Due to the sum of its beneficial characteristics, blockchain technology has the potential to generate a series of disruptive changes across multiple industrial sectors, reshaping the way in which multiple parties collaborate, verify the authenticity of components, and settle disputes. This article will explore how blockchain technology ensures data traceability while also giving users access to a complete record history of all the data that was introduced into the network. The second segment of the article will analyze the beneficial impact of data traceability and access to an immutable record history on the internal operational flow of a company, by focusing mainly on the supply chain sphere.
In the last couple of years, enterprises and smaller businesses alike have signaled the emergence of a new trend that diverges from established dogmas. Corporate giants including IBM, JP Morgan Chase, Ernst & Young have concluded after extensive research that decentralized forms of organization are no longer a variable which must be studied, but a goal, an ideal structure which can add considerable value not only to the financial and business realm but across every sphere of activity. Studies show that the main vehicle which will help make the transition from a centralized model to a decentralized one is blockchain technology which has already started to gain considerable momentum in industries such as supply chain, healthcare, retail, financial services, telecommunications, transportation, logistics, energy and identity management.
In our increasingly digital world, data has become a company’s most valuable asset. The value of distribution and decentralization directly stems from the fact that these structural characteristics facilitate consensus-based trust because the data in question is distributed among every participant. Blockchain mitigates the need for third-party gatekeepers which charge additional fees for their services and are often perceived as a security liability. Collaboration is enabled by shared data which becomes easy to verify and is always available. Data shared in a blockchain network is format agnostic and cannot be altered unless, all the parties are aware of, and agree with the changes made. This feature transforms blockchain into one of the most valuable tools a business can have at its disposal, a verifiable and incorruptible source of truth that facilitates data traceability and complete record history of every version of the information that was introduced in the network.
Blockchain is unique in the sense that it has managed to directly challenge our perception of data storage and management. For the untrained eye, blockchain may simply appear as a database, and to some extent they are right. Blockchain is a database, but a database is not a blockchain. In its most basic form, blockchain is a historical record of transactions. Data introduced in a blockchain network is secured through complex cryptographic algorithms and stored in structures called blocks. Each block of transactions includes a set of data from the previous block which link them together, forming a chain of blocks. Hence the name blockchain. Because data is stored in thousands of interconnected blocks, it becomes impossible to alter. If a malicious actor tries to tamper with data from a block of transactions, all the following blocks will be rendered obsolete by the system, which will discard any changes which are not approved by the members of the network.
Transparency, trust, and accountability are imposed by the decentralized structure of the blockchain. Businesses and trade partners are no longer required to rely on external parties to mediate disputes, perform an audit, verify and share data, as the one true version of the truth will be stored in the blockchain. Each participant maintains an encrypted record of every transaction, trust is guaranteed through complex mathematics during each stage of the transaction process. This resilient recording mechanism cannot be repudiated, as such, parties which do not completely trust each other can engage in business interactions.
How blockchain achieves data traceability and record history
In a traditional database system, users can perform the standard CRUD operations (create, read, update, delete), four basic functions of persistent storage that constitute the backbone for interacting with any database. Both relational and non-relational database systems are designed to rely on the CRUD operations to enable basic interactivity. The problem with this approach is that database administrators or users with sufficient clearance can access and modify data entries. This is also available for malicious actors who manage to exploit a security vulnerability and gain access to the database which can lead to numerous problems such as data breaches, corruption and even complete loss of data.
Blockchain technology enables companies to strengthen their database security and enhance audit and reporting operations by facilitating information traceability and record history. Blockchain differs from traditional databases because it is an append-only structure, which means that delete and update operations cannot be performed on existing data. As such, companies can employ a pure blockchain network or a hybrid solution like Modex BCDB that fuses the advantages of blockchain technology and the familiarity of a traditional database engine solution that stores all the previous versions of the information in a separate table to simply reporting and audit operations. In Modex BCDB the database displays by default the latest version of the information, but by accessing the record history, users can interact with older versions of the data and perform various operations including integrity checks, data analysis, and even settle disputes if the need arises.
Due to blockchain’s design, data traceability is available without configuring record history. This is because each data insert in a database has its hash stored in the blockchain network. Even a small modification to an input can drastically change the hash of the information. By comparing the two hashes, an admin can easily determine that the information has been tampered with. But because it is impossible to determine the initial input from the hash digest, they will not know exactly how the information was modified in the database.
Exploring the benefits of data traceability and record history
New layers of transparency
Companies that integrate a blockchain layer in their IT infrastructure significantly boost data transparency. In the context of blockchain technology transparency does not mean that users can see data in clear text, but the hash of the information. As such, network participants can only observe that the data exists and if it has been altered in any way. One of the most beneficial aspects rendered by transparency is the fact that it enables data traceability, which means that a complete record of the modifications made on a particular set of data creates a new version that is stored on the blockchain. On a closer analysis, this blockchain-powered environment can enhance audit operations by giving auditors access to an unabridged timestamped record history that not only registers any changes made to the data, but also the user who performed them.
Blockchain technology has garnered much attention from supply chain and logistics companies for its ability to replace legacy pen and paper systems with a digital, distributed environment, characterized by high levels of transparency, availability, and traceability. Currently, the largest supply chain companies have far exceeded regional boundaries, evolving into a large scale complex network of operations, and business relationships that extend at a global level. Managing this intricate web of operations as well as balancing different scheduling requirements, legal issues, and documentation is a daunting task where even the smallest error can lead to costly delays that can have deep ramifications across the whole chain of operations, that can even compromise the entire shipment.
