Blockchain Technology in Banking and Supply Chain Management

This document discusses the usage of blockchain technology in banking and supply chain management industries. It includes a comparative analysis between the two industries and their blockchain activities. The paper assesses that blockchain in the banking sector is not widely accepted due to its complexity while blockchain is used by various organizations for managing the supply chain efficiently. It has been assessed that the blockchain technology is beneficial for both the banking and the supply chain industry.

Running head: BLOCKCHAIN TECHNOLOGY
Blockchain Technology
Name of the Student
Name of the University
Author Note

1BLOCKCHAIN TECHNOLOGY
Abstract – The main aim of this
document is to discuss about the
blockchain technology and its usage in
the banking and in the supply chain
management industry. In this paper a
comparative analysis has been
conducted between this two industries
that are involved in blockchain
activities. From the discussion it has
been assessed that blockchain in the
banking sector is not widely accepted
due to its complexity while blockchain is
used by various of organization for
managing the supply chain efficiently. It
has been assessed that the blockchain
technology is beneficial for both the
banking and the supply chain industry.
Keywords – Banking; Supply
Chain; Blockchain; Cryptography;
I. Introduction
The blockchain is considered as the
increasing list of records which is known
as the blocks and this blocks are linked
with each other using the cryptography [1].
To secure the data of blockchain
cryptographic hash is used in this case
where each block holds cryptographic hash
of its previous block. With the
cryptographic hash, this blocks also
contains a transaction data and a
timestamp. This design of the blockchain
makes it resistant to data modification. The
blockchain is a typical type of distributed
ledger which is able to record the
transaction between two parties in an
efficient way and this type of transaction is
transparent [2]. Though this transactions
are transparent it is not possible to tamper
the transactions which makes this
transaction verifiable in a permanent way.
Due to these properties of the
blockchain, this is used in several of cases.
Some examples where blockchain
technology is used are the supply chain
sector, banking sector and the healthcare
sector. In this report two sector of the
blockchain use cases will be discussed
which are the banking sector and the
supply chain sector. In this discussion also
this two blockchain will be compared on
various of aspects.
II. Analysis of Blockchain
Technology
In current situation blockchain
technology has become vital for various of
organizational sector. Such two sectors are
banking sector and supply chain sectors.
A. Purpose of using Blockchain
The main purpose of using this
technology in banking sector is securing
the transactions which is being made
between two or more parties. In the
banking sector this technology uses
decentralised ledger for verifying the
transaction information [3]. In the case of
supply chain the blockchain holds equal
importance as banking sector. In supply
chain there are also various of transaction
is made which needs the documentation
process for keeping track of the
transaction. This consumes huge amount
of time and delays the supply chain. Thus
implementing the blockchain will
efficiently track the transaction and will
greatly reduce the delivery time for the
supply chain.
B. Development Activity
The blockchain technology was
first announced in 2009 and from then this
technology has been evolved quite further
[4]. In the initial stages of its release this
technology was solely made for secure
transaction of Bitcoin but with the time
this technology is now used in various of
sectors. Currently it has been assessed that
banking sector is interested to implement
the blockchain technology for the
transaction process but this technology is
not widely accepted in the world. Thus,
though blockchain technology is matured
enough, this acceptance barrier is creating
problem in the implementation of
blockchain in baking sector. On the other
hand blockchain is currently in working

