International Lines (PIL) and PSA International (PSA). This trial solution will connect multiple parties across the logistics value chain onto a unified ledger.
Use Cases in Food Safety
Food safety is becoming a crucial issue today. Every year, one-in-ten people fall ill (c.600 million) globally and around 420,000 die as a result of contaminated food, according to global estimates of foodborne diseases from the World Health Organization (WHO). Retailers aim to use blockchain technology to provide customers with more information about their products, improve traceability of their food supply, and gain consumer confidence in their stores.
IBM and global retail giant, Walmart, have collaborated to develop a distributed and transparent supply-chain tracker. The tracker allows users to track shipments of steak, medicine, and other foods from their origin to Walmart stores. Blockchain along with IoT sensors allows the retailer to track products quickly, efficiently, and in a trusted way.
For example, the solution provides a complete view of the entire ecosystem of papaya suppliers. Should a contamination occur, the source can be quickly identified using the trusted entries in the ledger. This means that the affected batch of fruit can be isolated quickly, reducing further illness, lost revenue, and wasted product!
Ultimately, the system can provide assurance to consumers on the quality of food they are consuming by authenticating the origin of the food.
The Future of Blockchain Outside Fintech
Blockchains will disrupt any business that generates value and profit from the frictions associated with the transfer of value, or the sharing of data or communication between diverse entities. With a peer-to-peer network and distributed consensus for data and transactions, there is less need for a trusted, central party.
While blockchains may appear complex and perceived to be primarily in the fintech domain, every business needs to understand the benefits, challenges and use cases of this potentially transformative technology.