Blockchain Technology- A Paradigm shift in the Way We Trust

625da44e4eaf58d61cf048d168aa6f5e492dea166d8bb54ec06c30de07db57e1 – This alpha-numeric code looks like a typing error or an illegible sentence/word, but it is not!! This code perfectly makes a sense as it stands for the word- “Blockchain”. This is actually a 256-bit (32 byte) signature for the text “Blockchain” and is called a cryptographic hash (sometime called digest). This cryptographic hash (SHA-256 hash) is not an encryption simply because it cannot be decrypted back to the original text; it is just one-way cryptographic function representing a unique transaction or a unique entry. You make any change in the name/text, the code will change.

For example, if I change the word to “blockchain (replace the letter B with b), the hash will change to ef7797e13d3a75526946a3bcf00daec9fc9c9c4d51ddc7cc5df888f74dd434d1. This is again a unique code which nowhere matches the previous code (although the name Blockchain is same in both the cases). It is noteworthy that every transaction and every new entry is associated with a unique code and that code will never change for that specific transaction. It can neither be altered nor deleted.

Now consider a situation when you are going to buy a house and reviewing the record of the house since the date of its construction to see all the records related to sale/purchase, repair, taxes, penalty etc. As on date, all these records are centralized with the city office of property registration (mostly municipal corporation of the city) and it is a single point of contact for all records. Any changes or tampering of the record is possible and as a buyer, you will never know if the tampering of record has taken place unless a documentary proof from some other party is submitted making a claim on the property. Then comes the situation of conflict and dispute.

In a second scenario, consider that the record of the house is not centralized but is distributed within a close group (called distributed ledger) and every transaction related to that house is associated with a unique key. Each transaction and associated key in this scenario is called a block. Every transaction on top of that transaction will be associated with a new key and will have a reference of the previous key (i.e. previous transaction) and time stamp. That means all the transactions or blocks are linked together as a chain and hence called as BLOCKCHAIN. Since each record or transaction has reference to the previous transaction, this chain is tamper-proof. If someone tries to delete an entry, the chain will be broken because the later entries in the chain cannot relate to the previous part of the chain and will be rejected by all in the group because the additional information (deletion of the data) will not be validated in the copies of the ledger available with all other users in the group.

This happens through algorithms in blockchain programming. In a blockchain ledger, this consensus algorithms runs every 10 minutes to validate the authenticity of the information and if that information is not validated by the copies of the ledger available with each user, then the record or the information was tampered. So, the person/ledger copy that has tampered record is moved out of the blockchain and replaced with the authenticated copy of the ledger. This way we get a distributed immutable chain of the ledger.

This blockchain technology to create immutable ledgers can be in implemented in almost all industry sectors like health care, Real state, Manufacturing, Banking and so on. The technology was announced by Satoshi Nakamoto (a person or a group- not known) in 2008.

The above example and introduction of blockchain indicates that the technology is changing a very important paradigm of doing business today, i.e. Trust’. Every transaction in a blockchain is associated with two important pillars of Trust – i.e. Identity and Authenticity. In all the sectors, identity, authentication and authorization are integral part of commerce and culture worldwide.

So, landing at a neat definition of blockchain can be attributed to a “shared and distributed digital ledger or database that records the valid and authentic transactions (anything of commerce value) and tracking of asset in a business network”. An asset could be a tangible asset like car, house, land etc. or an intangible asset like IP, patents, copyrights, branding etc. That means virtually anything can be tracked and traded on a blockchain as it provides an efficient, cost-effective, reliable and secure system for conducting and recording financial transactions. One of the best things the blockchain does is that, since it is a decentralized system between all permitted parties, there is no need to pay transaction commission to intermediaries like Bank, Letter of Credit etc.

Want to build a blockchain application? Great idea!!! You can build your application running on blockchain technology using any of the several blockchain platforms. There are approximately 20 blockchain platforms available, however some of the most popular are: (i) Ethereum, (ii) IBM Blumix (iii) Chain (iv) HydraChain (v) Open Chain (vi) IOTA (vii) Multi Chain (viii) Hyperledger (Sawtooth Lake) and (ix) Eris. Some of these platforms are open source while others are licensed having plans ranging from paid individual user license plan to Enterprise license plan.

Microsoft has also launched an Azure Blockchain Service with which you can deploy and configure a blockchain network in minutes. Azure Blockchain service is built on Ethereum platform and Hyperledger Platform. The hyperledger is unique as it combines different blockchain approaches and releases a framework that can be used across industry sectors. The unique feature of this approach is that it is being supported by large enterprises like ABN Amro, Accenture, Cisco, JP Morgan, Fujitsu, Hitachi, IBM, Intel etc.

To write blockchain program (normally called “smart contracts”) on these platforms, you need not learn a new programming language. These platforms support multiple coding language. If you are good at Python, C++, C#, JavaScript, Ruby, Node JS or Go, you can use a platform from the above list that supports any of these languages to write codes to build your blockchain application.

The smart contracts define conditions to which all involved parties agree, that means if certain required conditions are met, the contract is executed. As the smart contract is stored on every computer in a network, they all must execute it and get to the same result. This way user can be sure that outcome is correct.

Let’s take an example of a service provider and customer. The customer must pay to service provider on completion of service or part payments to be made at the completion of each milestone. To make it happen, contract is written, scanned, signed and invoice is raised to receive the payment on completion of service or milestone delivery which is usually time consuming and dependent on several internal accounting and payment process. Whereas in smart contract, the rules can be defined in the code. You make the payment to smart contract on the day the service starts. The smart contract will hold the payment till the final or milestone delivery in not complete. Once the services are delivered, the smart contract would release the payment to the service provider.

This is just a small introduction of Blockchain that holds huge possibilities and disrupt the way some of the industries work especially, (1) Banking and Payment, (2) Cyber Security, (3) Supply Chain Management, (4) Forecasting, (5) Networking and IoT, (6) Insurance (7) Private Transport (8) Cloud Storage (9) Government, (10) Health Care (11) Retail (12) Real State (13) Energy and Utilities etc.

The blockchain technology opens a lot of possibilities to do business without having expensive intermediaries. Big or small, the enterprises are testing the technology in closed network to collaborate with each other and directly without involving third parties or intermediaries. At Smart IMS, we are testing the blockchain concept in the field of Cyber Security & IoT.

If your industry deals with the data or transaction of any kind, you are likely to be disrupted by Blockchain, sooner or later. We understand your business and can guide you towards implementation of blockchain solution for your business.

AJ
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Categories: Thought Leadership