A Primer on Blockchain

Emerging technologies are impacting organizations as companies begin to explore new ways to innovate in order to stay current and to drive the bottom line. SAP Leonardo Services addresses these needs and makes it easy for companies to adopt up-and-coming technologies like Internet of Things (IoT), Artificial Intelligence, Big Data, Blockchain and more. With all the talk of blockchain I thought I would provide an introduction to the technology so you can get a grasp of what blockchain actually means, and how you can adopt it for your company.

First off, what is Blockchain?

Anytime someone tells me what blockchain is, it’s likely they’ll mention a distributed ledger that’s secure and immutable. It’s an accurate description but the accounting metaphor can be hard to grasp. So in its most basic form, think of a blockchain as a database, like any other database, that stores data or information (in this case the data is stored in individual blocks). Next, imagine that there are multiple copies of this database, and each is replicated seperately on individual computers (nodes), and are spread out, in most cases geographically. This is what distributed means. Instead of a central location of a single database, there are multiple copies, stored across multiple locations (all with the exact version of the database (or ledger) and in sync with one another). On top of being distributed, imagine each database is secure, the same way that your online banking site is secure. In fact, blockchain security is built using advanced cryptography.

So thus far we have a network that is comprised of multiple copies of the same database (ledger), distributed across multiple computers in a secure fashion. Now imagine that a single user attempts to make a change to the data in a single database. This would mean that throughout the entire network, that database would be out of sync, and wouldn’t match the others. This of course would create a flag. Now imagine if the person who made this edit to the database was acting in a malicious manner, and wanted his change to propagate across the entire network. Subsequently, they would have to access each remote computer, break through the highly secure and encrypted security layer, and make the change. Not to mention they would have to do this numerous times since there are multiple copies of the database. Imagine the time and effort of breaking into all of those computers to make a single change.

Then of course, if someone wants to legitimately add information to the database, one would need to submit information to the network for it to be validated, based on the network’s acceptance criteria. If the submission is a legitimate transaction then the entire network will update each of their respective databases (ledger) and the information will be written as a new block (a block is a compartmentalized group of data). All new blocks are linked to previous blocks and so on, hence forming a chain. Imagine a long chain of data that is connected to one another, that is secure and provides a complete visible and historical view of all transactions. That in a nutshell is blockchain.

And there in lies the power of the blockchain. By distributing the ledger across multiple machines, and by using a high level of security based on cryptography, the end result is a decentralized network that is secure and trustworthy. These are a few of the reasons why the cryptocurrency market is a fan of blockchain. In fact, Bitcoin, which is a digital currency, is built on a blockchain that is distributed across thousands of computers. Its appeal is that it’s decentralized since there’s no central authority that manages the transactions (like a central bank or government). Don Tapscott, Executive Chairman of the Blockchain Institute, provides an excellent overview of blockchain and cryptocurrency in his Ted talk, where he goes over some of the details I have already mentioned:

As an Enterprise, how can I adopt Blockchain?

There are a few reasons why blockchain could be a good fit for your company. One of the first things you can do is consider something like your supply chain. Is it fully transparent? SAP Global Track and Trace is a solution that allows full transparency into the entire supply chain. Imagine you’re a grocer, and you want to be able to track the origin of a piece of produce, like lettuce. By tracking the origins of that lettuce, all the way back to the farm it was grown in, and by logging that information into the blockchain, you can achieve a complete view of how that piece of lettuce ended up at your store, and you can be assured the information is accurate because of the security and immutability of blockchain. The implications are profound especially when there’s a food outbreak and you need to be able to get down to the source.

Finding redundant processes where there might be an unnecessary third party is another potential of implementing a blockchain solution. It’s a way to cut the middle man and improve your bottom line. On a recent project I worked on, our client was paying a third-party to retrieve distributor and customer data. Instead, if this data was written to the blockchain, and all parties had full transparency of the data, our client could essentially access the data themselves and enjoy some cost savings.

So to sum up, in situations where you need transparency across a supply chain, or across your organization, blockchain could be a good fit. And whenever there’s a middle-man you can also look for cost savings by implementing a blockchain network.

If you still aren’t sure where blockchain applies within your organization, you can work with SAP and use a design led development approach to identify areas in your business that can benefit from the technology. You’ll work with someone like myself, a design consultant, who will lead you through our process to eventually create a working prototype, based on your business needs, built on blockchain, and integrated as a pilot project within your environment. It’s an easy way to get started. Feel free to reach out to myself or check out SAP Leonardo Services.