Blockchain for Business Networks
In a previous article, we introduced an introduction to the Blockchain technology and its importance for business networks. In this article, we will describe the main elements of the business networks and the current challenges facing its market growth.
Business Network Elements:
An asset is anything that can be owned or controlled to produce value, for example: Goods and services.
Assets are transferred through business networks comprised of participants(for example, customers, suppliers, service providers, banks) across regulatory and geographical boundaries.
It describe the exchange of assets between participants. Each participant records transactions in ledgers.
A log of transactions, and the key system of record for asset exchange for a business.
A set of business terms that should be met by participants before a transaction is completed.
A market is the flow of assets across business networks, Public (market, car auction), Private (supply chain financing, bonds).
Business Network Challenges:
The traditional business networks face set of challenges that reduce their market growth:
- Geographical and regulatory boundaries.
- Multiple ledgers maintained by participants for multiple business networks.
- Participants requirements for trusted transactions.
So, the Blockchain for business is introduced to overcome these challenges, please review the “Blockchain for Business Requirements” section in our previous article for more info.
Business Network with and without Blockchain:
In the below figure, we have some difficulties in this traditional car leasing network:
Multiple ledgers. With multiple ledgers, it gets difficult to figure out who owns what and when ownership gets transferred.
Slow updates. Since each participant in the network has its own ledger, synchronization isn’t achievable real time.
Error-prone updates. Without having smart contracts, each participant relies on its own business processes to update the ledger. Having no central authority, this could lead to errors.
Thanks to Blockchain to add some benefits for this business network as shown in the below figure:
Shared ledger. The ledger is now an append-only distributed system of record shared across all participants in the business network.
Smart contracts. Smart contracts are business terms embedded in transaction databases and executed with transactions.
Permissions. Viewing permissions are defined for each participant in the business network to ensure privacy.
Consensus. All participants in the business network agree to network verified transactions.
Efficiency. Transaction times and data synchronization is reduced from days to near real time. Overhead and intermediary cost reductions.
Reduced risk. Risk of tampering and fraud is reduced with transaction certifications and signatures.
With Blockchain, you get smart contracts, shared ledgers, permissioned access, and secure and efficient transactions among other things.