Blockchain in Retail

By Richard Halter

Danger, Danger

We’re about to enter the realm of the unknown – Blockchain

I have seen many explanations of blockchain.? Most like to skip the most complicated parts.? I’m hoping this post will help clear up the complexities associated with blockchain without getting into the nitty gritty details.

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Let’s start with some of the characteristics of Blockchain.

?? Permission - Blockchains can be permissioned or permissionless. With a permissioned blockchain, each participant has a unique identity, which enables the use of policies to constrain network participation and access to transaction details

With the ability to restrict access to transaction details, more transaction detail can be stored in the blockchain, and participants can specify the transaction information they’re willing to allow others to view

? Immutability: No participant can tamper with a transaction after it’s been recorded to the ledger. If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are then visible.

? Consensus: For a transaction to be valid, all participants must agree on its validity.

? Speed - Pure digitization of assets streamlines transfer of ownership, so transactions can be conducted at a speed more in line with the pace of doing business. For example, instead of the 7-10 days it typically takes to transfer money internationally, a transfer via blockchain can occur in just a few hours.

? Public or Private - blockchain can be completely open to the public and allow anyone to join, or it can be totally private, with only certain folks allowed access to the data, or allowed to send and receive payments.

You own your personal information. No more storing credit cards, medical records, or identification on a centralized database to prove your identity. Your information remains yours, private and secure These ties to permissions.

? Contract - A smart contract is an agreement or set of rules that govern a business transaction; it’s stored on the blockchain and is executed automatically as part of a transaction. It lets Participants know where the asset came from and how its ownership has changed over time.

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It all is about a Transaction.? What is a Transaction?? It is the thing recorded in Blockchain.? It can be tangible?— a house, a car, cash, land — or intangible like intellectual property, such as patents, copyrights, or branding.

Here are some other samples.

1. an instance of buying or selling something; a business deal:
2. the action of conducting business.
3. negotiation?or an exchange or interaction between people:
4. published reports of proceedings at the meetings of a learned society.
5. an input message to a computer system that must be dealt with as a single unit of work.

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?As seen, the Blockchain Transaction starts with the information being recorded.? You then add terms and conditions to be part of the “contract”.? Of course, you need to know when.? So, it needs a time stamp for when this transaction occurred.? Finally, a Block ID to make it easy to look up previous Blocks once time has gone by.

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Now that we have a Transaction, how is it recorded in Blockchain.? It is posted in a Ledger.? A Blockchain post is an open, public, and anonymous peer-to-peer, distributed Ledger.

There are two components to the Blockchain – the information (the ledger) and the storage.

The Ledger has two parts – the Transaction and the contract.

The Ledger can be used to securely store all kinds of information.?

Like financial data

Or medical information

Or production logs

Or etc.

Basically, any kind of Transaction.

The Ledger is then securely and immutably stored in storage called a Block

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Every Transaction occurring on the network – the Blockchain -- is tracked and recorded publicly, throughout the entire network. Anyone can, at any time, verify each and every Transaction. Trust is created by design and by default.

?The Ledger is shared among all participants in the network; through replication, each participant has a duplicate copy of the Ledger.

?Is permissioned, so participants see only those Transactions they’re authorized to view. Participants have identities that link them to Transactions, but they can choose the Transaction information that other participants are authorized to view.

It's decentralized. That's a fancy way of saying that there's no central hub where Transaction data is stored. Instead, servers and hard drives all over the world hold bits and pieces of these blocks of data.

Three purposes.

1.????? First, it ensures that no one party can gain control over cryptocurrency and Blockchain. Also, it keeps cybercriminals from being able to hold a digital currency "hostage" should they gain access to Transaction data.

2.????? Second, removing the middleman from the equation and working around the traditional banking system allows for smaller transaction fees.

3.????? Third, and maybe most important, Blockchain offers the potential to process Transactions considerably faster.

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Each block contains a Hash (a digital fingerprint or unique identifier), timestamped batches of recent valid Transactions, and the Hash of the previous block. The previous block Hash links the blocks together and prevents any block from being altered or a block being inserted between two existing blocks. In this way, each subsequent block strengthens the verification of the previous block and hence the entire Blockchain. The method renders the Blockchain tamper-evident, lending to the key attribute of immutability

How do we build a Blockchain?

