Making Blockchain Real for Business

In the era of the 1990s, with the advent of the World Wide Web and eBusiness technology, we were introduced to several conveniences for communicating and accessing data either internally within a company or externally globally.

This technology is increasingly advanced, starting from communicating individually to collaborating to form an ecosystem in carrying out business tasks as well as making it easier to integrate one system with other systems, both internally and externally from one company.

With the existence of such sophisticated technology, many habits, businesses or processes are lost and replaced with various conveniences and conveniences for all users. For example, the use of e-mail, chat facilities, and e-mail social media has eliminated our need to go to the post office, reduced costs (no more buying stamps) and reduced paperwork (less paperwork). All of these processes are carried out in a very fast time (a matter of seconds). Previously the process took a matter of days depending on the destination).

With better communication facilities, almost all companies are trying to form a business model that makes it easier for customers to interact within the ecosystem or business networkto improve sales or business processes.

In this era of e-business technology, the integration between each business participant in business networkit's still point to point. Process/interaction between one member with member other unknown by member other and each member store transaction/interaction data in their respective systems.

Such a process will take a long time, be inefficient, expensive, and prone to fraud for every stage of the business process. This process can be assisted by the existence of Blockchain. Industry analysts regard Blockchain as a technological revolution for business.

What is Blockchain and its benefits?

Currently, the general public is more familiar with the term Bitcoin than Blockchain. Bitcoin was discovered in 2008, is a method of 'cryptocurrency', a digital currency that is not regulated and does not require permission from central banks around the world. The Bitcoin system is implemented to carry out cryptocurrency transactions between its users directly, without involving middlemen.

Bitcoin is the first implementation of Blockchain technology. Blockchain is the foundation for forming an application that will establish trust and transparency. Members use Bitcoin (as .) digital currency) to make payment. After a Bitcoin transaction occurs, the transaction data will be recorded by the system in one block which is equipped with one data hashes (which has beenencrypt) which shows information from previous transactions. The recorded transaction data are related to each other. This is what is the concept of Blockchain.

Blockchain system is an open system, which has shared ledgers (records all transactions/permanent activities between two or more members) which are replicated and distributed to each of them member of the business network.

The business network that is formed is closed (access is only given to the member concerned), licensed (only members who are authorized to join the business network), and confidential (using technology) cryptography, members can only access/view the given data/process).

Within this blockchain system, formed political consensus on its business network to determine the veracity of the relevant transactions and recorded transactions are considered final and cannot be changed.

In 2016, a panel of experts from around the world gathered at the World Economic Forum and selected the most important technologies that are currently trending the most. Blockchain was chosen to be one of the technology trends from Top Ten Emerging Technologies, which is considered sufficient disruptive and can change the way business in various sectors.

The benefits of using Blockchain include: a. Processing time becomes faster, because each transaction/process will be carried out near automation and equipped with a reliable process b. Reduce redundant and intermediary costs c. Avoid the risk of crime of vandalism and fraud d. Increase trust for transactions with the existence of a joint balance sheet and consensus

Main components of Blockchain

Following are the main components of the Blockchain system:

1. Shared Ledger (shared balance sheet) Blockchain system will record all transactions that occur in the business network. Each transaction that occurs will be recorded by adding a hash (encrypted data) of the previous transaction. Transactions will be distributed and replicated to members of its business network and only members who are granted access permissions will be able to view/access the transactions in question.

2. Smart Contract Smart Contract is a business logic which is made using Programming Language to define processes or contracts so that transactions can run according to needs, both in terms of business processes, business conditions, audits or others.

For example, in shipping goods from one city to another, IoT (Internet of Things) tools can be installed to monitor the temperature of the packets sent. If the temperature of the package is outside the specified limit, the delivery process will be canceled and payment will not be made. The above logic can be created in a Smart Contract, which will be executed every time a goods delivery transaction occurs in the business network using the Blockchain system.

1. Privacy (Confidentiality) Transactions recorded on the Blockchain are shared with each member in their business network, but with the existence of a cryptographic technology system, each transaction and member of the business network has privacy (confidentiality).

Not all business network members can see all transactions that occur in the Blockchain system. Cryptographics and certification management will control who can see what and what data they can see.

1. Consensus/Trust Consensus is a mechanism to validate and commit to the truth of the transactions that have occurred.

Sample case

Examples of business cases using Blockchain solutions from IBM:

1. International trade solutions using Blockchain https://ibm.biz/BdijFw
2. How Walmart uses Blockchain systems to improve food supply tracking https://ibm.biz/BdijF5
3. IBM and China UnionPay E-payment Research Institute demonstrate how bonus points can be shared between different banks using Blockchain https://ibm.biz/BdijEc
4. Shipping giant Maersk is experimenting with blockchain for bills of lading https://ibm.biz/BdijER

- Disclosure: This guest entry was written by Sianny Gandasasmita. Sianny currently works as a Banking Technical Advisor in the Financial Services Sector - IBM Indonesia. He can be contacted via email sianny@id.ibm.com, LinkedIn, or Twitter