When you’re buying a used car, you want to know its chain of custody. How many owners has it had? Has it been involved in any accidents? Does it have a good service history? Or, when you’re hiring a new employee, you want the background checks to be accurate. Is their resume honest and accurate? Do they have a criminal record?
The trouble is, this information is probably difficult and time-consuming to gather, and its accuracy and quality are questionable. The different pieces of information you want are likely to be held in different databases, and some of it may be tough, if not impossible, to access.
Now imagine a world where everything you need to know about a transaction or contract was embedded in digital code and stored in transparent, shared databases, where they’re protected from deletion, tampering, and revision. Every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Not only that, but organizations, machines, and algorithms would freely transact and interact with each other with little friction and total faith in the accuracy of the data.
This is the exciting new world of blockchain. The idea of the distributed database (or “ledger” as it’s often called) has huge potential across almost every industry, particularly those with multiple parties in the value chain. Its best-known application to date is the Bitcoin digital payment system, but the same peer-to-peer transactions without intermediaries can be applied equally well to physical products and services. The key benefit is the independent verification of the chain of ownership of every transaction at every stage of the process, which neatly sidesteps the bane of everyone’s life: the almost impossible task of trying to maintain an up-to-date and accurate central database.
Companies of every shape and size are starting to explore how they can harness the potential of blockchain, and early adopters include the financial services industries. Blockchain is disrupting financial technology by allowing cross-border payment processing within hours instead of days and enabling smart contracts that radically simplify trade finance. Tracking and tracing of products through the entire supply chain can be augmented with the distributed ledger technology of a blockchain, so you can be confident that you are not purchasing a blood diamond or that your favorite brew conforms to the fair-trade coffee procurement process.
Although it’s a potential game-changer, blockchain won’t replace legacy technology overnight but will co-exist with it for some time to come.
In March 2017, SAP Ariba announced that it will offer blockchain functionalities to improve the tracking of goods moving across its business network. To find out more about blockchain and other exciting technology innovations, visit the SAPPHIRE NOW page to see recaps of the May 2017 event.