Building trusted relationships one transaction at a time
People have exchanged goods and services for centuries. Over time those transaction-based relationships have evolved and spawned a full supply chain discipline, often with multiple trading partners involved. The result: complexity. And complexity can introduce opportunities for discrepancies, disputes, fraud or corruption.
These various issues become more prevalent as complexity increases, because not everyone within the supply chain records transactions and reconciles their ledgers in the same way, at the same time. In some cases, trusted third parties such as real estate title companies reconciled on behalf of multiple parties by ensuring that items were exchanged as promised, funds were available and payments were made. However, these methods are proving to be insufficient for handling many of today’s complex transactions and regulations. Furthermore, they historically did not address many of the vulnerable transactions.
With the rise of a sharing economy, new ways to simplify or add value to transactions are being developed at an increasing pace. From payment systems to peer-to-peer networks, the way we create and consume goods and services is changing how we conduct transactions and how we need to account for those transactions.
Therefore, today’s businesses need synchronized ways to record transactions and reconcile ledgers with their trading partners.
Yet as CTOs and other technology leaders start adopting technologies to streamline mutually reconciling these transactions, they can’t lose their focus on security. Ponemon Institute’s Cost of Data Breach Study estimates that the average consolidated total cost of a data breach grew from $3.8 million to $4 million dollars in 2016 – making safeguarding transaction records critical to prevent tampering and protect the security of sensitive information.
Enhancing security for digital ledgers
Emerging technology predictions are made every year. One such emerging technology contributing tremendous value to business transactions is blockchain.
Blockchain is all about security, so all associated technology was designed to be secure. Blockchain facilitates online transactions among business network participants. It is “tamper-evident” in that it reveals any alterations to data and requires consensus from the network to accept those alterations. Those business parties can be thousands of miles away and the transactions can occur at any time of the day without having to undergo the labor-intensive effort to gain each party’s agreement. The negotiation of terms for transaction concurrence are contained in logic called chain code.
But not all blockchains are created equal. Some are public (often described as permissionless), where anyone can access and add data to a blockchain anonymously. Other blockchains facilitate online transactions among permissioned blockchains, also called private blockchains, where participants are known and need permission in order to access, read or append information to the blockchain.
For example, public, permissionless blockchain, such as the type used by the bitcoin cryptocurrency, builds trust and maintains security through visibility and consensus validations. While a permissioned blockchain framework like the open-source Hyperledger Fabric™, one of the Hyperledger projects hosted by The Linux Foundation, gives greater control over the information each participant sees in order to preserve privacy of assets and terms and conditions between parties.
As the author, consultant and entrepreneur Don Tapscott explained in a session at the recent IBM InterConnect 2017 conference, both blockchain architecture and the computing resources used by network participants help maintain tight security. Each block contains multiple transactions recorded in a certain length of time. Once a block is validated, it is connected to the chain of blocks.
According to Tapscott, blockchains are difficult to hack. To compromise a block, the actor would need to hack the entire chain.
Hacking a public, permissionless blockchain would involve breaking into not just one computer but potentially millions of computers simultaneously, all of them using high levels of encryption and all of them monitoring every attempt at unauthorized access.
Despite the obstacles to compromising a blockchain, it can be done. And given that blockchain networks involve transactions of highly valuable assets—such as cybercurrency, diamonds, energy or other assets—maintaining the utmost security is critical.
Innovating with blockchain—securely
Blockchain presents important opportunities to businesses – in areas such as anti-corruption, reducing disputes and combatting fraud. To improve efficiency and maintain their competitive positions, early adopters are seizing the opportunity presented by blockchain technology to transform their business networks.
And even though blockchain is an emerging technology, a range of blockchain initiatives and solutions are available that help address the security requirements of enterprise organizations—including those in highly regulated fields such as financial services, government and healthcare.
Learn more about how blockchain works and how early adopters are exploring additional security measures to make blockchain enterprise-ready.
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