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Blockchain & Why It Matters for Manufacturers

Blockchain & Why It Matters for Manufacturers

Surya Sharma  |  April 12, 2018

“Blockchain” is probably a term you’ve been hearing about a lot these days. In fact, you may have heard anything from how it’s the technology that will disrupt essentially any industry imaginable to how it’s a fraud and not worth your time. But just like anything that draws people into extreme ideologies that oppose or support it, the truth is somewhere in the middle.

As a software developer, I find blockchains pretty exciting because they introduce a paradigm that opens up new possibilities for the way we develop applications. But they are not a magic bullet solution that can be used anywhere.

Definition of Blockchain: What It Really Means

Blockchains can come off as a very intimidatingly complex technology to dive into, but the idea is actually fairly simple. Let’s say that we have a large amount of data to store, and we’d like to do it in a way that makes it:

Very hard to change

To start off, we could take the data that we have to store, and split it up into chunks of a predetermined size. We can call these chunks “blocks,” and they will serve as the foundation for the way that the data is stored. Next, we link (or chain) all of these blocks together, thereby forming a “blockchain.”

Now you might be wondering how this data is hard to change. The immutable nature of this data comes from the actual linking process. To link the blocks together, we generate a cryptographic hash of the data and use it to identify each block. Each subsequent block in the chain then holds the identifier of the previous block within it. If the data in the previous block changes, its hash changes, and the chain can be considered broken.

Decentralized

Decentralizing a technology means that we’re going to split it up over a network of computers, rather than on a single server entity. In the case of a blockchain, this process can be as simple as distributing the actual blockchain over the network and asking for consensus from the network before committing any new changes. As a result, everybody always has the exact same data in their blockchain over time.

Why decentralize? There are two big reasons decentralization is good for blockchains in particular.

  1. Firstly, if there’s no centralized server where your blockchain is stored, there isn’t a single point of failure that could be attacked to bring it down or manipulate it.
  2. Secondly, if a blockchain is stored on a network of computers, each computer in that network can be used as a form of checks and balances. In other words, it ensures nobody has gone through the incredibly hard process of manipulating the data, making it even harder to change than it already is by design.

More transparent

Transparency is a byproduct of decentralizing the blockchain. Since a network of computers is holding onto your data, that network of computers will also be able to see it. This might seem scary at first, but this has a really positive net effect on the data integrity of the system. If everyone on the network can see the data, they can protect it from bad actors or errors and ensure unprecedented data integrity. And when data is structured the right way, it’s almost impossible to discern any identifying information from it.

3 Ways Blockchain May Impact Manufacturers


So what does this mean for you as a manufacturer?

There are three primary ways it may impact you:

1. Cryptocurrencies

Cryptocurrencies are the biggest and currently most important use case of blockchain technology. These open, decentralized and immutable concepts have given us the ability to transact without the need for a trusted third-party entity, such as a bank. This has empowered customers in a whole new way.

As people continue to use cryptocurrencies over time, you as a manufacturer may start to see a demand to transact with them as well. These currencies are growing and offer their users a lot of variety and freedom. The sooner you’re set up in a position to accept them, the bigger your advantage will be.

2. Smart contracts

A smart contract is essentially a piece of logic (code/script) that is stored on the blockchain and then can be executed on the blockchain network when certain conditions are met. This can be used to self-enforce terms of a contract by using an algorithm, rather than the parties involved in the transactions. This has enormous benefits for businesses, such as being able to automatically release payment when the terms of a contract have been met or even being able to automatically create new contracts to procure new inventory based on current stock levels.

3. Supply chains

Since data on a blockchain is inherently immutable, transparent and secure, it is the perfect data implementation for supply chains. As a manufacturer, if all of your data about your equipment - all the way from origin to when it’s delivered to the end users - was stored on a blockchain, you’d have the peace of mind of knowing exactly where everything came from and where it went. You’d know that everything was ethically sourced from quality distributors and that it safely made it through each step of your supply chain to where it needed to be.

Each of these use cases is individually very exciting for the future of manufacturing, but the true innovation and revolution will come when you start to put all of these things together. With an ideal blockchain implementation for manufacturing, you’ll be able to create smart contracts to initiate any commercial action, pay anybody involved with the transaction in cryptocurrencies, and then track every action taken in every stage of the supply chain.

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Posted in: Blockchain, Data Management, Manufacturing

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