You are here

Blockchain Business Scenarios: Machine to Machine

In the machine-to-machine scenario, the blockchain remains completely transparent to “human” business users, and it will be deployed to develop solutions tied to the Internet of Things. The IoT is the network of physical objects or "things" embedded with electronics, software, sensors, and network connectivity, which enable these objects to collect and exchange data.

The principle that the blockchain is the “enemy” of all intermediary business entails that the blockchain ensures a digitized and automated compliance checking process. Digitization hence extends from financial instruments and documents to the entire workflow of processes that generate, manage, exchange, and store these digital assets (i.e., blockchain tokens).

Digitizing a process workflow requires the digital integration of all trading parties’ enterprise resource planning systems with the core systems of the issuing and receiving banks. The process workflow also pervades document preparation, checking, and exchange. The secured trusted environment created by the blockchain protocol prepares for an end-to-end digital trade life cycle. Along the digitized workflow are event points that trigger decisions from the involved parties. For instance, a purchase order being issued may trigger the need for the buying party’s treasury system application to forecast a cash outflow to pay for the goods purchased; the supplier’s system will be triggered to plan for the necessary working capital to cover procurement, manufacturing, warehousing, and shipping of goods; the bank’s systems will be alerted to a possible request to finance the supplier’s working capital needs; freight forwarders will start booking cargo space in advance to get the best price conditions; and insurers will prepare to price shipping and credit insurance policies.

The blockchain creates a connectivity platform that supports an events-based workflow of digital assets exchange and controls the flows of information among all parties involved. The set of digital assets required in the workflow is predetermined based on the process, and corporate and banking systems use that information to decide what to share on the distributed ledger database.

In this machine-only scenario, the blockchain is the TCP/IP equivalent to automatically identify, direct, and manage digital assets between machines. It works best if it remains transparent to humans. For instance, blockchain-based applications can automate the exchange of invoices between machines that buy and sell digital goods (e.g., available energy, space on a truck, machine time, and spare parts). All of which represent the foundational elements of the IoT.

In the machine-to-machine scenario, the blockchain gets rid of human interaction and puts machines to work with each other. Paradoxically, the blockchain can work best when it removes intermediaries. In a human-to-human relationship, this is difficult to accomplish. Not between machines.

This is the final post in a series of four on blockchain's business scenarios. Previous posts explored bank-to-bankbank-to-corporation, and corporation-to-corporation scenarios.