Over the last decade, technology and innovation in India have come a long way. Among the very latest technologies, blockchain is set to disrupt various sectors of the economy including finance and manufacturing. Most people associate blockchain with cryptocurrencies such as Bitcoin. It is the technology that many are built on. However, blockchain is now referred to as a technology that will improve visibility, productivity, and security for business.
It is a protocol for exchanging value over the internet without an intermediary. Various Indian companies have already started providing financial services through blockchain technology, which has the potential of making industrial processes more efficient and transparent. So, what is blockchain and why is it important for business?
The first step towards understanding blockchain for business is to put aside any thoughts of cryptocurrencies. What we need to understand is why is it used in business, how is it used, how it simplifies work and the kind of potential it carries in the near future.
Invented to support Bitcoin, blockchain is a digital version of a classic ledger book. However, this new digital ledger has the capability to record and, most importantly secure, many different kinds of transactions. Blockchains can also hold rules about what kinds of transactions to accept and execute more rules in order to interact with other blockchains to form “smart contracts”.
The most important and disruptive feature of blockchain is that it’s a distributed ledger – multiple parties have a copy of the entire ledger. That means many kinds of business transactions can be decentralised, eliminating the cost, complexity and slowness of involving trusted intermediaries. Smart contracts provide new ways to automate complex, multi-party business transactions which reduce costs and increase the velocity of business. Blockchains are ideal for recording custody chains of goods like the fine art to prevent forgeries. The same is true for commodities to ensure sustainability for farmed products or conflict-free sourcing of raw materials.
A global realisation has emerged that blockchains can bring new efficiencies to commerce and profoundly change how the world conducts businesses and interacts with governments. Major IT providers like IBM, Microsoft and Infosys are collaborating with banks and other financial institutions in a race to develop commercial blockchain platforms.
The advent of blockchain is fueling a huge number of startup companies focussed on specific industries and consumer applications and governments are considering how blockchain can make tax reporting easier while reducing fraud.
The Concept – How Does This Technology Work?
The Blockchain technology is a powerful model for businesses. A blockchain is a ledger holding a list of transactions or events people want to track. What makes blockchains so appealing is that they are very secure and multiple parties can possess reliably synchronised copies. Blockchains are append-only data structures, which means that entries can only be added at the end of the list. Once added, entries are immutable and cannot be changed or deleted without corrupting the chain. Each entry in a blockchain is digitally signed by whoever creates the entry and the entire blockchain is also digitally signed to make tampering easily detectable.