Many existing applications in our organizations could be replaced or enhanced by incorporating shared immutable ledgers. In addition, blockchain applications can be built for processes that are today performed manually.

This section will explore the tremendous potential of these different uses for blockchain, with an emphasis on patterns. Patterns are templates, concepts, or ideas noticed in one area that can be applied to other areas.

Patterns are very useful, as they save us future work. In my data modeling work, for example, employees, students, and consumers are all people of interest to most organizations. These groups of people exhibit similar behaviors (such as breathing and laughing), and have similar properties (such as names and birth dates). We can generalize the behaviors and properties of employees, students, and consumers into the pattern of “Person.” Once we understand and design for “Person,” we can build more extensible and integrated databases, gracefully accommodating additional types of people, such as contractors and instructors.

Remember the theme in this book: if you understand the concepts and principles behind a technology, you’ll be able to apply it intelligently. The concepts were covered in Part I and the principles in the form of patterns will be covered in Part II.

There are three important types of patterns in blockchain: requirements patterns, risk patterns, and process patterns.

Requirements patterns

Once we understand the requirements patterns, we can fit them to any industry; this helps us identify opportunities for usage. Although the possibilities for using blockchain are virtually countless, five common patterns emerge as the most common. These five patterns truly drive blockchain development.

This overview will explain the five patterns, and each chapter in this section will show an actual use case for each of these five patterns within a particular industry: finance, insurance, government, manufacturing, retail, utilities, healthcare, nonprofit, publishing, music, and art.

We do not cover an exhaustive list of industries, or of usages within each industry. Use the following chapters to generate ideas; start from our examples and figure out how you can apply blockchain within your organization.

There might be blockchain applications already available for some of these usages. For other usages, you might be in uncharted territory, leading the charge to improve your organization’s processes with blockchain.

The reason for building a blockchain application must be for at least one of these five requirements patterns: transparency, streamlining, privacy, permanence, or distribution.

Transparency

Transparency means that a user, consumer, or organization has visibility into an entire process—not just the end result.

Did you know, for example, that 80% of the Italian olive oil on the market is fraudulent? Even though that label in the supermarket might say “extra virgin” or “Italian,” the olive oil can be very poor quality and come from other countries such as Syria, Turkey, and Morocco.7

So if we can’t trust the label on an item we purchase, how do we know the item is what it says it is? We can purchase olive oil directly from the source, but there is time and expense in traveling to a local farm in Italy.

Another option is having proof that supports the claims on the label. In other words, if we can have transparency of a production and supply chain process, we can see where the product was made and validate claims made by the manufacturer or seller.

For example, if you were shopping in the supermarket and wanted to confirm that the extra virgin Italian olive oil in your hand was indeed that, there could be a barcode or QR code on the package. You could scan it with your smartphone, and an app would show you the production lineage of your bottle, starting with that family farm in Puglia.

Each leg of the production journey can be recorded in the blockchain, providing the immutable ledger we need to feel comfortable purchasing a product.

Transparency can confirm any characteristic of importance, such as gluten, organic, or peanut-free. Transparency gives us lineage visibility which can lead to a reduction in corruption, fraud, or waste, and an increase in trust. In your industry, look for processes that have little to no visibility and a lack of stakeholder trust.

Streamlining

Streamlining means making existing processes more efficient, saving time and money. Streamlining involves removing intermediaries, leading to quicker transaction times, fewer steps, and lower fees.

Imagine that I invent a new ice cream flavor called Peanut Butter Frog. Peanut Butter Frog ice cream is something I believe will be successful, so I start the lengthy patent process. This process can take years, and cost thousands of dollars. One way to streamline this process would be to register my invention using blockchain. I would then have an immutable place to stake my claim, and announcing my invention would take minutes instead of years. In your industry, look for lengthy complex business processes, and see if they can be made faster and cheaper using blockchain.

Privacy

Privacy means participating in a process without divulging sensitive information. With blockchain, we can use public keys and addresses to represent ourselves and our transactions. No private information, such as social security numbers or credit card numbers, travel over the internet. Someone can buy a scoop of Peanut Butter Frog ice cream and pay using Bitcoin, and we will never know the identity of the consumer. In your industry, look for processes that have the opportunity to expose sensitive information, and see if they can be replaced using blockchain.

Permanence

If information has permanence, it is stored forever in an easily accessible format. There is no need to search through filing cabinets, hard drives, or spreadsheets to locate a document from six years ago.

