Why Enterprise Developers Need to Understand Blockchain

By Mary Hall, Director, Blockchain Product Marketing and Mark Rakhmilevich, Senior Director, Blockchain Product Management

One of Oracle’s top 10 predictions for developers in 2019 is about the growth of Blockchain applications in regulated industries. Some examples of regulated industries are food and agriculture, pharmaceuticals, or finance and insurance.  For example, 2013 Drug Supply Chain Security Act (DSCSA) and related FDA rules for increasing drug supply chain security, require detailed tracking of drug production and distribution by pharmaceutical companies. And even if you are not in one of those industries, if your company is in auto, aerospace and defense, or high-tech manufacturing, it may be subject to US Dodd-Frank legislation, as well as new ethical stipulations from electronics industry groups the Electronic Industry Citizenship Coalition and the Global e-Sustainability Initiative that require disclosure of the use of conflict minerals, such as tantalum (used in mobile phone capacitors), tin, gold, and tungsten. Recently, ethical sourcing of cobalt, which is used in electric car batteries, has become a concern as well.

Blockchain for Regulated Industries and Sustainability

Beyond the formal regulations, companies in many other industries now have Sustainable Sourcing policies that require tracking and reporting on sustainability in their supply chain – and not just by immediate suppliers, but everyone down the line to raw materials providers.  In addition to Sustainable Sourcing, brand compliance policies may require verification that no child or prison labor was used in sourcing or producing the materials or goods for the brand.  

In our increasingly interconnected and interdependent society, these types of regulations aim to ensure visibility and transparency despite the complexity inherent in global trade.  If you are working on the applications that produce or consume the data related to provenance and compliance, you are inevitably going to find more and more of this data on a blockchain.  As a developer you need to understand why blockchain provides the single source of truth and how to access it.

To understand why these industries will experience a growth in the use of blockchain development, it is necessary to understand the benefits of blockchain. Blockchain is a system that maintains a distributed digital ledger, where transactions and data can be shared across the participants of an interconnected business ecosystem. When it comes to regulated industries, that type of secure, transparent data sharing, delivers some extremely important benefits.  With blockchain for sharing data, regulated industries can:

• Maintain a single source of truth of the relevant information, based on multi-party agreement for each update, achieved  through endorsements and consensus protocols
• Ensure non-repudiation and durability of the data, reducing fraud and risk
• Lower the cost of regulatory compliance by streamlining data collection and reporting, while avoiding discrepancies that require expensive, often manual, reconciliation

Why Blockchain is a unique fit for regulation & compliance

Why blockchain, and not a database?  Application developers can add some of the non-repudiation and tamper-proofing capabilities of blockchain (e.g., digital signatures, cryptographic hashes to link records) in an application on top of a database, but as a recent ComputerWorld article Blockchain vs. a database: What's the difference? makes clear, if data comes from multiple sources, maintaining single source of truth using a centralized database involves greater operational complexity, risk of deletion or compromise of the privileged accounts at the centralized organization maintaining the database despite best security efforts, and time delays inherent in data integration processes across organizational boundaries. 

For starters, there’s likely no single database that has all of the data necessary to track compliance along a large, global supply chain.  Each party has its own database, and while they may exchange some data in the form of EDI files or Excel spreadsheets, which are used to periodically update the database, there are inevitable delays and exceptions leading to discrepancies.  Risk of insider attacks or external attackers using compromised credentials cannot be ruled out.  Unlike a blockchain, updates to centralized database do not require multi-party consensus that guarantees consistency in a distributed ledger environment.

What about distributed databases?  There are cases when an organization may use a distributed database, but generally only for high availability or scalability, and usually with limited number of replicas.  Furthermore, distributed databases and data replication technologies do not usually cross enterprise boundaries.

Blockchain can deliver greater trust and transparency around data coming from third parties such as suppliers and shippers, and that trusted data updated in near real-time based on digitally signed transactions and multi-party consensus makes it more likely to create a distributed single source of truth necessary to demonstrate compliance with regulations or policies.  Built-in features of the blockchain coupled with simple APIs used to submit transactions, query the ledger, or subscribe to events (e.g., Oracle Blockchain Platform provides rich set of REST APIs) can simplify and accelerate meeting these compliance requirements.

Some of the unique differentiators of Blockchain technology that make regulation and compliance easier than the current database logging and tracking are:

Blockchain is self-auditing and fully traceable. Transactions logged to a permissioned blockchain are linked for easy traceability and automatically include all the related data about who initiated them and when, who endorsed the updates, and the relevant values before and after the transaction.

Blockchain is tamper-evident and resilient. If someone tries to tamper with the cryptographically-linked records, it will be apparent very quickly.  And with the records distributed across the multiple organizations, correct data can be recovered from other nodes even if some nodes get corrupted.

Blockchain ledger is a single source of truth. The only updates that make it on the blockchain, are those that:

• Successfully passed multi-party smart contract execution, where business logic can be applied and business rules verified
• Garnered the specified number of endorsements from the required organizations
• Got grouped in a block after consensus about transaction order has been reached, and
• Verified for consistency of their input values with the current world state by the peer nodes before transaction is committed.

