Despite plenty of technical terms that make it sound futuristic, blockchain offers real advantages when moving goods
It has plenty of technical jargon, terms such as cryptocurrency, bitcoin, attestation ledger, ASIC, genesis block, permissioned and unpermissioned ledgers. It includes a bit of futuristic thinking, and it requires trust, a lot of it. Blockchain technology may be a hot term right now, but it likely is not a passing fad. And it will likely disrupt the supply chain in ways that are only being imagined today.
So, what exactly is blockchain technology?
According to the Institute for the Future, “A blockchain is an online database that stores information across a network of personal computers, making it not just decentralized, but distributed. This means no central company or person owns the database, yet everyone in the network can use and help run it, but not tamper with it.”
Joseph Ciccolo, founder and president of BitAML, a provider of compliance solutions for bitcoin companies, says a blockchain is only partially about technology.
“A lot of people think that blockchain is the technology, but it really is the artifact [of a transaction],” he says.
According to Bernard Marr, writing as a contributor to Forbes, blockchains were first created in 2008 by Sartoshi Nakamoto. The first blockchain implementation took place a year later as part of bitcoin. Marr writes that the blockchain is the public ledger part of bitcoin.
What is a blockchain?
Understanding the purpose of blockchain, particularly in the supply chain, is difficult to until you understand exactly what blockchain is and what it is not.
“The core idea behind blockchain is it is a [system] that lets multiple parties agree to the [facts],” Peter Kirby, CEO of Factom, tells FreightWaves.
Factom is an Austin, TX-based blockchain company. Kirby says the company provides solutions that run on blockchain technology.
“It’s, at the end of the day, a record-keeping tool,” he explains. “And supply chain and logistics involve a lot of record-keeping which is why we think it fits.”
But what is a blockchain, really? A blockchain is a collection of distributed computing databases that are joined together to create a chain. Data is then added to the chain in blocks. Each entry is time-stamped and unchangeable, giving a documented, verified ledger entry. To access a blockchain, a unique “cryptographically created key” is needed, providing security. One of the special features of a blockchain is that everyone included in the chain has access to all the data in the chain – complete transparency – but can only alter their part of the chain.
Trust and security are major components of any blockchain.
“No one can edit a blockchain without having the corresponding keys,” Marr writes. “Edits not verified by those keys are rejected.”
The first use of a blockchain was to transfer cryptocurrencies such as bitcoin.
“At the most basic, the bitcoin blockchain allows all the transactions to be visible, but not who made them,” explains Jeremy Kirshbaum, research manager with the Institute for the Future. He notes that a blockchain can be either private, available only to those who have been whitelisted, or transparent.