If some business owner were audited for tax deductions, and suddenly needed proof that she bought her staff an ice cream party three years ago and wrote it off as an expense, her receipt would still be safely stored in the ledger, and the purchase could be verified. In your industry, look for documents and transactions that need to be stored and retrieved over a long period of time.

Distribution

Distribution means that many people or computers are involved in completing a transaction. For example, if my ownership claim to the Peanut Butter Frog flavor is stored on twenty computers, and a hurricane wipes out five of them, my claim is still safely stored. In your industry, look for scenarios where having multiple recordkeepers would be advantageous, such as minimizing risk or generating new opportunities.

Risk patterns

In addition to identifying blockchain requirements patterns, there are also risk patterns. We can recognize the obstacles in our path and propose general solutions.

Cooperation

Blockchain applications often require organizations to interact directly with each other, rather than interacting with an intermediary. We know how difficult it can be to get different departments within our organization to work together. Imagine the difficulty in convincing people to work together across organizations. It could be possible for standards organizations to facilitate this cooperation.

Incentives

There must exist incentives to work together. If the organizations benefit from having that intermediary in place, why should the process change? For example, one of the processes we will discuss in the media chapter is the royalty payment process. Blockchain allows us to pay royalties to authors minutes after a sale, instead of up to six months later. What incentives, however, would a publisher or distributor have for paying their authors in a shorter timeframe?

Change

There is always risk with trying something new. How do we know that processes will improve with blockchain? Blockchain requires a different mindset—one that is comfortable with shared control and transparency instead of centralized power and opaque processes. It can be scary to make the leap to blockchain. Change is often scary.

Process patterns

One of my favorite books on business processes is How Work Gets Done, by Artie Mahal. On page 30 of his book, Artie defines the term “business process” and provides a powerful visualization:

The simple definition of a business process is: “how work gets done.” It is a series of activities or tasks that are performed together to produce a defined result. Typically, a process has inputs which are transformed into outputs and outcomes.

The following explanation of Inputs, Outputs, Guides, and Enablers is excerpted with permission from How Work Gets Done, pages 56-59. Grab a copy of How Work Gets Done if you’d like to learn more about processes.

A process is initiated by an Event. It receives Inputs, which are transformed into Outputs. The transformation uses Guides to manage and control the process, and Enablers (such as human resources, systems, data, and infrastructure) to support execution of the process.

Inputs are provided by stakeholders and/or upstream business processes. They may be raw material, data, or any other resource that the process will transform into output. The input source may be internal or external to the organization. Consider the example of placing an order for a book. The data about the customer, book, and payment amount becomes actionable information only after a user or process feeds it into the purchase process.

Inputs are transformed by the process into outputs. Outputs are the deliverables and goals of a process. For example, the finished product is produced, the book is sold, or the insurance claim is paid.

Guides manage and control the transformation of inputs into their planned outputs. Unlike inputs, which are consumed or transformed by the process, guides are only referenced—not consumed.

An organization’s enablers are those reusable resources that are engaged in supporting the process. If the guides are the rules, the enablers are the tools. Enablers can be classified into three categories:

• Human Capital. Roles represent the jobs or positions assigned to execute a process. This is the critical people-process link. The skills and competencies required to execute the process are used to define role profiles that, in turn, become job descriptions.
• Enabling Technology. Technology is a broad term covering a variety of mechanisms that provide technical support to processes. This includes business application systems, data stores, IT tools and platforms, production lines, and general tools.
• Supporting Infrastructure. The term “infrastructure” covers a variety of platforms and foundations upon which the enablers function. For people, infrastructure includes work space, buildings, and energy. For systems, it includes hardware, software, and communications platforms.

Blockchain impacts enablers

Recall our ongoing discussion of central power authorities and monopolies, which often act as intermediaries in highly-regulated processes. In most of these processes, we must trust that these intermediaries will complete the process in an accurate and timely fashion. As such, the central power authority is an enabler of the process.

As we’ve mentioned, one of the overarching features of blockchain is that it doesn’t require much intermediation. As we will see in the chapters that follow, blockchain applications often remove or redefine the enabler acting as an intermediary. The guides remain the same. The only thing that blockchain changes is how these rules are executed and how the data is stored.

In the following chapters, we will use the patterns mentioned in this overview to illustrate how blockchain can assist many areas of our organizations. For each of the five requirements processes (transparency, streamlining, privacy, permanence, and distribution) of blockchain, we will choose one example process that is typical to the industry in question. We’ll then walk through the process and explore the ways in which blockchain could supplement or improve it. We will also highlight risk patterns where appropriate.