TECH TALK
UNDERSTANDING BLOCKCHAIN
Blockchain can be defined as a digital ledger in
which transactions between parties are recorded
and distributed across a single network. In other
words, blockchain is an encrypted, decentralised,
and distributed public digital platform, which
records transactions across many computers in a
network, so that it cannot be changed without the
alteration of all subsequent records, or without
the collusion of the majority of the network. Now,
how is this relevant to a business? The best way
to understand blockchain technology is to see
how it works in the real world.
Imagine the following scenario: a supplier
and manufacturer need to update their account
balances when they engage in any transaction—
goods, services, money, etc. To ensure that this
transaction is precise, secure, and trustworthy,
they rely on numerous go-betweens such as
banks, agents, regulators, compliance officers,
etc. This consumes a significant amount of their
time and money as it requires multiple people and
systems to ensure that banking and accounts
systems are coordinated and synchronised, while
also adhering to all required regulations.
In most cases, the most common third-party
are banks, which ensure that money is securely
passed between the parties with no trouble. For
example, a bank makes sure that a manufacturer
with only US$1,000 in funds does not promise
two suppliers US$1,000 each and run an
unwarranted debt or risk. In effect, banks prevent
double transaction on any single amount. But of
course, this service comes at a cost and this is
where blockchain has the potential to save billions
of bucks every year.
BLOCKCHAIN IS
AN ENCRYPTED,
DECENTRALISED, AND
DISTRIBUTED PUBLIC
DIGITAL PLATFORM.
BLOCKCHAIN AND MIDDLEMEN
The cost paid to middlemen who secure and
protect the interests of business entities is only a
part of the system. At the macro scale, it is the
government, which oversees regulations and
ensures a degree of compliance, either via audits
or the threat of penalties. The cost of all these
services piles up and is considered a normal
part of doing business. But with blockchain, the
reliance on third-parties or middlemen and the
associated costs is no longer an essential. The
entire network of parties shares a single virtual
‘ledger’, where all transactions are encrypted and
APPAREL
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December 2019
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