Blockchain but Not Currency: Distributed Ledger Technology Is Innovation for Enterprises
There is no shortage of flashy headlines about blockchain, crypto, and web3 — these buzzwords have taken the media world by storm in past years as a multi-trillion-dollar industry has emerged out of what seems to be thin air. Everyone has heard of meme coins like Dogecoin and Shiba Inu, and even more have heard of the term NFT, or non-fungible-token, which is often in the form of digital artwork with attached scarcity and value. Most people know that blockchain is deeper than these internet trends and lucrative money-grabs, as it is framed as a serious technology that is the basis for creating decentralized, trustless, and non-custodial financial infrastructure. However, blockchain technology has even deeper implications; blockchains, at their core, are distributed ledgers, and this broad idea can be applied to many use cases. One main use is for enterprises and companies, which utilize the technology for various purposes ranging from supply chain management to fast payments. This utilization has been coined as “enterprise blockchain” and shows that blockchain technology has a serious impact outside of cryptocurrency.
Blockchain and DLT, Explained
Believe it or not, the idea of blockchain technology was not first conceived by Satoshi Nakamoto, the anonymous creator of Bitcoin. The blockchain idea was first proposed in 1991 in a research paper by Stuart Haber and W. Scott Stornetta titled How to time-stamp a digital document, in which they came up with a “cryptographically secured chain of blocks whereby no one could tamper with timestamps of documents” [3]. This data structure is a simple blockchain, yet the idea is revolutionary; the properties of tamper-proof, immutable, and decentralized data would go on to influence a cypherpunk future.
Most people don’t quite understand how blockchain works, let alone know what it is. A blockchain is a type of distributed ledger technology (DLT), which is basically a digital computer system for storing data. In layman’s terms, a distributed ledger is like a database stored by various different computers, or parties. Each party verifies that their copy of the database is the same as all of the other parties, which is called “reaching consensus”. A blockchain is a specific DLT in which the database is stored as a sequence of data blocks, each one cryptographically hashed and pointing to the next block in the sequence. Thus, parties storing the database can verify new blocks being added to the sequence, for example by hashing them with cryptographic algorithms — this style of consensus is precisely how Bitcoin works and what we call “mining”. Blockchains need not all have the same consensus mechanism, but they all are built out of a sequence of data blocks.
Going Private
Most well-known blockchains — e.g. Bitcoin, Ethereum, and Binance Chain– are permissionless and decentralized. Essentially, this means they are run by the public and for the public. Permissionless means anyone can become a validator (or “party” as we stated above) and anyone can participate in the network and add new data (or transactions) to blocks [1], while decentralized means that the consensus mechanism is dispersed among many different parties so that no individual party can take over to swing things in their favor.
While these are core principles for creating cryptocurrency, decentralized finance, and web3 blockchains, permissioned chains have their own use-cases as well. A permissioned chain is programmed to only allow certain parties to access, transact, add, validate, or enact consensus on data [1]. Most often, enterprises or corporations that use this type of technology employ permissioned, private DLTs and blockchains. This is because their intentions may be to simply verify data correctness among multiple trusted parties in a cryptographically sound, fast, and unhackable way. Let’s dive deeper into specifically what enterprises use these blockchains for.
Walmart on the Blockchain
The first notable example of blockchain in enterprises is DL Freight, a technology developed by Walmart Canada and DLT Labs with the purpose of making it easier for Walmart to communicate invoice and payment data with its 70 third-party freight carriers [4]. Walmart was experiencing severe discrepancies with the over two hundred data points included in every shipment invoice. It was especially costly for them to manually reconcile inaccurate data that had been misrecorded in the process of transporting between warehouses and different freight companies [4].
After collaboration with both DLT Labs and its freight carriers, Walmart Canada rolled out DL Freight, a blockchain built to track shipment data and invoices along every step of the way [4]. DL Freight is built upon a common distributed ledger technology called Hyperledger Fabric, which is an open-source enterprise blockchain infrastructure built by the Linux Foundation [2]. In DL Freight, data discrepancies and invoice disputes dropped over ninety percent due to the consensus-based nature of the blockchain — data is constantly being updated and validated as freight ships. Each freight company acts as a peer on the blockchain, with Walmart able to individually interact with every single one of them and make payments [4]. Completely governed by coded contracts, DL Freight is a completely trustless platform, meaning that every party involved in the blockchain needs not worry that the data is correctly validated — in this case, the freight carriers [2]. Trustless-ness is an essential component of blockchain, as one only needs to know that code is law, and no one can possibly break it.
