Blockchain Technology in Banking and Supply Chain Management

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