Why blockchain is not just for banks
Authored by: Alexander van Tuyll van Serooskerken, Senior Management Consultant, Synechron
If global supply chains are to gain the full benefit of this technology for managing payments and related data, all parties that play a role in global trade must be involved.
The last two years or so have been like a rollercoaster ride in the land of blockchain. Both existing and new players have been considering and evaluating the opportunities and the downsides of this important technological development.
The blockchain concept originally was developed as an efficient and secure way to manage and register transactions made with cryptocurrencies (for example, Bitcoin). Until now, it has mostly been of interest to individuals and financial institutions. But with its distributed-ledger technology (DLT) and smart contracts, blockchain has great potential to benefit all companies across the global supply chain—not just banks. This article will briefly explain what blockchain is, and then discuss why it is important for all parties involved in global trade transactions to adopt it.
DLT, smart contracts, and digital payments
Blockchain is a new computing infrastructure that emerged to power the Bitcoin digital currency application. In essence, blockchain provides the opportunity to have a connected, secure world with a distributed ledger that centralizes data for the involved parties and the ability to run automated checks and processes (called "smart code" or "smart contracts," depending on the legal implications of the code) that trigger all kinds of events (for example, payments).
The distributed-ledger technology component of blockchain allows each counterparty to have its own copy of the same ledger, similar to the way a Google doc allows multiple parties to view the same information at the same time. The database is built to be immutable, which means there is inherent security. Blockchain also allows for smart contracts to be coded and connected in such a way that the contract automatically executes an event if certain preconditions are met. An example would be a (near) real-time payment when goods are delivered.