DL Freight eliminated supply chain problems for Walmart, opening doors for many other corporations to follow suit. DLT Labs have now expanded upon this enterprise blockchain and offer it to more companies [4], even creating a whole platform of blockchain software purposed for supply chain management.
Volkswagen Integrating Electric Vehicles Into Energy Markets
Imagine your self-driving, electric car being connected to the blockchain. As futuristic as it sounds, enterprise blockchain is bringing that statement one step closer to being reality. With electric vehicle (EV) adoption reaching new highs, and poised to replace gas-powered vehicles, large companies like Volkswagen have raised worries that EV charging stations, power grids, and the overall energy markets will not be sufficient for the large influx of new EVs in the coming decade. This spurred Volkswagen Group Innovation to look for technical solutions that would incentivize drivers to charge at a certain time and place based on local power grid conditions [5]. After partnering with Energy Web, a company creating open-source technology for tracking zero-carbon energy markets, the group came up with a blockchain-based solution to do so.
Volkswagen and Energy Web are actively working on a blockchain to track the charging and energy history of every single electric vehicle that drives off the lot. Each EV made by Volkswagen and every charging station will be actively associated with a token identity on the blockchain, similar to a “digital passport” [5]. The Energy Web chain will reward cryptocurrency to drivers that avoid charging at places or times when the power grid congestion is high. The group is also trying to reward drivers for specifically charging their cars with renewable energy. Apart from this incentive scheme, storing EV and charging station data on blockchain comes with another benefit — all EV charging data is actively updated and quickly available at any time, a very useful thing for utility companies and power grid operators [5].
These characteristics could be beneficial at a global scale, as it makes it simple for electric vehicles to automatically integrate into foreign energy markets, for example in other countries. An EV in a foreign country could automatically begin following the rules, regulations, and monetary incentives of that country’s EV charging market simply by being a participant on the global blockchain [5]. Although Volkswagen and Energy Web are still in the process of building and testing the Energy Web chain, the idea’s scale and implications are significant enough to show just how impactful enterprise blockchains can be.
Blockchain Will be Everywhere
Cryptocurrency and Bitcoin are the buzzwords that immediately pop into our heads when we hear the word “blockchain”. However, after an explanation and a few examples of enterprise blockchains, it is clear that its influence runs deeper than that. At its core, a blockchain is simply a data structure, and living in the information age means that data is more important than ever. In any situations where decentralization, immutability, and cryptographic security are relevant, a blockchain is indubitably the best data solution. Thus, we will continue to see enterprise blockchains penetrate the operations of society, and often for the better. Blockchain is causing more efficient supply chains, incentivizing using renewable energy, and tracking important power grid data. The impact this can have on our day-to-day lives is larger than we think, going beyond Bitcoin and crypto headlines.
References
[1] 101 Blockchains, “Permissioned vs Permissionless Blockchains,” 101 Blockchains, 15-Aug-2022. [Online]. Available: https://101blockchains.com/permissioned-vs-permissionless-blockchains/. [Accessed: 22-Sep-2022].
[2] “Case Study: DLT Labs™ & Walmart Canada Transform Freight Invoice Management with Hyperledger Fabric,” Hyperledger Foundation. [Online]. Available: https://www.hyperledger.org/learn/publications/dltlabs-case-study. [Accessed: 22-Sep-2022].
[3] G. Iredale, “History of blockchain technology: A detailed guide,” 101 Blockchains, 15-Aug-2022. [Online]. Available: https://101blockchains.com/history-of-blockchain-timeline/. [Accessed: 22-Sep-2022].
[4] “How walmart Canada uses blockchain to solve supply-chain challenges,” Harvard Business Review, 05-Jan-2022. [Online]. Available: https://hbr.org/2022/01/how-walmart-canada-uses-blockchain-to-solve-supply-chain-challenges. [Accessed: 22-Sep-2022].
[5] R. Wolfson, “Volkswagen pilots blockchain to integrate electric vehicles with power grids,” Cointelegraph, 04-Mar-2021. [Online]. Available: https://cointelegraph.com/news/volkswagen-pilots-blockchain-to-integrate-electric-vehicles-with-power-grids. [Accessed: 22-Sep-2022].
[6] R. Wolfson, “Walmart Canada’s blockchain freight supply chain proving its value,” Cointelegraph, 09-Sep-2020. [Online]. Available: https://cointelegraph.com/news/walmart-canada-s-blockchain-freight-supply-chain-proving-its-value. [Accessed: 22-Sep-2022].