2BLOCKCHAIN TECHNOLOGY
phase for the supply chain management
[5]. For the supply chain blockchain has
improved the supply chain operation by
reducing errors, eliminating fraud
activities, avoiding product delays,
increasing the consumer trust and by
improving the management.
C. Innovative rules of Blockchain
The blockchain technology is
innovative and secure for both the banking
and the supply chain in the sense that it
uses decentralised approach of data
storage. Traditional data storing technique
in banking and supply chain uses the
centralised type of data storing technique
[6]. In the centralised type of data storing
technique the root of all data resides in a
single point. This type of database is
located, maintained and stored in a single
location. Thus it becomes more vulnerable
to attack as the attackers needs to hack
only a single point to get access of all data
in database. On the other hand, in
decentralised environment data does not
resides in a single point of control [7].
Thus absence of a single authority makes
this type of system more secure as the
attacker needs to hack multiple point of the
system to get access all of the data and
definitely this is not an easy task. Thus
decentralised environment of the
blockchain makes it effective for both
banking and supply chain sector. In the
banking sector blockchain is used as a
private blockchain where only the user can
see and track the transaction and it is
suitable for the banking transaction. In the
case of supply chain also private
blockchain is used as some specific parties
are involved in the transaction. This
technology provides real-time update
about the transaction and tracking and
product tracking features. Both banking
sector and the supply chain sector uses
closed source blockchain.
D. Economic Rules and Incentives
The main thing which incentives
users to use the blockchain technology is
the digital tokens. This digital token can be
used as specific type of currency or as a
reward from another type of organization
[8]. This actually makes the token more
versatile and attracts the customer more.
This economics of the blockchain
technology has helped both the banking
sector and the supply chain sector. While
the blockchain is used in two different
sectors or industries, the security of the
blockchain is not compromised at all for
both sectors. As per the economic rules,
security is comparatively same for both the
sectors as in both the cases cryptography is
used for the security purposes which uses a
combination of private keys and the public
keys. This mechanism makes the
blockchain transactions extremely safe.
Though this system is considered
one of the safest way of transaction the
banking sector and the supply sector can
face various of bad attacks on the network.
In the case of banking, malleability hacks
incentivises the bad actors as this hack can
change the hash of transaction and it is
done in a way that it does not become
invalid [9]. This is one major loophole
found in the blockchain technology. In the
case of supply chain, Sybil attack is
performed over the blockchain network.
This attack is used for creating fake
identities for taking over network
consensus which can create disturbance in
supply chain. For the transaction purpose
in the banking sector there a fee is
applicable but this fee depends on
transaction size and on condition of
network. Same fee is applicable for the
supply chain which are collected by the
miners for validating the transaction within
blockchain network.
E. Consensus
Within the blockchain network
nodes in the P2P network reach consensus
state by increasing robustness of the
network. This is same for both banking
sector and the supply chain sector as
blockchain is the core application for both
the sectors. In this case for achieving a
robust network environment decentralised

3BLOCKCHAIN TECHNOLOGY
nature helps in this case as the
decentralised type of network does not
hold a single point of network failure [10].
In this way consensus can be achieved
however, reaching consensus over a P2P
based network while maintaining the
decentralization nature is still a problem.
Thus for solving this challenge P2P
network based consensus algorithm is
proposed.
In the banking environment the
transaction is secured through the use of
cryptography. Here in the transaction
process each of the transaction is linked
with the previous record of transaction.
Also, the transition record is distributed
within the blockchain record which makes
every transaction almost tamper proof. As
in the banking sector private blockchain is
used the transaction is validated directly
between two parties involved in the
transaction and this transaction are ordered
by some trusted parties which mainly
forms a federation, thus no mining
structure is accepted in this case.
Here the supply chain is secured by
blockchain as this technology breaks down
vast information within various of entities
in a supply chain environment and in this
process privacy and the security is not
compromised which makes the supply
chain transaction secure. In this private
type of blockchain plays a huge role as it
provides private information and some
shared information which together creates
a shared model of governance [11]. The
validation process of supply chain
transaction is little bit longer. This
transition is based on a protocol
‘Chainpoint.’ This protocol provides two
things. In first case it provides an efficient
way of linking the transaction to a public
blockchain by allowing batch them. This is
an efficient way of validation as it allows
to verify a batch in a single process which
contains huge number of transaction. In
the second case this process verifies
existence and integrity of data without
depending on a trusted third party. Thus
this system actually leverages public
blockchain for validating transaction of
supply chain.
F. Market Capitalization
Considering the market
capitalization of both sectors of blockchain
banking and blockchain supply chain,
comparatively the supply chain is having
better market capitalization. Though the
baking industry is much bigger compared
to the supply chain industry market
capitalization of the blockchain banking is
significantly less as blockchain technology
in the banking sector is widely not
accepted. On the other hand, blockchain
has become an important part of supply
chain as through this technology many
organization is able to track the supply
chain in real time and also transaction
made in the various stages of the supply
chain can be easily tracked [12]. For this
reason various organizations are currently
using the blockchain technology for the
supply chain management. As this industry
is having practical implication and
services, this have better market
capitalization comparatively with the
blockchain banking.
G. Public Interest
Public interest of overall
blockchain technology is very much high
and there are various of examples of it.
How much the public is interested in
blockchain can be derived from this
examples and one of the prior example in
this case is the e-voting in Brazil using
blockchain technology. Publics are trusting
this technology very much in present cases
and for the supply chain management this
is also same. Public or the peoples are very
much interested in this technology as this
is providing various benefit to the overall
supply chain management. For the banking
sector this scenario is totally different.
Peoples are not interested in the
blockchain banking like the other sectors
of the blockchain. It has been assessed that
main reason behind publics are not
interested in the blockchain banking as

