Blockchain, a technology that has become synonymous with Bitcoin, has the potential to revolutionize many spaces and sectors apart from the world of finance. This article attempts to provide a glimpse into three important applications of blockchain apart from Bitcoin and the strides that a few companies like IBM and Hyperledger have taken in the respective areas through the use of smart contracts.
Let us begin with a brief introduction to blockchain and its benefits to better understand the applications.
Why Blockchain?
Before proceeding with the applications of blockchain in real-world scenarios, let us understand the benefits that blockchain offers. At it's most basic level, a blockchain can be defined as a distributed, decentralised, public immutable ledger.
That was quite a mouthful, so let's break down each keyword one by one. Blockchain is:
Decentralised - There is no centralised governance or authority which dictates the rules of what should and should not happen. Instead, the control is in the hands of the participants of the chain who come to a consensus regarding every decision.
Distributed - There is no central repository or database of transactions. Instead, every node participant in a blockchain maintains a common copy of the "ledger" or sequence of transactions that has transpired thus far. This makes blockchain completely transparent.
Immutable - The blocks that comprise each blockchain are designed to be recorded in a way that cannot be tampered with by an attacker. Each block carries a hash (encryption) of the address of the previous block in the chain, hence tampering the contents of the block will require tampering all the subsequent blocks in the chain which is nearly impossible.
Because of the above features, the blockchain is ideal to be used in situations where Trustless communication is required - where the parties involved in a transaction do not completely trust each other but need to communicate openly for the overall progress of the system.
Also the immutability aspect guarantees Non-repudiation of transaction, i.e no person or party involved can later deny having committed some transaction or request, as everything is recorded in a blockchain with due consensus from the blockchain participants.
With this rather long introduction, we proceed to the applications of blockchain.
Applications of Blockchain
Supply Chain Management
Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products.
The Need for Revolutionizing Supply Chain Management
Supply chain management across various sectors like Retail, Manufacturing, pharmaceutical and oil & gas companies, is fraught with challenges like tracing the goods from supplier to wholesaler to retailer, the logistics involved and the payments to be negotiated. What is desired is a seamless communication between the different stakeholders using a single version of the truth, to enable transparency in dealings and cut unnecessary costs and delays to improve efficiency.
The Solution
Blockchain sits perfectly as a solution to all these problems. Every "transaction" or step in the supply chain, whether it is a request for a particular item stock to the supplier by the retailer, the acceptance of the order by the supplier, the procurement of the necessary raw materials to fulfill the order, the processing of these raw materials into finished product, the logistics involved in the distribution of the requested stock and the final delivery to the retailer - all these operations can be efficiently recorded in the blockchain. Further , as every block is added after consensus from all parties and stored in a distributed immutable block available to all participants, it makes audit tracing and anomaly detection extremely simple. All the stakeholders involved have a clear idea of exactly what stage of the supply chain a product is actually in and this improves the speed of time required to market a product.
Figure 1 - Participants in a permissioned blockchain supply chain network writing to a common blockchain so all are able to view the updates as they happen (S1- Supplier 1, S2-Supplier 2, D- Distributor, R-Retailer)
Commercial Implementations
There are several successful commercially available blockchain implementations for supply chain management. IBM has a product called Food Trust which traces the ingredients of each product from the farm to the final store where it is available for consumption.
DID (Decentralised Identifiers)
We all have identifiers which uniquely identify us as individuals in a wide variety of contexts - like email addresses for communication, IDs such as driving licenses for proving our vehicle driving capabilities and so on.
The motivation for using digital identities
While these identifiers work for the most part, they are still issued by an external issuing authority which has complete control over the details that are required for issuing these identities, the verification process for issuing them and the duration for which they are deemed valid.
Further, each of these IDs are applicable in different contexts not in our control. Many of the IDs contain personal details which we may not be necessarily willing to divulge to everyone - For eg Passport has an individual's date of birth and address which may not be required when it is being furnished as an ID proof for say, renting a hotel room.
Above all, a physical identity can be compromised if a malicious third-party tries to replicate it fraudulently, through an attack known as Identity Theft.
The Solution
The W3 consortium has hence, come up with a standard for developing and maintaining digital identities called DIDs(Decentralised Identifiers). Each DID is expected to correspond to a unique URI (Uniform Resource Identifier) on the internet that resolves to a DID document. The document should conform to the syntax and architecture laid down by the W3.
A DID is a simple text string consisting of 3 parts 1) the did URI scheme identifier, 2) the identifier for the DID method, and 3) the DID method-specific identifier.
