Blockchain creates transparency in global business networks

There has been much attention and hype around blockchain in recent years. Some believe it’s the solution to all the world's problems, while others primarily know it from the original application to cryptocurrencies like Bitcoin.

Under the hype, blockchain is a technology for storing and exchanging information between multiple parties. What makes it interesting is its ability to reduce the need for third-parties who facilitate trust between two cooperating parties. Through transparency, conditional access and high security (in blockchain language called immutability), the intermediary is unnecessary. Instead, the two parties making a transaction can establish ‘trust’.

That, we believe, is one of the most interesting applications of blockchain. And one that’s especially useful for global business networks with many players.

What is a global business network?

One example is rice. Asia produces most of the world's rice before processing and shipping it to global markets. Before leaving Asia, exporters must complete many different papers for the port and customs authorities, and the freight company must know exactly what they’re doing. At destinations such as Europe, the rice must go through the same procedure. Then an importer takes control of the rice and sells it to a distributor. It’s resold to a chain of supermarkets that distributes it to stores before a consumer finally buys it.

The above process requires hundreds of pages of documentation for the various parties involved. It wouldn’t be a problem if there was a straightforward way to get an overview, but there isn’t.

The rice has been on a long journey, and when the consumer wants to know what chemicals might be in it, they must rely on the packaging. If the consumer gets sick from the rice and reports it to the supermarket, it’s almost impossible to find the origin of the rice and its production processes.

This example shows that the lack of transparency and traceability in a global business network puts all parties in a tough situation. As things are today, you must rely on the information you receive but have no chance of verifying it.

Blockchain applied to global business networks

By using blockchain in the global business network, all documentation would be digital and hosted in a shared database that acts as a single version of the truth that everyone can access. So, the supermarket could see where the rice is. And before the rice leaves the farmer in Asia, they can log the shipment in the blockchain so the information on the shipment is incorruptible. Throughout the rice’s journey, all stakeholders who touch the shipment will confirm and log their information in the blockchain.

The difference between using a traditional database and a blockchain is that blockchain has built-in trust. The trust comes from the fact that parties can only add data to existing data on the blockchain. Instead of overwriting data as in a regular database, you add an extra line. That means there will always be a history of changes. Additionally, depending on the type of blockchain, changes will need either a majority of the decision-making power or the agreement of two pre-authorised ‘administrators’.

Is blockchain relevant to your company's global business network?

The value of blockchain is, therefore, most prevalent in global business networks, although it has other uses.

Experience shows us that the biggest challenge in establishing a blockchain in a business network is not in the technical issues, but in getting everyone on board in a decentralised, distributed global network. It’s not a process that a company can operate alone. Several players will need to join forces and seek external advice to drive the process.