What is Blockchain? and Why Blockchain?

Sources :  IBM RedBook: "Developing a Blockchain Business Network with Hyperledger Composer using the IBM Blockchain Platform Starter Plan."

Overview

Blockchain has emerged as a disruptive technology for trading assets and sharing information. 

It has the capability to transform many industries, professions, and aspects of life. 

1.1 Why blockchain?

Ledgers are at the core of every business. 

Ledgers store the flow of assets, such as payments to suppliers, taxes owed, and goods delivered, current balances, revenue, relationships, and assets. 

For centuries, these records were stone, clay, or paper-based. However, these records were among the first systems to be automated and moved to computing systems. 

Even with the digitization of ledgers, many transaction-related tasks remain manual and outdated. 

• Each shipping container moved by freight requires a stack of paperwork that adds significant processing time. 
• Each time that you open a new bank account or visit a new doctor, you must share personal information using redundant and insecure forms. 
• The transfer of financial assets between parties often takes days to settle. 

If ledgers, financial records, personal records, and inventory have been digitized, why do these inefficiencies remain? 

The reason is that the move to digitization has generally only occurred within an organization, rather than between organizations. 

In addition, the systems that were created often cannot communicate with each other. 

The result is that modern business-to-business processes carry on with inefficiencies that date from when ledgers were on paper.

1.2 What is blockchain?

Blockchains are distributed ledgers that allow multiple parties to access and update a single version of a ledger while maintaining shared control. 

A business network describes any group of organizations or individuals that connect with a desire to transfer or share assets. 

Those assets can be tangible, such as food or manufactured goods, or digital, such as music or data. By tracking items using a common, shared ledger that is distributed across the business network, assets can be transferred between members, with each member having a record of the transaction and access to the latest version of the ledger. 

Blockchains establish trust across a business network through the combination of a distributed ledger, smart contracts, and consensus. 

The ledger contains the current state of assets and the history of all transactions. 

Transactions can only be added to the ledger, not removed. Past transactions are protected with cryptography so that they cannot be successfully tampered with. 

The blockchain also makes changes to the ledger final and immutable, allowing the ledger to be the source of truth within the network. 

The strongest use cases for blockchain involve business networks, which add additional trust through the benefits of immutability, provenance, consensus, and finality. 

• Immutability means that the historical record of transactions cannot be altered. 
• Provenance means that the origin of any assets contained in the ledger is known. 
• Changes to the ledger require approval by participants according to an agreed upon endorsement policy. This goal is achieved through consensus, in which participants of the network endorse that the transaction is valid and come to agreement on the updated state of the ledger. 
• Finality provides ease of mind because each participant is assured that their copy of the ledger matches all other copies, and that transactions contained in the blockchain have been committed faithfully. 

A smart contract is an application that contains business logic. Smart contracts define all access to the ledger and are invoked by participants to query or update values of assets.