Figure 2 A simple example of a decentralized identifier (DID) (Source : W3 website for DID )
The example DID above resolves to a DID document. A DID document contains information associated with the DID such as :
The unique identifier of the
DID Subject- the entity being identifiedThe
DID Controller- the entity having the capability to modify the DID documentWays to cryptographically authenticate a DID controller.
EXAMPLE : A simple DID document
{
"@context": [
"https://www.w3.org/ns/did/v1",
"https://w3id.org/security/suites/ed25519-2020/v1"
]
"id": "did:example:123456789abcdefghi",
"authentication": [{
"id": "did:example:123456789abcdefghi#keys-1",
"type": "Ed25519VerificationKey2020",
"controller": "did:example:123456789abcdefghi",
"publicKeyMultibase": "zH3C2AVvLMv6gmMNam3uVAjZpfkcJCwDwnZn6z3wXmqPV"
}]
}
Under the DID architecture as described above, a DID controller can be the DID subject itself, which means the person being identified has full control over what and how much information is being shared. As the public key details of the controller are shared in the DID document, the authenticity can also be verified.
The following excerpt from the W3 document on DID neatly sums up the advantages that a DID offers over a traditional form of identification:
Since the generation and assertion of Decentralized Identifiers is entity-controlled, each entity can have as many DIDs as necessary to maintain their desired separation of identities, personas, and interactions. The use of these identifiers can be scoped appropriately to different contexts.
Commercial Implementations
A DID by definition lends itself perfectly to the concept of a decentralized ledger and hence is an ideal use-case for blockchain implementation. Hyperledger Indy and DIF Sidetree are examples of blockchain implementations of DIDs
Copyright Protection
A copyright is a collection of rights that automatically vest to someone who creates an original work of authorship like a literary work, song, movie or software. (Source - Copyright FAQs ).
It grants legal rights to the owner of the work to reproduce and monetize the work and at the same time prevent its misuse and replication by a third party. However, given the ambiguity involved in legally defining and attributing creative works among other factors, copyright protection has always been a sticky subject with artistes and creators often receiving the short end of the stick.
The issues with the existing system
1. Lack of reliable information on ownership: There are no rigid formalities in place regarding the identification of ownership of a piece of art. If we consider a song composition, there are different stakeholders who need to be credited for the composition like the song writer, the composer and the artiste(s) who perform the piece. The problem is further intensified for older works of art where there is no clear information regarding rights and credits.
2. Fragmentation of ownership: A copyright grants the right holder several exclusive rights with regard to the protected work, including, for example, the right to reproduce, distribute, or publicly perform the work. Continuing with the example of a musical piece, apart from the people listed above who are creators of the song, there are the sound recorders in the form of record labels, the distributors, the companies who manage the public performances and finally, the streaming platforms which stream the songs on personal devices - all of whom are vying for a share of the pie.
3. Lack of transparency in content usage and payments: In most cases, there is no track of how often the piece of art is used and how the revenue is calculated and apportioned. Thus, the artists have no means of verifying the calculation of the royalties that they are paid.
4. Piracy: Due to the fact that a digitally available piece of work can be easily replicated without loss of quality and made available for free, the original creators and studios stand to lose their share of revenue if the work is pirated.
The Solution
In order to overcome these challenges, blockchain can be used. A blockchain-based copyright register can (a) provide right holders and users with comprehensive and reliable ownership information, and allow right holders (b) to tokenize works and rights and (c) control the usage of works. As Blockchain offers an immutable single version of the truth, it can be leveraged to ensure the artistes are paid their dues based on how many times their work is being used, which can be tracked efficiently.
Further, smart contracts can be used to automatically trigger an action based on certain conditions. By using this functionality, an artist can grant rights to a person who wants to access the work of art for public exhibition or performance by accepting the user's digital signature. He can also collect royalties or payments based on the usage.
Commercial Implementations
As per the report of Practice Panther, “Today, there are several companies using blockchain technology to register and protect copyrights, including Binded, Pixsy, TinEye, Ascribe, Mediachain and Proof of Existence."
From the above applications, it is clear that the scope of blockchain far exceeds its current usage for Bitcoin currency. By leveraging the power of smart contracts, we can utilize the concept of blockchain for different use-cases to improve the quality and efficiency of the existing systems. With a slew of companies adopting and developing blockchain solutions, it is only a matter of time before it gains momentum in different areas requiring decentralized distributed transaction processing.
Sources:
COPYRIGHT UNCHAINED - A paper on the implications of blockchain usage for copyrights