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Blockchain and Smart Contracts in a Business Process

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Buying something through an internet portal, for example something as expensive as a car, normally involves two parties who don’t trust each other; a buyer and a seller. The portal is just a broker so either the buyer must transfer money before getting the ordered item, or the seller must send the item before getting the money. To overcome this lack of mutual trust, Bernd Rücker claims that a blockchain can be used.

Rücker, with more than 10 years’ experience working with long running processes and co-founder of Camunda, notes that traditionally this lack of trust is resolved by introducing an intermediary that can be trusted by both parties. The buyer transfers money for the bought item to the intermediary who delays transfer to the seller until the buyer has received the item. But this service is not for free; the intermediary charges a fixed fee or some percentage of the amount payed.

For Rücker, a blockchain can establish the same mutual trust by providing a database where all data is distributed to everyone involved and using cryptography to make it impossible to tamper with the data stored. Without a single party in control and with data protected, the data store can then be trusted by everyone.

Smart contract is a small software program that runs in a blockchain and is secured the same way the data is. Together with a cryptocurrency it is then possible to create a contract that locks a specific amount of money in a safe and trusted way. Technically a smart contract is a simple, public and trusted state machine that can be implemented quite easily. The execution of a contract has a cost, but it is much smaller than that of a typical intermediary.

Although it is possible to create an automated end-to-end process without mutual trust this way, Rücker notes that there are several obstacles that prevent blockchain and smart contracts from being commonly used:

  • You need other parties that do not trust each other, you cannot be alone.
  • Smart contracts work best together with cryptocurrencies, but they have a limited adoption.
  • Business processes must change radically which will take time.
  • All transactions are public to all participants, thus preventing all usage where privacy is demanded.

In a comment Alexander Samarin claims that the process described by Rücker can be simplified but Rücker argues that this is not correct.

In two presentations published at InfoQ, Laurence Kirk introduces blockchain and Ethereum, a framework Rücker refers to in his blog post, and Christopher Gilbert discusses blockchain and smart contracts.

In December 2017 Rücker wrote an article at InfoQ about Events, Flows and Long-Running Services: A Modern Approach to Workflow Automation.

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