Using the Blockchain to Bridge Data Silos

Over the last 20 years the IT industry has invested huge effort in integrating the data silos inside the corporate boundaries. Standards for data exchange like XML and JSON and for web services like SOAP and REST has emerged and enjoy wide adaption, mainly to share information inside the corporate firewall using middle ware products like Enterprise Serial Bus, Mainframe Integration, Screen Scrapers and as such.

As a result, most large organizations now have some form of data sharing between their Mainframe applications, Windows applications and Web applications inside the boundaries of their corporate firewall.

However, when is comes to sharing data between organizations, not much progress has been made, if you look for example at the most common financial and logistical data shared between organizations like invoices, payments receipts and work orders, you’ll see that while in nearly 100% of the cases, these documents are produced by a computer system on the supplier side and entered into a computer system on the customer side, the transport itself of these documents, in nearly 100% of the cases, is still done using paper over snail mail or at best using insecure email attachment which, in most cases, is not digitally signed in any way. Even worse, in most cases these documents are keyed in manually on the receiving side in order to keep up with accounting and reporting requirements.

Let’s imagine how we can automate the process of invoice sharing. Assume for a moment that there is already an agreed upon standard data format for invoices that both the supplier accounting system and the customer accounting system supports.

The supplier financial system instead of printing an invoice, will expose the invoice as a link pointing to the data structure which represents the invoice in the standard format, then send the link to the customer accounting system, which would automatically download and enter it as a supplier invoice document.

Simple right? Problem is that in order to enable this process you need to perform mutual authentication. The supplier system needs to authenticate with the customer system in order to make sure it indeed sends the invoice link to its customer and not to a competitor. Similarly the customer system needs to authenticate with the supplier to make sure it is not being fed with some malicious invoice by an evil supplier.

In practice, getting such mutual authentication between many suppliers and many customers does not scale well. Getting even one customer and one supplier accounting systems to trust each other and interface seamlessly with each other is a time consuming task. Let alone scale this process to many customers and suppliers.

A better approach is to introduce some mitigation layer that both sides can trust. But if this mitigation layer is controlled by some central entity, customers and suppliers will need to trust this central entity which will in return require fees and control and collect information about its clientele.

What is needed is a trust-less decentralized ledger which is not owned by any specific party but is instead shared and controlled together by all participants. As always when 3rd party organizations that do not trust each other need to deal with each other, this provides a good use case for a public or private Blockchain.

In my next article I’ll discuss how a Blockchain based system for invoice sharing can be implemented using the Nxt and Ardor blockchain platforms.