Blockchain & Its Application in Marketing - Part 1

This is the first post in the series of two posts on Blockchain Technology. This post is intended to create an understanding about the Blockchain technology  and it will be followed by the second post which will talk about various applications of Blockchain in Marketing.

A distributed ledger, a peer to peer network and a decentralized network system. Blockchain has been called all of that, and rightly so. There have been numerous posts and articles written about blockchain and what it can possibly do in future in various fields. These articles however, have still left many in binds about the fundamental and the prospects of the technology.

In this post, we walk through this new technology elixir in a ridiculously simple way to understand its founding. This may hurt sentiments of some experts, but I believe, like the fundamental of Blockchain itself, the democratization of its concept should also be transparent and decentralized.

So what are some of the problems that the Blockchain technology has potential to solve? Let’s briefly look at those first. Mind you, Blockchain is a technology that at its core create, process, store and manage data efficiently (too simplistic). Hence, it will be fair to assume, that its application will help in problems related to data. So here are some of these problems –

•                Lack of data security, For eg. loss, theft and change in data
•                Lack in data transparency, For eg. invisibility of data and how its stored
•                Difficult real-time tracking of data For eg. real-time asset location and movement
•                Inability to locate the accurate and precise value chain movement of product
•                Data ownership and control over data by limited parties in a centralized manner

Systems like ERP, CRM, SalesForce and others have in some way tried to help but none were able to solve all of the above problems at a time.

Hence, it should be understood that anywhere and everywhere, the problems cited above are present, Blockchain technology will find its application. Period. So now, think of all those places where how the data is created, stored, shared and managed, causes problems or create loopholes and darkspots. Yes, Blockchain can be applied to all these areas to solve those problems.

How does Blockchain do this?

So imagine this scenario. You want to buy a diamond ring for your loved one. You are also concerned that the diamond you buy is not from a conflict zone which helps in funding local conflicts or wars or is extracted through violence in the area. You wonder, if there is a way to find out that the particular diamond is ‘guilt’ free? Broken supply chain tracking and data opaqueness makes it difficult for anyone to confirm the source and the journey of a diamond from the mine to the jeweler. The keywords again are real time data, data accuracy and opaqueness.

A small platform pilot, Tracer, created on blockchain technology for De Beers involving a handful of miners and manufacturers was able to precisely do that. The platform helped in creating a secure and indelible trail of selected diamonds(high valued 100 diamonds to be precise) from the mine cutter, to polisher and finally to the jeweler, hence creating a strong asset-traceability. (Source:Reuters)

Now imagine this scenario. A financial transaction is initiated by you that is recorded in your account detail. The account detail is stored with the bank with which you have the account. The ownership of the data and any authority over it remains with the bank at all the times. Essentially making the bank the owner of the data. In case of an incident of data manipulation, since the data is centralized at one place (bank’s server in this case) with a single owner (bank in this case) and there is no transparency over how and where the data is stored, a data fraud or manipulation will be difficult to detect and reverse. This exposes the customer and the data to manipulative practices which are difficult to pin point and even more difficult to correct.

With Blockchain technology, the ledger (the book that records transactions) is distributed. Which means the book is not owned and controlled by one party but multiple parties or systems. Due to this arrangement, an isolated manipulative change in the data on one system will not be accepted. This is because the entry with this fraudulent transaction on one system will not match with entries on other systems. Any legitimate change on the other hand, can be implemented only on consensus  mechanism. It means that if  a change needs to be implemented, it can only be done through consensus between all the parties on the network and not by a single controlling party (like a bank or a data hacker in the above case)

This means that with Blockchain technology as foundation, fraudulent practices can be reduced to minimum, thanks to its distributed–ledger, consensus based updating mechanism and decentralization. Clearly, Blockchain technology can be implemented at multiple places where data security, transparency and ownership is complicated but important for functioning.

So based on what we know about Blockchain technology now, a definition can be put together for the same –

A decentralized distributed ledger sitting upon a network of computers which are updated for every transaction that happens in the system through consensus mechanism. This creates an indelible trail of transactions which makes the system transparent, shared, secured and watertight.

Of course, like any new technology or invention, Blockchain has its own challenges which need to be addressed for it to be viable, relevant and scalable. We will look at these challenges in the next post when we discuss what could be the potential uses of Blockchain in Marketing. Not like a laundry list which is abundantly available on internet, but based on Blockchain’s applicability which we know now. For more details on how Blockchain works technically, please watch this video.