4BLOCKCHAIN TECHNOLOGY
inclusion of the blockchain in the banking
sector makes the transaction process
extremely difficult to understand for many
customers. Thus peoples within the
banking sector are not interested in the
blockchain technology as the supply chain.
H. Community
In the current scenario community
size of the blockchain is very high and
there are numerous number of support are
available. Large number of miners are
available in the market who helps in the
transaction validation process of the
blockchain. The community for the
blockchain banking and supply chain
management using blockchain is also very
much large. Considering the developers,
large number of developers are working to
improve the blockchain technology in the
banking and the supply chain sector. Also,
various of updates regarding the
blockchain makes the community power
more stronger for this blockchain
technologies.
I. Environmental Concerns
In the current situation the
environmental concern is very much high
regarding the blockchain technology.
Actually both the blockchain banking
sector and the supply chain management
sector is having some environmental
concerns as the whole process of running
the blockchain eats up a vast amount of
electrical energy [15]. The equipment that
are mandatory for running the blockchain
is very much powerful, thus takes a high
amount of energy. This is the main
environmental concern for both the
banking and the supply chain.
J. Social Consideration
In the social consideration the
blockchain technology provides various of
advantages for both the banking and the
supply chain. First of all the block chain
technology provides a very much low
amount fee to the society for making
transactions which is a big advantage.
Also, the blockchain technology is able to
provide a high amount of trust and security
for both banking and supply chain sector
as the fraudulent chances in this case is
very much low, which is another
advantage to the society. Finally this
technology provides an open and
transparent transaction to social and
community sector [16] which is one of the
major social consideration for both the
banking and the supply chain sector.
K. Disadvantages and Advantages:
One of the main disadvantage of
the blockchain technology in the banking
sector is the signature verification. Every
transaction need to be signed digitally
using the private-public cryptography
scheme [18]. Generating and verifying this
signature is very much complex which
bottleneck entire system. This is one of the
main disadvantages in banking and supply
chain management. Redundancy is another
issue in both the banking and supply chain
management. As blockchain uses a
decentralised type of database every nodes
in the database need to be processed
separately which requires a large amount
of computing power thus it needs huge
amount of power and it is a drawback for
the entire system.
This blockchain technology also
have some positive factors on the banking
and supply chain sector. The transaction
made through blockchain are consistent
and tampered free. The blockchain is also
transparent and immutable and this is
another advantage for the banking and
supply chain sector [18]. Faster transaction
is also achieved through this blockchain
technology with lower transaction cost.
L. Real time examples:
As the blockchain transaction is
very much complex in banking sector
many banking sector uses this technology
for digital identity verification [16].
Identity verification is very much
important for traditional digital transaction
also, thus blockchain is used in the
banking sector for authentication of

5BLOCKCHAIN TECHNOLOGY
financial transaction. ‘Tradle’ is one of the
most useful application based on
blockchain for digital identity verification
[17].
In the case of supply chain one of
the best real time example is
‘Blockverify.’ The Blockverify application
is totally focused on anti-counterfeit
solution by implementing blockchain [16]
for verification of diverted goods,
fraudulent transaction, stolen merchandise
and counterfeit products.
III. Conclusion
From the above discussion it ca be
concluded that the a brief and precise
comparison in between the usage of the
block chai terminology in the field of
banking and the usage of the block chain
in the field of the supply chain
management system. This comparison is
performed on the basis of the usability of
the technology of platform in both the
sectors. From the above discussion the
main aspect that can be taken into
consideration is that the implementation of
the blockchain has been effecting the
processing of the banking sector and the
Supply chain management sector in a
positive manner. This is the main reason
that the adaption of supply chain
management has been growing in a drastic
manner. With the implementation of the
block chain technology it is seen that the
efficiency in the functioning process of
both the sectors have increased and the
outputs that are received are more
desirable in nature. The sole issue that has
been founded the usage of the block chain
terminology is the usage of excess power
during its functional period. This usage of
excess electricity creates negative impact
on the terminology on the revenue that is
collected. This is one of the major reason
that the projection of the entire system loss
its credentials.
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