Overview

It can be difficult to implement a solution across several firms since you have to have faith in partner data. You use a central database most of the time. As the source of truth, data is kept in one place. As the primary authority on the data, the organization that manages the database needs to be trusted.

When you need to trust participants and data, blockchain technology enables you to implement a business process without the need for a central database.

Assume you work as a solutions architect for an ice cream manufacturing dairy processing company. To obtain raw dairy products from several dairies, you employ a supply chain. Your business delivers packaged ice cream to different stores. Problems with food safety and quality have arisen from incorrect temperature storage during shipping. The product must be sent and stored by several organizations, therefore it has been challenging to pinpoint the supply chain partner at fault. You want to design a system that can promptly detect problems in the supply chain. Every supply chain business desires to independently audit shipments in the event of a food safety recall and connect the solution with their current processes.

What is a blockchain?

Blockchain is a method for storing records and enforcing contracts that employs encryption to make it challenging to alter the past. By keeping track of modifications on a shared ledger, it enables participants to share workstreams.

In the case of the ice cream, how can we find out if there’s a problem with food safety or quality because of incorrect temperature storage during shipping? We must maintain a record of all modifications and track the offending party and temperature.

Using a centralized database makes sense.
To track shipments, we might make use of a central database that is accessible to all parties. A centralized database is the best option in many situations. Let’s say we have a centralized database where information about the shipment and the person currently in charge are kept. The farmer, shipper, factory, and merchant in our scenario may all access the same centralized database.

Diagram showing how a single, centralized database is used by a farm, factory, shipper, and shop.

One benefit of a centralized database is its ease of control over consistency and access. Everyone is utilizing the same database, and access is managed by a reliable authority. Every participant uses the same set of data because there is only one database. Every participant must have faith that the database is accurate, and thus, they must have faith that the database owner would not alter past data for any reason.

What happens if there is no reliable central authority in our scenario? What happens if no single business wants to handle hosting a centralized database? It’s possible that the requirements for system integration with every system involved cannot be fulfilled.

Distributed database
Imagine if every participant had access to a personal copy of the database? Multiple copies of a database are used in distributed databases, and updates are synchronized. The farmer, shipper, factory, and store in our example might each utilize a distributed database of their own.

Diagram showing a shipper, a shop, a farm, and a factory, each with a separate distributed database. The copies of the database are synchronized with each other.

Every participant has a copy of the database, which is an advantage of the distributed database. Controlling access and integrating your systems and processes is typically simpler when working with your own copy of a database. It is necessary to synchronize the modifications to every database, though. Data integrity problems and complexity can arise while handling errors and conflicts.

Distributed ledger
A distributed ledger is the term used to describe blockchain technology. A history of transactions is what the distributed ledger is, just like an accounting ledger. Every ledger transaction has an impact on the ultimate state.

Consortium networks are blockchain networks in which participants are dispersed. Every participant on the consortium network has visibility into every transaction that takes place on the network.

Diagram showing how a shop, factory, shipper, and farm use separate distributed ledgers. Every node in the network receives transactions.

Consensus rules are used by blockchain to guarantee data consistency between nodes. To help users trust the data, cryptography is also used. It specifically prohibits changing history for any one person or for a small group of participants. Solutions that can make use of a decentralized database function best because blockchain is decentralized. For example, because of expense, control, or the risk of becoming a single point of failure, you must support several businesses without a central authority.