Blockchain is a disruptive technology which has taken the world by storm in recent years. This article will explore how blockchain can best be adapted for business uses, with a focus on IBM's Hyperledger Fabric framework for building scalable and permissioned blockchain solutions. But first, let's start with a brief introduction on blockchain, its history, importance and most common use cases.
What is Blockchain
So what exactly is blockchain? At its core, blockchain is a decentralised, trustless and immutable ledger which maintains a record of all its transactions across a peer-to-peer network of nodes. In other words, blockchain is a kind of database which can be shared and managed amongst many actors, with full confidence that no actor can manipulate the data inside of it without the permission of the other parties. Once a transaction is entered in the blockchain, it is public to all parties and cannot be changed.
The first blockchain was implemented as part of the bitcoin protocol in 2009, by an anonymous individual or group under the pseudonym of Satoshi Nakamoto. It was the key solution which allowed the first truly decentralised digital currency to work, a problem which had been puzzling researchers since the dawn of the internet. For a very long time, bitcoin was the only real world practical implementation of blockchain technology. However, in recent years, many new platforms have emerged which provide capabilities to develop and deploy all kinds of programmable blockchain solutions, through the use of smart contracts. A smart contract is a digital contract stored on the blockchain which can automatically self-execute (be verified and enforced), when specified conditions are met, without the need for human interaction. The main use case of this being automated escrow, meaning that funds can automatically be released/payed out when the conditions of a smart contract have been met.
Blockchain is the perfect use case anywhere where an immutable public record or strong audit trail is needed, or multiple, possibly distrusting parties want to share data, without relying on a central database which might be prone to influence, hacking or manipulation. Some examples of use cases and industries which have started embracing and investing in blockchain are capital markets, corporate banking, regulatory compliance, supply chain management, healthcare, real estate, identity management, voting, and many more.
However, for blockchain to be successfully adapted inside business networks, a trustless and completely open system is not the ideal solution. And a network where every peer is required to execute every transaction and maintain the entire ledger might be unnecessary and could face scaling issues. Such networks don't inherently support true private transactions or maintain contract confidentiality, which is something every business network will require. This is where Hyperledger Fabric comes in.
Introducing Hyperledger Fabric
Hyperledger Fabric is a framework for creating blockchain solutions with a strong focus on the enterprise market. It was created by IBM and is open source, existing under the umbrella of the Linux Foundation. Its main features are private and permissioned blockchains which allow for transaction privacy. Every member of the network is known and enrolled through a Membership Service Provider (MSP). Unlike other popular blockchain platforms, such as Ethereum, Hyperledger Fabric has no cryptocurrencies underpinning it, and does not require one in order to execute transactions, which means no computationally expensive coin mining is necessary. It is highly modular, with the ability to switch components, such as the storage engine for the ledger data, its consensus mechanism, or the MSP it uses. Its smart contracts, called chaincode, are written in Go, which makes it possible to easily define and automate business processes. All of this allows Hyperledger Fabric to achieve a high level of confidentiality and scalability in business environments, making it the perfect tool to build performant and secure Business-to-Business blockchain networks.
Hyperledger Fabric achieves transaction privacy through the use of channels. Channels are private blockchains between parties that operate inside the same network as the public ones. This allows a group of participants to create a completely separate ledger of transactions between them, that cannot be accessed by anyone else. For example, imagine a blockchain business network which allows transactions between buyers, sellers, shipping companies, banks, tax authorities, and many other participants. Since the data on the blockchain is public and shared between everyone, all parties involved in a transaction can track a shipment and sign off on it during various checkpoints. However, a seller might want to initiate a transaction with a buyer under some special, more favorable terms, and keep the details of the contract secret from the other buyers, with whom it has other contracts in place. In a traditional blockchain, every peer inside the network would need to validate, execute and store the transaction. But in Hyperledger Fabric, the buyer and seller can open a new private channel where they execute this new contract, which will only be stored there and will not appear on the ledger of the other buyers, and that no one else will be able to access or execute. This presents a huge benefit, as the buyer and seller can still operate inside the same network as the other participants who are part of the transaction process, but don't necessarily need to know all the details of this transaction, such as the special discounted price.
Similar use cases apply to many different industries, one of them being the pharmaceutical industry. As described in another blog post , GoSmarten recently attended a hackathon organised by Deutsche Telekom and sponsored by one of the largest pharmaceutical companies in the world, Merck & Co. There, we successfully managed to apply blockchain technology built on top of Hyperledger Fabric in order to solve a very complex problem involving clinical trials for new drugs. We created a network which linked patients, doctors, clinical research organisations and regulatory agencies, and featured a public blockchain between these parties as well as several private blockchains inside the same network, in order to ensure patient data confidentiality and adherence to regulatory agency rules. You can read more about our solution here.
All together, these features form a remarkable and groundbreaking technology which can pave the way to countless new business opportunities previously not possible, with the potential to disrupt established business models and transform industries on a global scale.
Blockchain adoption has started steadily rising across a vast number of industries, and many businesses are heavily investing in blockchain based solutions. According to Accenture, blockchain has already attained a 13.5% adoption rate amongst financial services in 2016. So far, the total value of private equity invested in blockchain startups can be placed in the high billions of dollars, and growing fast throughout the whole world.
If you’d like to learn more or consult with us about big data, machine learning or blockchain solutions, drop us a line at [email protected]!