Keep up: Blockchained explained (Simple)

Posted: 27. September 2019-Likes: 0-Comments: 0-Categories: Ikke kategoriseret
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Keep up: Blockchain explained (Simple)

If you work in the e-commerce, retail or logistics industry you most likely have heard the phrase “Blockchain”. You may know that it is technology that connects businesses in some way. But how? After reading this you will be able to keep up in conversations regarding the mysterious blockchain. So let’s sum up.

What is blockchain?

Let’s start by dissecting the name, “Blockchain”. Blockchain is basically pieces of transaction data stored in intangible blocks, that link together in an equally intangible chain. When a transaction happens, the chain extends. This chain of blocks records and confirms the time and sequence of asset transactions. It

Dorian Satoshi Nakamoto is shown during an interview at the Associated Press bureau Thursday, March 6, 2014 in Los Angeles. Nakamoto, the man that Newsweek claims is the founder of Bitcoin denies he had anything to do with it and says he had never even heard of the digital currency until his son told him he had been contacted by a reporter three weeks ago. (AP Photo/Damian Dovarganes)

Satoshi Nakamoto – The presumed inventor of Blockchain

can remind you a bit of the supply chain and they actually overlap each other dynamically in the span of a product’s cycle from production to purchase. Example

Blockchain was first mentioned in 1991 by a research group, that wished to send documents in a tamper-proof system, such as time stamps that couldn’t be backdated. But it first gained popularity when adopted by Satoshi Nakamoto to develop the concept of Bitcoin.

The benefits of Blockchain are many and significant:

  • It’s peer-to-peer: No central authority monitors or controls every action. Every participant can reach each other directly.
  • It’s distributed: The ledger is spread across a network, which makes fraud very hard to accomplish.
  • It’s cryptographically secured: There is no way to tamper with the information in a chain
  • It’s add-only: Data can only be added, and fortunately it is practically impossible to change former data.
  • It has consensus: All parties in the network must give consent to changes/updates in the ledger.

Why do we need blockchain?

Millions and millions of business transactions take place each day. This means that senders and receivers of information need to keep track of a lot of things such as orders, payments, account tracking etc. Usually each participant has their own ledger, and the perception of the truth may therefore vary. Because each participant has their own ledger is increasing the risk of human errors, fraud and simple inefficiency.

Take a look at this comparison between the conventional transaction and that of a blockchain

Ordinary transactions:

• Each participant has their own ledger. This can form a risk of human error or even fraud

• Not time efficient since you rely on intermediaries

• The fact that it can require a lot of paper pushing can result in delays or even losses for stakeholders

Blockchain:

• One shared ledger, that can’t be tampered with.

• Every participant must give consent before a new transaction is added to the network

• Nearly eliminates paperwork, speeding up transaction times and increasing efficiencies

There have already been multiple uses of Blockchain technology. One extraordinary and so far atypical example of the technology is a property deal. Ukraine is the first country to facilitate such a deal to the co-founder of the tech news site Techcrunch, Michael Arrington, for $60,000 with the use of smart contracts.

The deal was assisted by Propy, a real estate startup and decentralized title registry.”We’re starting with Ukraine, but over the coming year we plan to facilitate real estate transactions with the use of token in California, Vermont and Dubai” says CEO of Propy, Natalia Karayaneva.

Blockchain glossary

Ledgera system or book for logging financial transactions

Cryptography – The method of disguising (encrypting) information through complex mathematics. The information can only be viewed by the chain’s participants.

Node – A replica of a ledger to keep track of the transactions in a blockchain. It can be any electronic device, such as a computer, phone or even a printer, as long as it is connected to the internet. These nodes take a great deal of memory to run because blockchains can contain a considerable amount of information.

Smart contracts –They serve as a computer program, that defines the rules and penalties of an agreement, and controls the transfer of the digital currency or assets between parties when specific conditions are met.

Hash pointer – A pointer to the place where some information is stored. These refer to the last blocks made before that transactions time stamp.

Miner – A person who logs new transaction requests, that are waiting transactions to become blocks, through solving difficult mathematical problems. These miners are awarded with bitcoins, when they solve a problem and log a transaction. It’s a competitive environment and it takes about 10 minutes to solve a problem

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How does blockchain work?

So now you know about some of the bits needed in a blockchain. This is how it works in function. Take a breath and read on – it’s actually really simple!

Blockchain graphic icons

A blockchain begins when a node starts a transaction by creating and then digitally signing it with a private or public key created with cryptography.

Blockchain graphic icons2

The transaction data is transmitted using a “Gossip protocol”, which sends the request to peers that have to validate that transaction. Typically, more than one node has to approve the exchange.

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Once the transaction is approved, this action is included in a block. That makes the transaction confirmed.

Blockchain graphic icons4

Now this transaction block is part of a ledger, and the next transaction will link to this first block.

Blockchain graphic icons5

Every time a new block is created, all the previous actions are reconfirmed.

Why use Blockchain in Shipping - Maersk containers

Why use in shipping?

Besides the obvious benefits of applicating blockchain to shipping such as decrease of fraud and theft, secure payments and tamper-proof data, the gains for the shipping industry are several. The most popular benefit is the traceability of goods, which is a big reason why food and pharmaceutical industries is adopting blockchain technology. That makes it easy to view the point of origin and the road through peers to destination. Also, this traceability creates a transparency, which helps reduce counterfeiting of pharmaceuticals, electronics or designer items and might even solve the problem of child labor.

A study by Maersk mentioned in Seatrade Maritime News has analyzed a shipment of avocados from Mombasa to Rotterdam, which involved 30 parties, 100

people, 200 information exchanges (of which some were electronic, others on paper, some were hand-written delivery notes). Because Blockchain relies heavily on technology and cryptography, the use of it also reduces the need for paperwork drastically for shippers, ocean lines, ports, terminals, 3PL’s and more. That fact might be enough reason to start the move towards Blockchain.

Humans and machines

It sounds like the perfect system, right? Well, there are downsides to the concept. As mentioned, every transaction needs consensus from participants, which requires both time and resources because of the back-and-forth communication. Also, the network of a blockchain grows at a very fast pace causing the need for increased amount of miners to validate the blocks. These miners need so-called supercomputers with strong CPU’s to handle this – and that entails a heavy energy consumption.

Most limitations, such as security flaws (like the 51 percent hack), to Blockchain can be solved, but in the end, it still all comes down to human performance. It can be a complex system to get to know, and education will be much needed, if venturing into the world of Blockchain.

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