What is Blockchain?
The generally accepted definition of a blockchain is a distributed ledger with smart contracts.
In business, whenever any object of value or important changes, it is captured in a transaction. Transactions therefore describe how a company's essential assets move through a lifecycle; for example, their movement between their suppliers and consumers in a supply chain.
Traditionally, transactions are recorded in a business ledger. Unfortunately, a transaction which involves multiple organizations will be recorded differently by each business. Business processes which would benefit from a consistent, up-to-date and high integrity ledger are adversely affected organizations with different ledgers and technology recording essentially the same transactions. For example, if two organizations disagree on the state of a transaction then a dispute occurs, which can often be costly and time-consuming to resolve. A shared ledger can also introduce new possibilities; real-time tracking and tracing of products becomes possible when all the participants in a supply chain have access to a trusted source of transactions.Blockchain transactions and ledgers are different. Blockchain introduces a new kind of transaction – a multiparty transaction - that is signed by everyone involved in the transaction. Blockchain ledgers are different too; the same ledger is replicated in every organization in the network, and kept synchronized using a process called consensus. Moreover, these ledgers are immutable and final; once a multi-party transaction is written to the ledger, it cannot be reversed.
Smart contracts
In business, transactions are generated according to contracts which define the exact conditions under which a transaction is generated. If I buy a car from you and it breaks down a month later, the terms of our contract might say that you are liable for the repair.
Blockchain introduces the idea of a smart contract. It describes in code what a transaction generated by the smart contract looks like. For example, a car contract might use logic to check that you're the current owner of the car, and that a purchaser has the required funds. If so, then a transaction will be generated that represents the transfer of the money to the seller and the car ownership to the buyer.
Blockchains such as Hyperledger Fabric make it easy to write smart contracts, by maintaining the current value of every business object in a ledger. It means that smart contracts don't need to compute the cumulative effect of the history of transactions that involve your car -- they simply look up the current state of that car, and modify it as required. Hyperledger Fabric makes it easy to capture these object changes as transactions and recorded on the distributed blockchain ledger.
Blockchain and Bitcoin
Blockchain is commonly associated with Bitcoin, the cryptocurrency and peer-to-peer payments system. Bitcoin uses a blockchain as the ledger to record its transactions and a resource-intensive method of consensus called proof of work. Bitcoin favors anonymity; even though the ledger is public, it's almost impossible to determine who is behind a Bitcoin transaction.
Businesses often have a different operating environment. For example, they are required to carry out Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, which require businesses to know who they are dealing with. This means that business blockchains require identifiable participants and favor features such as privacy and confidentiality. Knowing who's behind a transaction helps to remove incentives for fraud and as such, resource-intensive methods of consensus are not needed.
And of course, business ledgers also store more than cryptocurrency transactions; any object of value to a business could be subject to multi-party transactions, and will therefore also benefit from a business blockchain.
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