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SAP and Blockchain

Blockchain has the potential to revolutionize how businesses operate.

What is blockchain technology? The simplest blockchain definition? A reliable, difficult-to-hack record of transactions – and of who owns what. Blockchain is based on distributed ledger technology, which securely records information across a peer-to-peer network. Although it was originally created for trading Bitcoin, blockchain’s potential reaches far beyond cryptocurrency. Blockchain ledgers can include land titles, loans, identities, logistics manifests – almost anything of value. The technology is still new, but the potential impact it can have on business is exciting, and immense.

What is distributed ledger technology? A distributed ledger is a database of transactions that is shared and synchronized across multiple computers and locations – without centralized control. Each party owns an identical copy of the record, which is automatically updated as soon as any additions are made.

How does blockchain work? A blockchain records data across a peer-to-peer network. Every participant can see the data and verify or reject it using consensus algorithms. Approved data is entered into the ledger as a collection of “blocks” and stored in a chronological “chain” that cannot be altered.

What are smart contracts? Smart contracts – self-executing agreements based on blockchain technology – automatically trigger actions or payments once conditions are met. In the near future, they will use real-time information, such as asset GPS data, to trigger an event, such as a transfer of ownership and funds.

4 types of blockchain networks

  • Consortium blockchains - In a consortium blockchain, the consensus process is controlled by a pre-selected group – a group of corporations, for example. The right to read the blockchain and submit transactions to it may be public or restricted to participants. Consortium blockchains are considered to be “permissioned blockchains” and are best suited for use in business.

  • Semi-private blockchains - Semi-private blockchains are run by a single company that grants access to any user who satisfies pre-established criteria. Although not truly decentralized, this type of permissioned blockchain is appealing for business-to-business use cases and government applications.

  • Private blockchains - Private blockchains are controlled by a single organization that determines who can read it, submit transactions to it, and participate in the consensus process. Since they are 100% centralized, private blockchains are useful as sandbox environments, but not for actual production.

  • Public blockchains - Anyone can read a public blockchain, send transactions to it, or participate in the consensus process. They are considered to be “permissionless.” Every transaction is public, and users can remain anonymous. Bitcoin and Ethereum are prominent examples of public blockchains.

Major Beneifts of Blockchain:

  • Fewer Intermediaries - Blockchain is a true peer-to-peer network that will reduce reliance on some types of third-party intermediaries – like banks, lawyers, and brokers.

  • Faster Processes - Blockchain can speed up process execution in multi-party scenarios – and allow for faster transactions that aren’t limited by office hours.

  • Transparency - Information in blockchains is viewable by all participants and cannot be altered. This will reduce risk and fraud, and create trust.

  • ROI - Distributed ledgers will provide quick ROI by helping businesses create leaner, more efficient, and more profitable processes.

  • Security - The distributed and encrypted nature of blockchain mean it will be difficult to hack. This shows promise for business and IoT security.

  • Automation - Blockchain is programmable – which will make it possible to automatically trigger actions, events, and payments once conditions are met.

SAP Leonardo and Blockchain

SAP views blockchain as a promising way to simplify complex multi-party processes and create trust among participants. SAP Leonardo, the digital innovation system, includes some early-stage blockchain capabilities, and integrates them with other breakthrough technologies – such as the IoT and machine learning.

  • Asset Management – In the case of mandatory audits performed by third-party service providers, blockchain technology can be implemented to track audits and ensure that obligations like regular maintenance are fulfilled.

  • Distributed Manufacturing – SAP Leonardo Blockchain helps manufacturing enterprises record events for parts and material production, such as when a design is released or when production parameters are defined. Blockchain stores CAD designs, documents, and other assets, tracing complex supply chains as a substitute to using a central database. Certification, registration, and verification are all managed in a distributed way.

  • Trusted Digital Credentials – The world is becoming more digital; however, digital copies of physical documents, such as government-issued IDs, professional credentials, and health records, can’t be trusted. Manual verification processes for these items tend to be slow. SAP Leonardo Blockchain delivers trusted credentials, guaranteeing the authenticity of digital documents while enabling individuals to be in control of their credentials.

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