UNDERSTANDING BLOCKCHAIN PART 1: Blockchain is neither a Block nor a Chain…discuss
By Kirk White, Yusen Logistics
There’s been much buzz about the nascent technological buzz-wonder known as Blockchain. To hear folks talk, it’s either the salvation of humankind OR the seeds of our destruction. It’s going to revolutionize the way we secure and transfer data by being completely HACKPROOF which is something we desperately need in today’s modern society where it seems like each new day brings a fresh disaster of somebody clicking the wrong link and suddenly the entire corporate machine is quarantined…a big metaphorical bug tent covering the entire operation for the foreseeable future…OR it’s going to insidiously infiltrate our daily lives with malicious dark web Day of the Triffid-esque whip stingers (look it up) that will poison us all and steal our kids’ college funds and birthday card money. It’s either the safest thing ever OR the most dangerous thing ever.
So what gives?
As a certain 90’s comedian might say: “what is the deal…with Blockchain?” (you did the voice in your head, didn’t you?)
We can start by simply answering: What IS Blockchain? And before we do that, let’s answer what is NOT Blockchain because a lot of the skepticism and fear surrounding the concept stems from a common misconception that can be dismissed now:
BLOCKCHAIN IS NOT BITCOIN
Cryptocurrency is complex enough to deserve its own article (let me know if you want this article in the comments below) and, like Blockchain, it’s maliciousness or benevolence largely hinges on your own personal experience with the mania. You may see it as a ponzi scheme bubble that is going to leave a bunch of people high and dry or you may see it as a safe anonymous way to pay for things without a centralized banking platform and the requisite fees therein or you may have used it to buy a Sherman Tank on the deep web and in that case, nothing to see here, folks…
However you feel about it, Cryptocurrency (Bitcoin and the rest) is an application. Blockchain is the system upon which the application runs. So, we can debate the integrity of Bitcoin until the digital cows come home but let us not throw the digital baby out with the proverbial digital bathwater.
Blockchain has much potential value beyond anonymous untraceable asset exchange.
We’re not there yet. That must be said. Everything we are talking about in this series is FUTURE WORLD stuff. Even though there is much buzz about the concept of using Blockchain for supply chain applications, a real practical implementation is nowhere near ready. But make no mistake, it IS in the pipeline and somebody is going (to get super rich when they) crack it.
SO WHAT IS BLOCKCHAIN?
The twenty-five cent answer to a five dollar question is this: Blockchain is an immutable universal shared common ledger for business transactions involving asset exchange built upon a peer to peer network…okay that was not really a twenty-five cent answer but do an internet search of “what is blockchain”, that is pretty much in line with the responses you’ll find, right above “Snake-Oil”. And once again, there is the rub: as it’s new and for the most part, people are reticent towards change, there is theoretical pushback as strong as the potential. And this article is NOT a sales pitch. The verdict has not been rendered as to Blockchain. But, again, people are working on it, not just as a means of potential improvements in data efficiency and validity, but also as a bona fide revenue generating value added service…but this is cart before horse.
So what IS Blockchain? Well, since you were so patient:
Blockchain is a big spreadsheet.
Blockchain is a big MAGIC spreadsheet.
Blockchain is a big public MAGIC spreadsheet.
Blockchain is a big safe public MAGIC spreadsheet.
And we could get more complicated (ie. Computer stuff) but that is Blockchain in a nutshell.
Think about your job; your paycheck. Let’s assume, for the sake of universality, that you work for a company, use some form of time card (either electronic or punch version) and are paid a weekly or bi-weekly check (either direct deposit or physical) by a payroll company and not by your boss whipping out her checkbook and writing a personal check (but even if that is your case, this will still work).
So, for a moment, think about the components involved in your getting paid. First, you have to do the work, ‘natch. But beyond that, you have a timesheet (DATA) that is stored on your company’s platform (LEDGER1) you enter your time into or have it entered automatically if you are salaried. At the end of the pay period, this data is sent to a payroll company and used to process payment (LEDGER2) and that payment information (DATA) is sent to a bank (LEDGER3) to have funds distributed. The bank sends funds (TECHNICALLY STILL DATA) electronically to the state (LEDGER4) and federal (LEDGER5) governments to satisfy withhold requirements and then the rest is sent to your bank (LEDGER6) and then you may or may not take that deposit info and enter it into your personal budgeting software (LEDGER7) or even hand write into an actual ledger (ALSO LEDGER7). So, the simple act of your getting paid for doing your job actually involves five to seven completely separate data repositories.
Let that sink in. five to seven SEPARATE spreadsheets that hold basically same info for your labor to wage ratio that work to get you paid, and isn’t it great that there has never any time where something goes wrong and one of those databases ended up with the wrong information? Isn’t it wonderful that, in the history of the known world, NEVER has the wrong amount been transferred?
Sarcasm aside, five to seven separate databases, means five to seven opportunities for something to go wrong. Data can get corrupted. There are viruses, phishing, system glitches, upgrades that cause delays and let us not forget, good ol’ fashioned fraud.
But what if there was only ONE DATABASE. A central repository for all the users: your labor (you), your pay rate (your company), your taxes and withholding (the government), your bank account number for deposit (your bank), and everything goes into this ONE DATABASE, a “big magic spreadsheet”, if you will and each person is, through business logic and crypto keys (computer stuff), only allowed to interact with their specific applicable data. For example, YOU could see all data, but your company can only transmit your pay rate and withhold info and would have no access to your deposit information or bank balances. The payroll company can only transfer into your bank, but couldn’t see your balance.
And instead of five to seven separate repositories of that data, there is ONE common ledger and the ONE common ledger is not centrally located in a building somewhere where someone could hack the data. It’s, through MAGIC (okay, more computer stuff), broken into components (think Mike TeeVee in Willy Wonka) and distributed across multiple peer servers in encrypted data BLOCKS and each block is linked (CHAINED) to the next with a specific key that replicates as new BLOCKS are CHAINED and so on and so forth and it’s impossible to hack because even if you could grab the data from one block, it’s not complete and without the entire chain code, the information is unrecognizable. (It gets more complex and, if you are interested, please leave a comment below and we can co a full unit on the HOW BLOCK CHAIN WORKS technical specs.)
This is how blockchain works, or COULD work; remember this is all in development at this point. But hopefully you can see the potential. Lots of other people can and do.
Next time, we will delve into the practical (potential) supply chain applications of blockchain, including vendor compliance and regulatory uses. The pharmaceutical industry is already working on this in earnest.
Until then, if you would like to know more technical aspects of the blockchain process (HOW the blockchain connects and all the “computer stuff” bells and whistles), please leave a comment below and I’ll address in a future article.
Kirk White is a corporate creative and a supply chain futurist. He has worked in every division of Yusen Logistics. After a brief stint in Transportation, he transferred to Corporate, where he coordinated Yusen’s Employee Empowered Kaizen system and served as a Specialist for the Business Process Re-engineering group, after which he moved to the Warehouse division to serve as the East Coast Quality Manger before ultimately joining the International division, where he hopes to use his Quality knowledge base to prove an asset to OCM.