Contracts, transaction and their record form the foundation of our economic, legal and political systems. They help protect assets and set boundaries of an organisation. They are critical to establishing the and verifying identities and chronicling events. They govern interactions among organisations, communities, and individuals. And, they guide managerial and social action. The digital transformation sweeping the world has meant that it has become impossible to keep a good track of the contracts, transactions and their records. Here is where blockchain comes in.
So, what is blockchain? The blockchain (or distributed ledger) is the technology that powers the digital currency bitcoin. It is an open, distributed ledger that can record transactions between two parties in an efficient and verifiable manner. One can imagine blockchain as a giant spreadsheet that runs on millions of computers. The blockchain is distributed, open source and everyone can see what is going on.
In the blockchain world contracts are embedded in the digital code. This code is stored in transparent, shared databases where they are protected from deletion, revision, and tampering. In this world, every agreement, every process and every transaction has a digital record and signature that can be identified, validated, stored, and shared. Futurists anticipate that the need for intermediaries like lawyers and bankers is likely to disappear. Transactions are likely to become frictionless.
There are many new uses for blockchain that are emerging almost every day. This new way of transacting could support business responsibility in many ways by supporting green supply chains, measuring water use, emissions management and supporting the sharing economy.
1. Green supply chains: Suppose a farm field is certified as organic. This certification enters the blockchain as a contract. When the produce is moved to another intermediary, the contract containing details of the produce is passed on to the intermediary. This link continues till the food item or a product manufactured out of it reaches the customer. The customer can have a complete record of all the ingredients in the product providing assurance that the product contains what it is supposed to.
Read more: Blockchains and responsible business