Due to its inherent characteristics and unique architecture, blockchain positions itself as a major disruptor, capable of removing overhead costs associated with third-party intermediaries while mitigating the negative effects generated by friction points. Transparency, trust, data immutability, and traceability are highly sought after by any company regardless of the sphere of activity. The value of this technology stems from its ability to guarantee these values.
Growing brand trust
In a market oversaturated with companies that compete with each other to win client recognition and trust, it becomes increasingly difficult to separate actual real-world value from inflated promises and empty words. Currently, the main method through which companies strive to differentiate themselves from the competition, and demonstrate trust in their product and brand is through elaborate PR stunts and marketing strategies. The problem is that SMEs have little to no chance to compete with giant multinationals. As such, trust becomes an issue of how much money a company has to invest in marketing or simply blind trust based on the recognition of the brand name.
By enabling a blockchain backend to existing software applications, Modex BCDB gives companies and enterprises, regardless of their annual turnover, the ability to demonstrate trust through technology. With blockchain’s distributed, immutable ledger of transactions, growing brand trust is no longer a process deeply rooted in PR and marketing manipulation, instead, the focus shifts on practical, and more importantly, viable use cases that can be demonstrated through technology. This is because blockchain technology can enable a transparent and immutable data ecosystem, where each member of the network has access to a complete record history of every version of the data that was introduced in the blockchain. In a real business scenario, for example, the supply chain, every party involved in the operational flow would have access to one single version of the truth, thus eliminating the friction points generated by data inconsistencies. Besides enhancing the interaction between manufacturers, shipping companies and vendors, the end-user will also benefit from the ability to verify product origin and authenticity.
Streamlined supply chain operations
Blockchain technology can enhance visibility and increase efficiency across each segment of supply chain operations, offering clients guarantees on product authenticity, product warranty and order tracking. Blockchain data immutability can offer clients and vendors guarantees in regards to distributed products or product components.
Product owners can track their orders using blockchain-based ledgers. This way, they have the vendor’s guarantees in regards to order details and delivery queue. Also, all product warranties and serial numbers of parts can be stored in the immutable ledger as legal evidence in any eventual dispute and, of course, to allow product verification and to remove counterfeit suspicions. A blockchain-based supply chain platform can improve both vendor processes by offering better traceability, but it can also serve product owners who can track the history of each purchased product.
In a supply chain case study, IBM has outlined key areas in supply chain operations that can be improved with blockchain: visibility and data consolidation, tracking, transparency and trust, real-time issue resolution. IBM and Maersk are collaborating on a blockchain-based platform to enhance shipping and secure global trade. This initiative aims to enhance transparency, simplify operations and create a set of open standards for moving goods across borders and trading zones. The IBM blockchain solution has also been adopted by a large aircraft manufacturer to track the origin and authenticity of components and improve tracking. The system is designed to enhance product verification by attaching digital documentation and certificates to components. The tech industry giant is also aiming to combine blockchain with AI to create a solution that will streamline inventory tracking in food supply chains, that could predict future demands and accurately monitor the condition in which perishable goods are handled and transported. With respect to this issue, multinational retail corporation Walmart has partnered with IBM to enhance food safety with IBM Food Trust, the first blockchain-based food safety solution which allows early adopters to share data with supply chain partners in a secure and trusted environment.
A boon for the automotive industry
The automotive industry is composed of a complex web of operations that encompasses multiple parties ranging from components suppliers, manufacturers, safety regulators. At the core of this industry lies a network of transactions and an extensive set of documentation that supports the vehicle manufacturing process. Because the industry involves a myriad of external actors and third party regulators, the challenges revolve around the ever-expanding amount of data that industry players need to manage as well as supply chain challenges posed by defective or counterfeit parts. Through blockchain technology, the automotive enterprise sector can boost trust and transparency by securing trade secrets, guaranteeing ownership and traceability of components and goods.
According to IBM, mobility services, supply chain, and finance are only a few segments of the automotive industry that can be improved by a blockchain-powered backend. Concerning mobility services, IBM has partnered with ZF and UBS Bank to implement a blockchain-based car eWallet service that facilitates cashless micropayments multiple services including parking, tolls, electric charging and congestion fees. This system can be used to reimagine package transportation by enabling a secure drop point for goods, with permission-based access to the vehicle’s trunk. From a supply chain perspective, Boeing is integrating an IBM blockchain-based solution to make supply chain data accessible to aircraft owners, regulators, maintenance workers, and component vendors. Through a blockchain-powered supply chain, automobile makers can streamline component tracking, ensuring that parts are genuine by checking their accompanying digital documentation.
Indian multinational car manufacturing corporation Mahindra is also implementing blockchain to enhance their supply chain finance needs. Their aim is to create a blockchain ecosystem to ensure transaction visibility between component suppliers and manufacturers by streamlining communication and trust between the parties involved.
Supply chain operations involve multiple actors and several adjacent parties which perform different functions such as clearing mechanisms. However, anybody involved in this intriguing field can confirm that setting up secure supply chain collaborations most often involves application integration, and if the need arises, manual reconciliation which translates to increased costs and time. In the not so distant past, it was burdensome and not very cost-effective to ensure the authenticity of items exchanged or to track the execution of transactions, due to the involvement of third-party entities like banks, logistic brokers, trading partners, EDI vendors and so on. As the number of parties involved in a transaction increases, the number of friction points also grows, which may manifest themselves as costly delays and numerous data-related security risks.
As an append-only structure that enables data traceability and record versioning, blockchain technology mitigates a series of bottlenecks associated with legacy systems while facilitating a trustworthy environment for business relationships. Due to its inherent characteristics, a blockchain back-end can demonstrate its value by overcoming integration challenges, ensuring trust concerning product authenticity while streamlining collaboration between every party involved in business and supply chain operations through a shared digital distributed ledger.