Why Blockchain Technology and BPM Are Natural Partners
Blockchain technology is a type of virtual distributed ledger that copies all transactions to all computers in a distributed, peer-to-peer network. Blockchain data is contained in (as you may have guessed) “blocks,” which are distributed across multiple computers and cryptographically validated.
This means you don’t have or need a central storage point for data and don’t need a third party to perform validation. It has the potential to obviate the need for countless “middlemen” in the business world because the technology allows people who don’t know each other to have a trustworthy shared event record.
Blockchain Is Currently Most Associated with Financial Transactions
Blockchain is probably most associated in the public’s mind with Bitcoin, a virtual currency. Every blockchain user has three key elements: a public key to identify and verify the signers to a contract, a private key, which a user uses to sign a contract, and the signature itself.
Every block contains a cryptographic “hash” of everything that’s been in the chain before it, and every transaction is immediately time-stamped, so once someone has spent a Bitcoin, for example, they can’t go back and spend it again on something else. The financial industry is embracing blockchain technology because it can eliminate a lot of “back-office” functions that used to be required for validating transactions.
The IoT May End up Largely Powered by Blockchain
But it isn’t only finances that benefit from blockchain technology. Supply chain sensors, smart appliances, smart contracts, and the entire Internet of Things (IoT) can benefit too. Imagine a “smart grid” energy market where power generators and consumers exchange and transact energy without the need for large utility suppliers. Things that are currently illiquid (things you can’t trade) could become liquid, like unused mobile phone minutes or airline miles.
Smart contracts alone have the potential to revolutionize markets. Self-executing, self-enforcing contracts are programmed to stick to contract terms while minimizing the need for a trusted intermediary. They could significantly reduce fraud and the arbitration and enforcement costs that go along with it.
Algorithms Can Almost Always Be Improved
So, if blockchain technology has the potential for eliminating back office functions and even intermediaries, wouldn’t it also eliminate the need for business process management (BPM)? No. BPM software will have to evolve to work with blockchain technology and the IoT, and it could play a tremendous role in expanding use cases for blockchain technology and improving it. After all, “smart” contracts aren’t necessarily “perfect” contracts, and algorithms that can’t be improved are few and far between.
The BPM tool in the context of blockchain technology will likely do a lot of information gathering, like gathering data on when smart contracts generate exceptions. Once this data is aggregated and analyzed, it can be used to improve smart contracts and identify particular sets of circumstances in which exceptions are more likely to be issued. As a result, smart contracts can be modified to work as closely as possible to the way they’re envisioned.
BPM Can Oversee and Evaluate Blockchain Processes
Data gathered by BPM software from smart contract execution or from the behavior of objects connected to the IoT can inform future business decisions. For example, imagine people have stopped using one smart contract because a better smart contract has replaced it. A BPM tool can notify the appropriate people that this has occurred so they can re-evaluate whether the original smart contract should continue to be offered or can be scrapped.
If a smart object, like the Amazon Echo appliance, were monitored by a Business Process Automation tool, emerging trends in use patterns could be recognized, helping manufacturers and retailers modify their inventory levels based on buying habits and trends. Blockchain technology generates data that is automatically verified, and BPM software that makes use of this data can help a company outpace its competitors.
Blockchain technology and the IoT are both emerging technologies, so it remains to be seen exactly how they will interact with BPM software. But it only makes sense that BPM principles can be applied to processes carried out by smart objects and smart contracts just as they are applied to manual and automated processes today.
PerfectForms offers BPM workflow software that makes it easy to create, execute, and track business processes so that they can operate in an environment of continuous improvement. The uses to which PerfectForms can be put are nearly endless, and you can try it out for free by signing up for a free trial. PerfectForms is there to make sure technology works for you, and not the other way around.
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