Blockchain is a design pattern made famous for its use in Bitcoin in 2009 by Satoshi Nakamoto. But, technology is compelling, and its uses go far beyond our imagination. It can be used in the following areas: Health Care, Financial Services, Supply Chain, Logistics, etc. We can reimagine the world’s most fundamental business interactions using Blockchain Technology.
It opens the door to invent new digital interactions. Gradually, enterprises adopt Blockchain to a vast range of business applications because of shortcomings of existing technologies and how they work.
Problems with the existing centralized systems
One of the major problems in the current enterprise systems is the interaction management among the various enterprises independently in a business network. However, interaction happens successfully but happens in a point-to-point manner via the multiple transits or involvement of multiple parties or semiautomatic methodologies, which is inefficient, expensive, vulnerable, and slow.
Properties of Enterprise Blockchain
Enterprise users usually do business with each other, and the Blockchain technology brings them all together into one common platform to securely exchange or share information.
- Blockchain provides a mechanism by which multiple enterprises can come to a common shared platform to exchange business information with one another in a shared secure manner.
- Every node in the blockchain network stores replicated copies of all the information that is getting transacted. The exchanged transaction information is recorded on the blockchain, which is called ledger in the blockchain terminology.
- The stored transactions in the ledger is a completely immutable log, or it is an append-only log. It means we can only add transactions to this ledger and cannot tamper with previous transactions.
- These transactions are added to the ledger through a consensus, where all the parties agree that transactions are legitimate and must be added to the ledger. They all do simultaneously in a consistent manner.
- The transaction logs are fully auditable and immutable, which gives provenance. It is like we have entire transaction records. Everyone has copies of these transactions so that in the future, parties cannot deny the transactions.
- It gives us a sense of immutability so that no one changes the record in the future. And it also gives finality, so once the transaction is performed, it is there forever.
The above features ensure that using blockchain technology, we can significantly reduce some of the inefficiencies that exist in multiple ecosystems today.
Key Concepts and Benefits of Enterprise Blockchain Technology
Few key concepts are important to understand blockchain technology and its applications.
Shared Ledger: It is shared among all the participants in the network. This is an append-only distributed system of records of all transactions performed in the shared business network by any participant. This ledger is maintained consistently across all the participants through a notion of consensus.
Consensus: All parties agree to network verified transactions, and agreement happens through a consensus algorithm. The entire interaction among the parties happens through consensus protocol which includes a consensus algorithm, interaction mechanism, etc. In the end, parties reach a consensus on whether to accept or reject the transaction.
Security: This ensures that only certain participants can see certain pieces of information, or they can only perform certain kinds of transactions. All these requirements can be achieved by implementing security services such as authentication, authorization, privacy mechanism, etc.
Smart Contracts: Apart from exchange information amongst the participants in the network, we are also interested in executing business processes. These are captured as smart contracts. It has a code written in some traditional programming languages that can be executed in a decentralized fashion. So all of the nodes actually execute this transaction. They will compute the output state, and the output state will get recorded onto the ledger if this is a valid transaction. It is more like business terms embedded in a transaction database and executed with transactions.
Putting all these together is what we called blockchain (it is more like a permissioned blockchain) and gives a bigger acknowledging advancement together to the blockchain community. It helps reduce the time for executing some of these transactions, which was previously a very manual process but now it can be automated across organizations. It also helps in reducing cost and risk and also enables new business models.
Degree of Centralization
From the below diagram, we can see that from the extreme right, there is a completely centralized system that is typically available currently. However, if we move from right to left, we can see three categories of decentralized systems.
- Permissioned, Private, & Public Shared Systems: These kinds of systems mainly focus on the need to fulfill enterprise business processes exchange requirements, including security, privacy, and scalability in transactions throughput.
- Permissionless, Public, Shared Systems: These systems mainly focus on censorship-resistant, scale to many nodes, one global blockchain where anyone can join the network and obtain the service.
The requirements of permissionless and premissioned blockchain are very different, so designing these blockchain platforms will also be different. However, the underline properties remain the same such as immutability, finality, the consensus amongst all the parties, and run in a decentralized manner where no single entity has complete control over the entire network.
References
- NPTEL lecture series on Blockchains Architecture, Design and Use Cases by Prof. Sandip Chakraborty, IIT Kharagpur.
- Distributed Ledger Technology: beyond blockchain, A report by the UK Government Chief Scientific Adviser
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