Should distributed ledger technology or blockchain
be used in the enterprise?
INFO.4800 Project-Based Information Systems
Nowadays we hear more and more about the fast growing blockchain or the distributed ledger technology. What is the blockchain and should it be used in the enterprise? This technology has the potential to eliminate huge amounts of record-keeping, save money and enhance data security, although many fundamental blockchain technologies are unready and still untested for large-scale commercial implementation. However, blockchain technology promises to entirely reshape money, middlemen, and trust.
Blockchain, at its core, is a growing digital ledger that records transactions and data through the means of cryptography. Each chunk of data is called a block, and these blocks are linked via a cryptic code. The digital ledger is decentralized, providing a copy to all the transacting parties. The data entered is automatically updated in every ledger holder’s copy – it is tampered proof and cannot be edited without the knowledge and consensus of the network majority. Thus, blockchain technology provides a way to store information on a distributed network of computers, rather than on a centralized server. A ‘ledger’ of information is shared between many different servers, rather than just a private body, such as a bank. It also allows each party to have their own copy of the same historical record.
The public ledger supported by blockchain technology can only be updated with the consent of the majority of participating bodies and, once entered, information can never be erased, meaning it provides a verifiable record of ‘digital events’. This vastly increases the transparency of transactions recorded by blockchain systems, because they are all publicly recorded.
“A public blockchain, like the one bitcoin uses, is a ledger that keeps time-stamped records of every transaction. Recording a transaction on a public blockchain is the digital equivalent of writing something in stone — it’s permanent. More important, it’s publicly available for anyone to see and verify.”
Brian Forde, Senior lecturer for bitcoin ; blockchain in MIT,
Senior advisor for mobile and data innovation in the Obama White House
Since all transactions added to public and private blockchains are signed and time-stamped, enterprises can quickly track down specific events or users of interest.
“At its very core, blockchain is another type of database technology. Many different companies share access to a common database, so it keeps multiple redundant copies of the database in sync at all times.”
Will Bible, Partner, Deloitte ; Touche
Previous iterations are stored, providing companies with a complete history log that both limits the chance of data tampering and ensures all IT actions are auditable as required by emerging compliance regulations.
“It’s transparent technology. It can reduce cost; it can transact faster and cheaper. And it gives you an immutable record of all transactions that cannot be changed, so that’s automating the audit trail. No one party controls it. We look at it as an opportunity to make audits more efficient in the future.”
Ami Beers, Director, Association of International Certified Public Accountants
A system of public and private keys, protected by a layer of cryptography, ensures that participants of blockchain services can be verified by those same services without exposing their most sensitive personal financial or identifying information. You can keep certified copies of identity documents, biometric test results, health data, or academic and training certificates online, available at all times, yet safe unless you give away your key. At a whole system level, the database is very secure. Each single ledger entry among billions would need to be found and then individually “cracked” at great expense in time and computing, making the database as a whole very safe.
Smart contracts are the economical option that can help small businesses inexpensively streamline the flows that keep them in business. They use blockchain to create, check and enforce contracts between users, who would be a young firm’s merchants, clients and customers. Whether it be invoicing, paying employees or bills, settling interest fees, creating insurance policies, handling fulfillment of inventory, closing new deals or any other transactional activity, smart contracts can have a positive financial impact on small business. With smart contracts, agreements can be automatically validated, signed and enforced through a blockchain construct. This eliminates the need for mediators and therefore saves the company time and money.
The conclusion of the presentation is – the distributed ledger technology or blockchain should be used in the enterprise, because: multiple parties have a copy of the entire ledger and the historical records can`t be changed or erased; blockchain provides the enhanced data security due to the system of public and private keys, protected by a layer of cryptography; it could be applied to improve the forms of record-keeping, agreement, contract (smart contracts) or register. For the first time, multiple untrusted parties can create and agree on a single source of truth, without the use of a middleman. The future of blockchain will likely take on forms yet to be imagined.