2016-10-27

Beauty of #blockchain – ugovor dorozhe deneg (contract is more important than money)

There is a Russian proverb “Ugovor dorozhe deneg” which means “Contractual agreement is more important than money”. Breaking a contract is a huge risk (reputational, financial, etc.) that is difficult to “pay back”. Also, having business with an unknown business party may be a high risk because of anti money laundering.

The key of doing business properly is a contract that is an agreement with specific terms between two or more business parties in which there is a commitment to do something in return for a valuable benefit known as consideration ( see “Digital-contract-as-a-process enables business in the digital world at http://improving-bpm-systems.blogspot.ch/2016/07/digital-contract-as-process-enables.html ).

Blockchain (as the best, so far, records storage) provides integrity and traceability (see “Beauty of #blockchain - doveryai, no proveryai (trust but verify)” http://improving-bpm-systems.blogspot.ch/2016/10/beauty-of-blockchain-doveryai-no.html ). This is a mandatory component of digital contracts as enablers of the safe digital economy, but not sufficient one. Let us see in a few following scenarios what is missing yet for the trustful sharing of data and documents in digital business transactions within digital contracts.

Variant 1 - P2P anonymous


As simple as giving a few coins to a poor person.


Variant 2 - P2P with zero-knowledge proof


Transaction participants may verify that their counterparts are a real and respectable person. In case of problems with a transaction, its participants can be reveal by court’s request.


Variant 3 – simple B2B


Some documents (e.g. offer, payments, certificates of digital assets, etc.) must be exchanged between participants. Thus they must be managed properly within each transaction by specialised “chains” as docs-chain and assets-chain. Their lifecycles are bounded by the relevant transaction. Actually, they are temporary secured storages that may use the blockchain for storing digital hashes of their content (see also “Electronic Health Records ( #EHR ) implementation with #blockchain, #BPM, #ECM and #platform” http://improving-bpm-systems.blogspot.ch/2016/07/electronic-health-records-ehr.html ).

Of course, the best contract is a digital one ( see again “Digital-contract-as-a-process enables business in the digital world at http://improving-bpm-systems.blogspot.ch/2016/07/digital-contract-as-process-enables.html ).



Variant 4 – B2B and partners


If the PartyB has a partner (PartnerB1) to produce PartyB’s goods then some documents from the PartnerB1 may be embedded (like a Russian doll) into the documents from the PartyB. In some cases, such documents may be anonymised.


Variant 5 – Supply Chain (SC)


As firms now rely on ecosystem partners for many of the functions once done in-house, one of their major organizational challenges is how to best manage their increasingly complex operations across a network of interconnected companies. Distributed operations can lead to increased risks, unanticipated consequences and new kinds of serious frictions. ( from http://blogs.wsj.com/cio/2016/10/14/blockchains-and-the-promise-of-more-frictionless-trusted-economies/ )

To be able to run comprehensive monitoring and, potentially, some global optimisation, all the partners, all related data and all related documents must be in one secured storage of records, ideally, blockchain-based.


Conclusion

By looking at those variants, it is prudent to say that blockchain is only one of many serious issues to be addressed and architecture together to enables the digital economy. Fortunately, the current hype around blockchain is accelerating the better understanding of many things to be done together and, I hope, in well architected way.





Thanks,
AS
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