We live in an age that is fueled by data. Every query, every click, every digital interaction is captured, recorded, and stored for analysis to improve customer experiences, targeted marketing campaigns, business process optimization, and strategy projections. The sheer volume of data that is generated every day is mind blowing. According to Forbes, over 2.5 quintillion bytes of data are generated each day, and 90% of the data that currently exists in the world was generated in the last two years. Enterprises have invested heavily in data protocols and physical devices to capture all kinds of attributes- location, movement, buying patterns, entertainment preferences, and health data. Most of this data is sifted, collated, arranged into common formats, and subjected to thorough hygiene processes for ingestion into AI/ML engines to make accurate insights and predictions for a whole host of uses. Oftentimes, this collected data is packaged and sold to other enterprises for industry insights at the macro level. This multiparty environment makes data sharing especially attractive for enterprises that want to collaborate, but must maintain their competitive positions or privacy compliance. In fact, Gartner has found that organizations that share data with external partners outperform their competitors who don’t by a 3 to 1 margin.
Today’s supply chains and business networks are growing larger, more dynamic, and more interconnected. Often involving large numbers of participants with varying levels of technical sophistication, these multiparty environments can be difficult to manage, especially in environments of continuous change. Enterprises are challenged to reap the advantages of interconnectivity and collaboration, including the commercial value inherent in the overall network-level flow of information, while at the same time protecting their valuable data and business secrets. Data sharing and handoff present several particular challenges, especially when counterparties are unwilling or unable to share sensitive information due to competitive position or privacy compliance. Despite all our advances in communications and information technology, businesses have been unable to automate shared processes to the degree that many would like, stymied by data security concerns and lack of a broad-based, common collaboration platform that can square the circle between transparency and privacy.
There are several approaches to address this problem, with varying levels of effectiveness in multiparty process environments. Most, if not all will attempt to unify disparate data silos around a shared configuration that all authorized parties can access. Others will use private business communication networks to allow the sharing of data objects between trusted parties. Each has its advantages and tradeoffs, so let’s take a look at the common solutions in use today:
EDI, short for Electronic Data Interchange, is a computer-to-computer method of securely sharing documents between counterparties. It has been in use for over 50 years and remains a common method of sharing in use today. In its simplest terms, EDI is the electronic interchange of business information using a standardized format - a process which allows one organization to send information to another organization electronically much faster than with paper-based methods. A Value-Added Network (VAN) is a cluster of EDI networks that allows multiple parties to securely exchange documents in EDI format. This is heavily used in finance, supply chain, and healthcare settings where all of the parties are known and have regular interactions. A VAN reduces the total number of involved stakeholders to only those that send and receive the EDI communications, thereby decreasing the amount of “noise” from internal B2B complexities. It fully supports process environments that range from “one to one”, “one to many”, and “many to many”.
The EDI VAN approach isn’t without disadvantages, however. In large environments of continuous change, EDI solutions can be slow to keep up with the added workflows, and maintaining access control, partner onboarding and offboarding, and version updates require a tedious orchestration to maintain. Most remedies are limited to resource-heavy, manual processes, and may not integrate with new systems and software. Additionally, EDI requires significant technical overhead to set up and maintain and can be quite expensive to operate.
Public blockchains were the first types of blockchain networks. They allowed for secure, peer-to-peer transactions and launched the awareness of distributed technologies. All transactions are validated by consensus algorithms, and immutably stored on a public ledger which anyone can access. No valid record or transaction can be changed on the network, and anyone can verify transactions, find bugs or propose changes to the source code. Bitcoin is the most well-known, but Ethereum is the most common public blockchain for enterprise use cases. It offers the use of “smart contracts” that guarantee correct execution of its code every time, and are triggered based on defined external criteria e.g. a delivery confirmation triggers a payment. Smart contracts are an elegant form of automation in multiparty applications.
Given the absolute transparency of the public ledger, public blockchains are not at all attractive to enterprises. Data privacy is paramount in business relationships, and public chains do not serve this purpose very well. As the number of network users increases, the data replication across the network nodes increases as well, making the network slower. Additionally, there is a computational cost requirement of each transaction, paid in tokens or “gas” to complete and commit to the chain. This presents a challenge for CFOs who would prefer not to hold cryptocurrency on their books or run an enterprise “wallet” for their transaction management. Public chains are also unable to perform many things corporations require, such as time/date stamping, calling APIs, file support, or generating random hashes. For many companies looking to build enterprise-wide, practical solutions, those restrictions make the use of public chains untenable.
Private blockchains share some of the basic architectural elements with public blockchains- validation by “consensus”, immutability of stored data, peer-to-peer connections, and distributed architecture. Private chains are “permissioned”- access is restricted only to those granted privileges, and everyone maintains a continually updated version of the ledger. This allows for a “single source of truth” for all participants to rely on.This is attractive to enterprises because of the breakdown of data silos and associated gatekeeping, allowing for a more efficient, coordinated operational environment. Hyperledger Fabric and Quorum are the most common examples of private blockchain architectures.