1.?????????? First, a Transaction is created.

2.?????????? The previous block’s Hash is added to the current block.

3.?????????? Miners take the Hash of a Transaction, combine it with a Hash of another Transaction, and re-Hash that into a new smaller Hash. Combining Transactions in this way is known as a Merkle Tree.

4.?????????? A new Block Hash is created by the designated Miners - Miners within a Blockchain implementation must execute algorithms to evaluate and verify the history of the individual Blockchain block that is proposed. If a majority of the Miners come to a consensus that the history and signature is valid, the new block of Transactions is accepted into the Ledger and a new block is added to the chain of Transactions.

5.?????????? As new Transactions are added, new block Hashes are created and validated by the Miners

What is a Hash?? Hash is a mathematical function that converts an input of arbitrary length into an encrypted output of a fixed length.? For Blockchain, it is standardized to 64-character length. You can have transactions of different sizes and complexity, and they’d all get changed into a string of 64 characters. Whether it’s one word or a whole paragraph, any text could be standardized to a 64-character Hash.

It’s unique - The way the cryptographic algorithm works, changing even one character of the original text gives you a completely different output.

It’s deterministic - As long as, you enter the exact same original input, you will always get the same output. if you use such a function on the same data, its Hash will be identical

It works in only one way - This is called pre-image resistance. The output of a Hash is directly tied to the input, but it would be incredibly difficult to work backwards and figure out the input given only the output hashes cannot be used to "reverse-engineer.

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There are two primary ways that transactions on blockchain are validated: Proof-of-Work (PoW) and Proof-of-Stake (PoS).

A proof-of-Work system involves giving all the computers on the network a very difficult problem. The computers who choose to compete to solve this problem are called Miners. After each Miner compiles the current Block, they’ll begin the process of solving the difficult puzzle for that Block. The first computer on the network to solve the puzzle receives a prize, and the Block that computer compiled is accepted across the network as the new Block in the chain.

The prize for solving the puzzle is called a “block reward.”? For Bitcoin, a block reward is paid as a fraction of digital bitcoin.

Because of the sheer number and complexity of the problem, this solution uses lots of electricity.

Proof-of-Stake (PoS). Rather than using a ton of electricity in a competition to solve equations, the computer with the most coins gets to solve the problem.? The more coins you own of a virtual currency, the more likely you are to be chosen to validate Blocks and add to the Blockchain. After you submit the Block to the network for approval, someone else will get chosen to assemble the next Block. You won’t get to create a Block again for a period of time.

As for the rewards, the PoW method hands out Block rewards as virtual coins, the PoS model rewards its stakeholders with the transaction fees paid by the users of the Block that's being verified.?

Conclusion

We took a look at the characteristics of a Blockchain.? We then took a look at the various kinds of Transactions that can be recorded in a block.? A Transaction contains not only the information being stored but the terms and conditions pertaining to that Transaction, the timestamp and the unique Block ID. In the Blockchain, this Transaction along with its contract is recorded in a Ledger.? The Ledger is now distributed to all participants in the network.? The Miners then figure out and vote for a Hash for the Ledger.? The Hash along with the Hash from the previous block makes this immutable and makes the information difficult to change.

Now you are a Blockchain expert.

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To see more details check out this YouTube Video - Blockchain for Retail (youtube.com).

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To learn more about retail technology, check out my book "ARTS for Retail Using Technology to turn your consumers into customers and make a profit” (3 book series) Kindle Edition https://lnkd.in/g4SqtRB8. You get a MILLION dollars’ worth of knowledge from over 1500 subject matter experts for less than $25.

-??????I’ve created a whole set of YouTube videos https://www.youtube.com/user/richardthegeek/videos to show how to use this information.

-??????I’ve also created a School of Retail with courses:

?-- on the "Modern Retail Architecture" It is a 10 lesson self-paced course.

-- on "Unified Commerce" https://schoolofretail.thinkific.com/courses/unified-commerce..

--?on "Modern POS World" It is a 14 lesson self-paced course.

Reach out to me to learn how to get access to these courses.

-- My next one is under construction called "Standard Agile Retail Data Model - Who did what"

Richard Halter

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