How will the digital economy revolutionize Supply Chain and Logistics? BLOCKCHAIN
Nowadays, the biggest buzz word when people talk about digital economy is BLOCKCHAIN. But what is Blockchain? What is the relationship between Bitcoin and Blockchain and what does it have to do with Supply Chain?
To be able to answer all these questions, we have to understand the basics of Blockchain and Bitcoin. In this series of articles we will get into more details on how blockchain works and how it is used in Supply Chain.
It all started with digital currencies. A person called Satoshi Nakamoto (whose identity remains shrouded in mystery) published his seminal white paper in October 2008. His paper presented a solution to the “double-spending” problem for digital currency. In so doing, he revealed the underlying technology known as blockchain and an example of blockchain’s possible applications in the form of a simple blockchain implementation called “Bitcoin”.
How does Blockchain works
Blockchain allows parties to that don’t know each other trust the integrity of the information sent and stored. Imagine one wants to retain and monitor changes to a file, for example a logfile. Further, imagine one wants to verify an unbroken history of all changes ever made to the file. How can one proceed? Blockchain cryptographs all changes made to the file, storing all transaction, or changes made to the file, in a cryptographed block of transactions. By storing the transactions in blocks, if one transaction is altered, the cryptographed “ID” of that block changes.
Blocks of transactions are appended using “IDs” – or hashes – of previous blocks as inputs into hashes of subsequent blocks. Any participant can quickly verify an unbroken chain of blocks (in the correct order).
Transaction blocks are logical units that wrap up a set of transactions in a specific order. While the implementation details are somewhat more subtle, for now, let’s think of this as the set of transactions that occurred during a time interval, in a specific order.
This set of blocks of transactions are called Blockchain: a ledger of transactions that record all information that was exchanged between two parties.
This architecture is used as the infrastructure for bitcoin: all bitcoin transactions are recorded in blocks, in an open Blockchain for bitcoin transactions.
On the next article we’ll get into more details where the blocks are stored and who records the transaction on the blocks.