Private blockchains still have some of the same drawbacks as public chains, such as no calling APIs, lack of file support, and complex technical overhead to set up and deploy. While there isn’t a computational “cost” to transactions via tokens as with public chains, private blockchain approaches still have problems with scale & interoperability. External parties will have to join the enterprise’s chain and vice-versa. Connecting two or more chains is difficult and not very performant, and a multiparty landscape with multiple blockchains is even more difficult to manage than the existing, siloed environments. Even within a single enterprise, transparency can be a double-edged sword. Some have designated private permissioned blockchains as basically digital nudist colonies….not everyone wants (or needs) to see what everyone else has. Furthermore, with a private chain all of the enterprise data now resides on a massive new threat surface; all a hacker needs is to gain access. This is not ideal for regulated industries that handle sensitive data.
Packaged, Managed Service
Managed File Transfers, Relational Databases, and SaaS solutions are all different emerging approaches to a common problem- the lack of speed, visibility, & control in multiparty enterprise data sharing. All seek to address the issues of trust, scalability, and data quality. The most difficult and challenging aspect of this architecture is that data sharing has to be carefully choreographed with APIs, databases, file storage solutions, a webapp to integrate these together, and a reconciliation layer to correct any data that has changed throughout the end-to-end process environment. Each participant must invest in, set up, and maintain this technical stack on an ongoing basis. Even the best deployments of this architecture managing information from multiple sources do nothing to ensure that the user copies of the data remain consistently updated.
One area of concern around managed services and enterprise blockchains is the cloning and moving of data to a shared environment. This usually involves giving up custody and control, and entrusting the privacy and compliance to a third party. There should be a fully-fledged risk management and governance arrangement in place to answer the inevitable questions like Who “owns” the network? How are disputes resolved?
Baseline Protocol offers the most promising approach with none of the limitations of blockchain while still offering a process design pattern that utilizes blockchain’s most important elements of security, data immutability, and distributed architecture. Baseline Protocol is a method to synchronize information inside different systems of record between different organizations without ever revealing that information. This ability solves some of the biggest problems facing companies that want to collaborate but are worried about the security of their data and/or the expense of building new collaboration infrastructures or relying on third party platforms. It combines highly advanced cryptography, secure messaging and a distributed ledger to create mathematical proofs that collaborators on a workflow share the same information in their systems of record without the actual data ever leaving those systems, and with no need to alter those systems of record or invest in expensive new infrastructure. It is safer, cheaper, and easier-to-implement and deploy than most other methods of synchronizing information and workflows among multiple parties.
With Baseline, you can virtually eliminate your back office reconciliation costs, reduce your cycle times to mere minutes, and maintain consistent recordkeeping in multiparty/counterparty workflows, all without sacrificing your security profile or data privacy compliance. Furthermore, you can do this with your existing systems of record and without a significant capital investment. Baseline can be applied to almost any business process involving multiple stakeholders where trust, security, interoperability, ease of access and low cost are important. It is particularly well suited to simplifying complex supply chain and procurement workflows, automating business processes in large business networks with heterogeneous stakeholders, preventing fraud, and in helping dramatically reduce the cost of reconciliation and dispute resolution. Additionally, with native (but optional) tokenization capabilities, the Baseline Protocol has compelling applications in Supply Chain, ESG, Healthcare and Life Sciences, as well as decentralized finance (Enterprise DeFi).
As an open source project sponsored by some of the biggest names in enterprise collaboration and blockchain, Baseline Protocol is open to any and all who want to contribute or participate. It offers high transparency, low cost, no vendor lock-in, and the ability to easily adapt to myriad business use cases. Designed to integrate with legacy systems of record, Baseline requires little investment to use, and no changes to existing infrastructure. By leveraging a distributed ledger as middleware, enterprises can benefit from a reliable, always on, open infrastructure that operates on a pay-per-use principle. With Baseline, no data ever leaves the enterprise. Instead, the protocol provides a means for business collaborators to easily build verified workgroups, agree on shared workflows, and then share cryptographic proofs that all parties’ systems of record are in sync.
As is plainly evident, more and more data is being generated each day that can be used to improve business processes and outcomes. However, no enterprise is an island. They need to collaborate with other organizations to have actionable insights without revealing any secrets. This has been one of the most difficult nuts to crack in the modern business world- how to use data to make money, save money, or stay out of trouble. Enterprises will do well to prioritize those use cases where increased data sharing will yield the best alignment with business outcomes- increased costs savings, net new revenue or business value creation, and improved risk management decisions. It’s that simple.
By Marc Haddle, Outreach Team Chair & TSC Member