By Steve Griffith
, Industry Director, NEMA
Many consumers across the planet have heard of Bitcoin, the first mainstream application of blockchain technology. As the original cryptocurrency, it made some people very rich and spawned numerous imitators. Understandably, it fueled a mountain of hype about blockchain technology. But what is blockchain, and what makes it revolutionary? What is its potential use for business enterprises? How can it help the electroindustry?
The answer to all three questions is that blockchain provides a foundation of trust, making its technology unique and valuable. Blockchain offers a set of guarantees with data and business logic that minimize the amount of trust an organization must have with others. Trust is the most important business and brand asset organizations manage, especially in relationships with customers, suppliers, employees, and others. Entities that do business with each other are exchanging things of value; these can be anything of value to them from money to stocks, hours of labor, food, or product parts. To avoid disputes, an organization must know that they are getting a fair exchange of value. They must insist on seeing a delivered product, receipt, tracking invoice, or other documentation or signoff as proof to validate a transaction.
Blockchain creates trust in business relationships through its support for shared data, consistent logic, and governance.
Blockchain enables trust in shared data through a unique combination of characteristics. A blockchain is much more than a regular database of information that can be changed or even hacked. It is a shared, distributed ledger of sequential blocks, accessible by all participants. It is uneditable and tamper-proof, with a permanent chronological history of transaction records and events that make it easily auditable. Secure communication protocols are used by all permissioned users and network devices, ensuring the validity of the data. Blocks may contain any data, from dollar amounts and bank accounts to trade dates, product characteristics, locations, arrival or departure dates, identities of asset buyers and sellers, Internet of Things (IoT) device notifications, compliance test results, certifications, or almost anything else.
Many people are interested to learn that the data itself may be encrypted or kept private if required by the business. In fact, blockchain solutions often store only a small encrypted hash code representation of a transaction, with the associated details of the actual data, events, products, and certifications stored elsewhere in client business applications.
Blockchain enables the user to trust consistent logic through smart contracts. Smart contracts are lines of code that parties mutually agree to store on the blockchain, which automatically execute when predetermined terms and conditions are met. Automation can be enabled with smart contracts, triggering actions based on predefined agreements and events. For instance, a manufacturer’s office can be notified to make an electronic payment to a supplier once their shipment is scanned upon arrival at the manufacturer’s loading dock. Other examples include an IoT device sending notifications when the temperature in a refrigerated container rises above a set threshold for a predefined period or a security camera on Industrial IoT (IIoT) machinery raising the alarm when it detects an intruder trying to cause trouble.
The last element of business trust is governance. In a permissioned network, the governing body participants embed rules in the blockchain to enforce access permissions such as adding and removing Members, business models, financial models, endorsement policies, operating and monitoring networks, or writing to and reading from the blockchain. The governing body can also specify how the rules can be changed, and what approvals are needed, such as requiring a majority of the involved parties to agree to the change.
Trusted data and trusted logic in a peer-to-peer economy network create opportunities for innovative business models. Enterprises can develop new solutions for operations such as asset digitization, the tokenization of energy or currency, track and trace with e-labels, dispute resolution, certification and compliance, process simplification, the elimination of intermediaries, data monetization, and identity management—all while ensuring privacy, confidentiality, and security. These business models enable use cases applicable across all industries. Solutions are being implemented by organizations to address shortcomings and inefficiencies in many areas, including identity and consumer services, supply chain, a circular economy, product quality and safety, product security, smart manufacturing, financial payments, healthcare, smart cities infrastructure and services, and workforce solutions. Each new use case leveraging core blockchain characteristics demonstrates another way blockchain can streamline businesses worldwide.
Blockchain Catching On
The universality of trust requirements, and the implications on business efficiencies, is why “Gartner estimates blockchain will generate $3.1 trillion in new business value by 2030.” Experts compare blockchain to the Internet of the early 1990s—a horizontal technology that can be used as a launchpad for new enterprise applications and business models. With blockchain protocols showing promising maturity levels, more businesses are getting involved across all industries. Some are understandably further along than others, with more straightforward use cases, and have begun to transform their businesses and reap the benefits. Other industries are just starting to define use cases and develop blockchain solutions to incorporate into existing infrastructure. Leaders have learned that blockchain is not an off-the-shelf product to be installed as a solution by itself, but rather a foundational framework upon which to revise existing products and processes and sometimes even disrupt current business models.
Consequently, the hype of blockchain is sliding away from yesterday’s expectations of quick fortunes toward tomorrow’s slope of growth. Several enterprise solutions and service frameworks have already moved into production. Early adopters who engineer blockchain solutions based on solid use cases—those that provide value for all their participants and encourage participation—secure advantageous positions to reap the lion’s share of the deal for themselves in the long term.
The path to success is not without bumps in the road. It can be difficult to convince an entire ecosystem of suppliers, customers, and competitors to participate and work together on a specific use case, implementation plan, and supporting governance model. Nevertheless, the rewards can be great. And depending on the business, it is possible in the future that using blockchain as a foundation for critical processes might be a requirement to be in business at all.
To Learn More
To learn more about the different blockchain types and technology platforms, or gain a better understanding of use cases and how blockchain may be applicable to you and your business, a great source is the NEMA document “Blockchain Technical Guidance for the Electroindustry.” The technical guidance document also dispenses with some common misconceptions about blockchain and shares many examples of production blockchain solutions, Standards bodies, industry consortiums, and pioneering companies. If you are still wondering what blockchain can do for you, it is a great resource to get started as it provides an adoption strategy for success.