Blockchain, what is it? How is it working? Here is a practical Description of the Supply Chain
Blockchain, what is it?
With the advent of crypto giants such as Bitcoin, Ethereum, and others, blockchain technology has been a game-changer in the last few years. It is used to build various applications, and it is just one of them to construct cryptocurrencies. It utilizes cryptography, which produces a decentralized block network that houses and is accessible to the public with a copy of the blockchain ledger.
Blockchain technology is focused on cryptocurrencies like Bitcoin and others, with powerful encryption software that almost ensures that no one will ever be able to erase or change a block. The blockchain is also an emerging technology since Linkedin rated the blockchain as the top hard skills for 2020 and remains in the top 5 skills in 2021.
How does the blockchain function?
Blockchain may be a complex technology, but we’re going to bring the way it functions into a real spin. Consider the above picture; each person has certain qualities that are factual and, to a certain extent, immutable about them. People identify with a name, have natural hair color, eye color, birth date, and birthplace, are of a specific gender. You can narrow down a single person in the world dramatically by adding these attributes together. These are distinctive characteristics of a person (unless they choose to modify these attributes willfully)
. A blockchain is a chain of blocks that is very similar, except each block has its characteristics. Consider the distinctive and unchanging artifacts of a block below
Each of these attributes, such as the hash values and the index, is unique to these blocks and only defines these blocks. The combination of these characteristics adds to the originality of this block. But how is this block connected with the other leagues?
Each block begins with a hash value that is unique to that block for these blocks to connect. In conjunction with transaction data, nonce, and other specific data elements, the initial hash value for that block is used to calculate a hash for that particular package. Look above at Box 2. The soup from box one is used as the previous hash for TV 2. It uses the hash’s value and combines the transaction data (inventory movement, crypto sales, etc.), and generates a new hash for that block. This is how they bind the blockchains. When a blockchain calculates the unique hash value, to do this job, it must go through specific parameters. Bitcoin, for example, uses something called work proof, which simply uses a series of rules to ensure that the system does not generate new blocks at an unmanageable rate.
The law to be fulfilled in the above instance is that the hash needs to start with two 0s. It needs to contain this rule for a new soup to be legitimate. So, in this case, we use the nonce to add a variable that allows the algorithm to recalculate a unique hash value. In realistic cases, these nonce values, with far more complex laws, can exceed a million or even billions.
Please visit https://youtu.be/MyXndVDCIY88 to see a video with a python code tutorial and expand on how this works.
When someone attempts to tamper with a block, the hash values change, and the blockchain splits. Let’s see how it works here.
If the hash value of block two is somehow mutated from D7a1 to D7a3, the current hash value does not fit the previous hash value of box 3. It can attempt to measure the entire chain, but this is resource-intensive, and it would be challenging to keep up downstream at the speed at which new blocks are formed. This block is called broken because there are misalignments in the hash values.
If any of this is confusing, before you step on it, I urge you to reread it and watch the video. You must understand the basic principles behind what a blockchain is and how a blockchain works.
Example of Retail
Consider the above picture; a manufacturer is looking to sell pants and shirts through transport X company to retailer X. And object in the supply chain has its unique identifier when an intricate blockchain is set up (just like a person does, as illustrated above). This allows anyone to use the serial or some other identifier to track this object worldwide virtually. We can monitor the condition through the supply chain when these clothes travel if there were any damaged products, and where the damage occurred. For instance, when good hands change between the supplier and the transport company, both accept that the item is intended to do and free of harm. They both add their digital signature, and this trade across the chain is captured in its block. A similar transaction and block are generated later when the item changes hands between the transport company and the retailer. If the item is damaged, we know that it did not occur between the manufacturer and the transport company because both parties produced and signed the block.
There is also no way to go back and change the block since, as seen above, there is a distributed ledger. Each entity has a copy of the catalog, and at least 51 percent of the allocated blocks need to agree for a new partnership to be produced. So let’s say between transportation to the retailer, a shirt gets broken. How is this functioning?
This is where intelligent contracts theory comes into play, but that is an article in itself. However, the summarized version includes agreements between these groups about how money can flow in the case of all types of transactions (damages or no damages). It is also very unique about how these organizations set up these contracts. There was a problem with transportation to the retailer in this case. The item is then sent back to the manufacturer, and the manufacturer refunds the retailer immediately. Then the producer will be paid by the transport company (usually through insurance).
If the blockchain is to be leveraged by the entire supply chain, then the funds’ transfers are very automated. Each object also has a permanent record of where it was, how it was treated, any damage, etc. If we speak of responsible procurement, this is also becoming a thriving industry.
In the market, Blockchain has many other uses, only a few being the supply chain or cryptocurrencies. The application of this technology is still relatively new, and over the next few years, I believe there will be tremendous growth in this area.