What do IBM, Microsoft, Walmart, and JP Morgan have in common?
They are all companies investing heavily into blockchain technologies to improve business operations.
Once primarily associated with cryptocurrencies, blockchain technology has found other uses in other areas beyond peer-to-peer cash systems. In particular, large companies have found ways to modify blockchain technologies to fit their business objectives.
As corporate interest in blockchain continues to grow, it's important to understand the benefits of this new technology for businesses. This guide covers everything you need to know about enterprise blockchain and its applications.
Let's dive in!
Enterprise blockchain is a blockchain network designed for large companies and organizations. Enterprise blockchain networks retain benefits of blockchain technology, such as privacy, immutability, and decentralization, but tweak the underlying architecture to function in enterprise-level environments.
Since Bitcoin's introduction in 2008, experts have recognized the benefits of blockchain technology for streamlining business processes. However, the drawbacks of public blockchains like Bitcoin discouraged companies from using the technology.
For example, companies sending financial information may want to keep the data confidential. That would be impossible with a public chain, where every node can view records of data exchanged on the network.
In addition, companies process many transactions and need a system capable of handling spikes in transaction rates. Decentralized public blockchains require every node to confirm transactions, reducing transaction speed. A public blockchain like Bitcoin, which processes a meager 5-7 transactions per second, cannot work for a business processing hundreds, if not thousands, of transactions per second.
Enterprise blockchains solve the problems associated with traditional blockchain networks and modify them to satisfy the needs of big businesses. With enterprise blockchains, your firm can adopt distributed ledger technology (DLT) and enjoy privacy, scalability, and control.
Enterprise blockchains differ in the following areas:
The choice of an enterprise blockchain solution should reflect the needs of your business. Here is a brief overview of enterprise blockchain examples:
Private blockchains are closed networks open only to participants allowed by the central entity. Unlike a public blockchain, private blockchains rely on a central node to validate transactions.* This node may also determine who can contribute to the system and what data is acceptable.
As is common with centralized networks, private blockchains are susceptible to attacks. An attack on the central node will jeopardize the entire system.
The question of data reliability often comes up with permissioned blockchains. Since one participant determines the validity of data transactions, they can alter the blockchain for malicious purposes.
However, private blockchains have their benefits. With fewer parties on the network, transaction-verification speed increases, and scalability improves. Companies can transact safely on a private blockchain network without fearing public access to classified information.
Hybrid blockchain networks combine features of private and public chains. The result is a solution that addresses the problems inherent in the two blockchain systems while retaining their benefits.
In practice, a hybrid blockchain would allow companies to section off some parts while opening up the rest of the network.
Data integrity on a hybrid blockchain is higher since the owner cannot rewrite data without the approval of other nodes. Also, hybrid networks have better security, as consensus is distributed across all network nodes.
With their decentralized, peer-to-peer structure, consortium blockchains resemble public blockchains. No single entity controls the system, and every network participant holds a copy of the distributed ledger.
However, a consortium blockchain is still a private network. The difference here is that the collective decides who can join the network, not a central organization. Besides, all network participants must agree on the validity of data before it is recorded on-chain.
Consortium blockchains are often a collaborative effort between different businesses that want a trustless, secure, and efficient method of communication.
The blockchain-as-a-service sector has the potential to revolutionize entire industries. Here are some benefits of adopting enterprise blockchain solutions:
Instead of storing information in vulnerable data silos, they can record it on-chain for better security. Hacking a blockchain network to steal the data stored on it would require comprising the majority of the nodes, an awfully expensive task.
Additionally, data added to the blockchain's ledger is tamper-proof due to the use of cryptography to encrypt information. Blockchains store information in blocks linked to create a chain (hence, the name "blockchain"). Each block contains a unique 256-character value called a hash and a "pointer.”
The pointer references the previous block's hash, and changing the hash generates a new pointer. As a result, any attempt at changing data inputs would be automatically detected, and the responsible party identified.
Enterprise blockchains provide transparency, a key ingredient of successful business relationships. Even in a private network, participants can see all transactions conducted on-chain. More importantly, the data is impervious to manipulation.
Blockchain networks allow companies to communicate directly without relying on third-party services. As CEO of R3, a blockchain-as-a-service provider, describes it, “enterprise blockchain is like e-mail, but for machines.”
Imagine company X needs to send a huge amount to company Y across international boundaries. With the current international banking system, it may take days to complete the transaction. The same transaction, processed with blockchain technology, would cost a fraction of the time.
SAP combined with ATB Financial to send a payment from Alberta, Canada, to Reisebank in Germany using the Ripple blockchain network. On average, such cross-border payments often take 2-6 business days to process. However, Ripple's frictionless network completed the transaction in just 20 seconds.
When deployed properly, enterprise blockchain technology can save companies millions of dollars. For instance, businesses wouldn't need to invest so much in data management and security, given the secure nature of blockchains.
Another area where companies can save money with blockchain technology is customer identity verification. Per statistics, businesses spend millions on Know Your Customer (KYC) processes.
A blockchain-powered ID system would remove the need for customers to submit the same information to complete KYC processes at different organizations. Instead, customers can record the information on the blockchain, where it's visible to all.
An interbank KYC system would ensure customers only have to upload relevant details once and don't need to go through the same process with each bank they want to register for.
From Walmart to De Beers, businesses are using enterprise blockchain to improve supply chain management. This technology can increase supply chain visibility and transparency and ease the tracking of defective products. Moreover, customers can trust the information about products since each party in the network verifies it.
Enterprise blockchain, aka Blockchain-as-a-service (BaaS), is a nascent industry, so service providers are few. However, the field is projected to grow following strong corporate investment in blockchain technology. Below are some of the best enterprise blockchain companies to consider:
Hyperledger is a product of the Linux Foundation and has a dominant share of the BaaS market. The company focuses on providing industry-grade tools for enterprises to deploy applications on the blockchain.
Many prominent companies use Hyperledger's DLT technology, including Intel and SAP Ariba. IBM uses Hyperledger Fabric, one of the company's products, as the basis of its BaaS offering IBM Hyperledger Fabric.
Created by enterprise software firm R3, Corda provides the benefits of distributed ledger technology (DLT) while programming in enterprise-specific features, such as privacy and scalability.
Corda has carved a niche for itself in the market, especially in the financial services market. Users include banking giants HSBC and Bank of America. With its growing profile, Corda may well be among the biggest enterprise blockchain companies in a few years.
While Ethereum is a public blockchain, its value for enterprises lies in its programmability. Ethereum allows developers to create smart contracts and decentralized applications (dApps), which are useful for businesses.
Beyond dApps, the Ethereum network facilitates the creation and exchange of non-fungible tokens (NFTs)—tokenized assets stored and exchanged on the blockchain. Coca-cola, Taco Bell, and Nike are some of the big companies using NFTs.
The Enterprise Ethereum Alliance (EEA) is a 250-member nonprofit dedicated to advancing research on enterprise use-cases for the Ethereum blockchain network. Notable members include Walmart, JP Morgan, Samsung, and Cisco.
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