Everything on Blockchain is NOT Crypto Currency
Blockchain Supply Chain the TRUST Matters
20th Dec 2022
Prabir Mishra , TRST01
A blockchain is a distributed, or decentralized, ledger that records transactions among multiple parties in a verifiable, tamper-proof method. The ledger can also be programmed to trigger the transactions automatically.
A blockchain without cryptocurrency refers to a distributed ledger that keeps track of the status of a shared database across numerous users. The database can include the history of cryptocurrency transactions or confidential voting data related to elections, for example, that cannot be updated or deleted once added.
Blockchain technology is relevant to more than just cryptocurrencies. Blockchain, however, is mainly concerned with the decentralized storage of information and the consensus of particular digital assets, which can or cannot be cryptocurrencies.
So, can Blockchain be used for anything?
Blockchain technology can replace business models relying on third parties and centralized systems for Trust and Traceability. For instance, NFTs were initially introduced on the Ethereum network in late 2017 and are one of the disruptive innovations based on Blockchain — beyond cryptocurrencies — that influence intellectual property.
Cryptocurrency networks are designed to replace fiat currencies. The primary function of Blockchain is to enable the network with an unlimited number of anonymous users to transact privately and securely without an intermediary.
Public Blockchain only needs cryptocurrency to function, while private blockchains do not. Public and private blockchains are the two main categories of blockchains. Public blockchains are permissionless, allowing anyone to join the network and participate in the Blockchain. On the other hand, private blockchains networks lack in decentralization and are invitation-only networks and mostly run by a single organization.
Private blockchain examples include Hyperledger and Corda. The Linux Foundation created the Hyperledger project, which uses private blockchains to create distributed ledgers to support confidential commercial transactions. Another permissioned blockchain project developed by R3 is called Corda, which is intended for companies wishing to establish interoperable distributed networks with private transactions.
There is neither a mandate nor a requirement for cryptocurrencies to power and incentivize network members because centralized corporations manage these private blockchains.
Blockchain in Supply Chain
In the case of Supply chains, a limited number of known parties interact, and Blockchain allows them to protect their business interest against any malicious actors. Successful blockchain applications for supply chains require permissioned blockchains and rules to govern the system.
The world of ERP systems and financial ledgers stands to benefit from Blockchain. The scenario could be a simple transaction involving a retailer, a supplier, and a bank supplier needing to execute the order, with support from the bank in the form of working capital.
It could also apply to an E-commerce platform involving millions of daily transactions with thousands of vendors and multi-country settlements. The transaction involves flows such as information, inventory and finances.
Note that a given flow does not result in financial ledger entries for all three parties involved. ERP systems, manual audits, and inspections can’t aptly connect the three flows, making it challenging to eliminate errors in execution, improve decision-making, and resolve supply chain conflicts.
Errors in inventory data, missing consignments, and duplicate payments are impossible to detect in real-time. Even when a problem is detected after the fact, it is difficult and expensive to trace the sequences of activities recorded in available ledger entries and documents. The reconciliation challenge is always a nightmare.
Though ERP systems capture all flows, it can be tough or Impossible to assess the journal entries (accounts receivable, payments, credits for returns) that correspond to the individual transaction or Specific Inventory. This is true for companies engaged in thousands of daily transactions across an extensive network of supply chain partners and products such as eCommerce platforms.
Blockchain provides a unique Idefiier with a hash (#) for each transaction of CoS (Change of State). Also, records and assets such as units of inventory, orders, and bills of lading are given unique identifiers. Additionally, each participant in the Blockchain has unique identifiers (# Value), or digital signatures to sign the blocks they add to the Blockchain. Every transaction step is recorded on the Blockchain as a transfer of the corresponding hash( #) from one participant to another.
A blockchain is valuable as it comprises a chronological order of blocks integrating all flows (three types) in the transaction and captures details that aren’t recorded in a financial ledger. Moreover, each block is encrypted and distributed with all participants who maintain copies of the Blockchain, thus making it immutable.
Thanks to these features, the Blockchain provides a complete, trustworthy, and tamper-proof mechanism for the audit trail of these three categories of activities in the supply chain. Permissioned Blockchain can do magic for the complex supply chain.
A blockchain without cryptocurrency is a distributed ledger that stores data associated with non-fungible tokens (NFTs), supply chain initiatives, the Metaverse and more.
Ideally, blockchain technology has the potential to replace business models that rely on third parties and centralized systems for Trust, transparency and Traceability.
Reference HBR, Coin telegraph
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