As the result, the Blockchain can simplify quality assurance and tracking by making it possible to trust the shared business logic in the smart contracts, the underlying protocols that manage the updates to the distributed ledger, and ultimately the data in the ledger and its transaction history.

Blockchain Apps for Regulated Industries

Because Blockchain eases the work required by industries to ensure compliance with federal, state and sometimes International regulation, it follows that the demand for developers who can build “killer blockchain apps” will increase.  Here are a few sample apps that Blockchain developers should familiarize themselves with in 2019.

Finance Industry applications: Many applications using Blockchain are being developed to expedite cross-border payments.  These apps eliminate middlemen who are charging fees to transfer funds. With Blockchain, the middleman can be eliminated, fees can be reduced and transfers can move easily between parties regardless of what country the parties to the transaction are residing in.  Arab Jordan Investment Bank is using Oracle Blockchain Platform for cross-border transfers between its banking subsidiaries after getting approval from the Central Banks in multiple countries. Those approvals depended on showing that the new solution can still comply with KYC/AML requirements and all the other internal financial regulations.

Healthcare applications:  Within the healthcare industry, applications are rapidly being developed to share medical information.  Oracle Partner HealthSync has developed a Blockchain app which allows remote monitoring of patient vitals via IOT-enabled devices and sharing out-of-the-norm exception readings with the distributed healthcare team in real-time to enable better decision making and alert for dangerous situations. Patient consent and other HIPAA requirements had to be met as part of this pilot.

Pharmaceutical Industry Applications:  Counterfeit and impure drugs continue to enter the stream of commerce despite quality control measures such as prescription identification processes. With Blockchain, it’s possible to track drugs through the distribution chain and their journey conditions  to ensure their authenticity and safety. Oracle worked with NITI Aayog in India together with Apollo Hospitals and Strides Pharma Sciences to build and run a blockchain pilot tracking all the touch points in the complex distribution chain along with IOT location and temperature data, with regulator access to the data provided through blockchain.

Food Provenance Applications:  Food integrity and sustainability of the agricultural production are paramount concerns for consumers and grocery chains. With Blockchain applications, it’s possible to track food products from farm to table and throughout the stream of commerce.   Food recalls can be expedited with the ease of track and trace using Blockchain technology. Oracle customer Certified Origins is tracking Italian Extra Virgin Olive Oil from pressing and bottling to retail outlets, and Infosys used Oracle blockchain platform to create a solution for tracking palm oil from 1000s of small farms to pressing mills in Asia and awarding redeemable loyalty points for sustainable farming practices as part of the project sponsored by a global development institution.

Manufacturing Sourcing Applications: Ethical sourcing of raw materials is a big concern in many industries, but particulars of conflict minerals make this a pressing problem for electronics, automotive, and aviation manufacturers. Current methods involving signed paper documents, which are then used to create tracking spreadsheets are difficult to manage across a deep supply chain and are prone to human errors, risk of fraud, and costly verification procedures.  Using blockchain to track and link the records from mines, refineries, component makers, and OEMs who use the components containing conflict minerals provides a much more reliable foundation and significantly reduces compliance costs for all participants.  Oracle customer Circulor has been using blockchain to track tantalum from Rwandan mines to European refineries that turn the ore into rolls of thin film, and to component manufacturers, who make capacitors that are in growing demand in all sorts of electronics – from mobile phones to game consoles and computer motherboards.  Another emerging requirement is to track cobalt mined in Africa and used in electric car batteries all over the world.

For more examples of how Blockchain apps can help regulated industries and why developers need to be thinking of creative ways to use Blockchain to empower consumers and businesses visit Oracle’s customer page. Oracle is also trying to make it easier for companies in these industries to adopt blockchain.  In addition to the blockchain platform, Oracle has announced a Blockchain Applications Cloud, which will include business-ready applications, such as Intelligent Track & Trace, Lot Lineage and Provenance, Intelligent Cold Chain, and Warranty and Usage Tracking that are using blockchain platform inside the application, but do not require companies to provision blockchain instances, connect other members, deploy smart contracts, or integrate variety of data sources on their own.  Instead, business users can register their ecosystem partners and define data sources in Oracle ERP cloud, SCM cloud, IOT cloud, and other SaaS applications as needed.

Accessing Data on Blockchain

Blockchains come in a number of technological implementations, and each offers its own set of APIs and client SDKs.  Oracle's blockchain platform is based on and compliant with Hyperledger Fabric, a Linux Foundation open source project, which means that client applications can use open source Hyperledger Fabric client SDKs.  In addition Oracle provides a REST proxy that simplifies access to the blockchain ledger by providing identity mapping and RESTful APIs.  Oracle's documentation is a good starting place to learn about accessing blockchain data.

Additional Information

To learn more about Oracle's blockchain, please visit the  Oracle Blockchain Platform website.  For developer’s insights and useful articles, visit the Blockchain developer website.  Oracle’s main Blockchain site provides an overview of Oracle’s offerings, additional links for startups, customers, and partners, and is always updated with recent news and opinions.