Because Beyco makes use of blockchain technology, we offer a series of blogs in which we explain more about what this technology actually entails. In the first blog, we gave an introduction to blockchain. We explained that blockchain is a system of recording information in such a way that makes it difficult or impossible to change, hack or cheat the system. We referred to blockchain as a giant spreadsheet such as Onedrive or Google Drive, in which we can enter and store information, which then gets updated and simultaneously shared with all participating parties.
Now that sounds great, but how exactly does this work? What are the mechanisms behind blockchain that create such a “giant spreadsheet”? And what makes that the technology is difficult or impossible to change or hack? In this second blog, we dive a bit deeper into the technical mechanisms of blockchain, to give you an idea of how it is considered a safe technology and why this is being appreciated.
So, to start off, where does the name blockchain actually come from? The name blockchain originates from its structure. Individual data inputs, called blocks, are linked together in a chain; the blockchain!
Blocks within the blockchain are the files where data is permanently recorded. The primary blockchain mechanism can be explained by analysing the three components of such a block. Each block contains data, a hash and a hash of the previous block. First, the data on the block involves for example transaction data or a signed contract. What sort of data is in a block varies according to the type of blockchain used. Generally, blockchain stores details about a transaction such as sender and receiver information, amount and time stamp. Second, a hash is developed based on this information present in the block. Hashing is the process of converting an input into a string of text of letters and numbers using a mathematical function. This might seem complicated, but think of the hash as a fingerprint! It is unique and identifies the block’s content. Third, the block contains the hash of the previous block. As the name already suggests, this means a block is connected to the previous block. This ultimately creates a chain of blocks. Hence, the name blockchain!
Hashes are extremely important to ensure data cannot simply be changed. Why? Because changing something inside a block will cause the complete hash of that specific block to change. Also, this new hash no longer coincides with the hash of the previous block! Changing a single hash would “break” the chain. In this way, the primary mechanism of blockchain protects itself against changes. In technology terms, this characteristic of blockchain is called immutability. Immutability literally means: “unable to be changed”. So, to change something in your data, or to add something new, you cannot change a block, but only add a new block to the existing chain!
Let’s look at this mechanism from the perspective of contracts on Beyco. On Beyco, users are able to find partners and sign coffee contracts. A contract that is signed between two parties gets recorded on the blockchain. This happens in the form of a new block. So, the data of this block is the contract with information about volume, price and other specifications of that coffee contract. The hash of this new block is created and linked to the other already existing blocks of the system. It is a safe idea that no one can later on change the document for its own benefit. So, because of this immutability mechanism, blockchain is considered secure and tamper-proof.
So, Beyco enables the recording of personal data and individual contracts between two parties. Details of such a contract are defined between both the buyer and seller. It is important to mention that individual parties record, own and manage their data. Beyco just facilitates the platform. Instead of one party recording all the information on the blockchain, every party, whether this is a producer organization, roaster or trader, is able to upload and manage their data. That is why every user is the owner of their own data!
In addition to hashing, there is also another mechanism that makes blockchain safe. This is called a consensus protocol. Basically, this means that when new data is added to the blockchain in the form of a new block, this block first needs to be approved.
Putting these two mechanisms together is what creates the immutability of blockchain technology. So, in short, changing the data of a specific block not only requires changing all the hashes but also redoing the consensus mechanism for that block and all the other blocks. Ultimately, these two mechanisms make recorded data on blockchain very difficult to change. [1]
Why is this immutability so important? It reduces fraud and generates trust. In supply chains, we often see paperwork being transferred from parties to other stakeholders, with sometimes fraud happening because of no control of no digital verification. Beyco on the other hand offers a safe space to trade coffee. This helps increase trust between trading parties. Besides these aspects, Beyco makes the coffee trade more efficient. Instead of sending paperwork from stakeholder to stakeholder, Beyco offers a platform in which all coffee supply chain stakeholders can connect and share data. With the option to make certain information transparent, with the reassurance that this data is immutable, collaboration between parties and visibility of data is made possible. This ensures an efficient and verifiable supply chain!
In the following blogs, we will describe the different existing forms of blockchain. We will dive deeper into public and private blockchains, what the differences are and how these are used. Further, we will describe what type of blockchain we use for our Beyco platform. Stay tuned!
