Blockchain Explained – How it Fits Into a Manufacturing

What is It?

Although not a particularly new platform, it has been on the receiving end of a huge boost in popularity recently, in response to increased fears around data security. Many businesses are exploring the use of blockchain as a secure network for storing and transporting data. Unlike a standard ledger used within a business; a blockchain, or distributed ledger to give it its proper name, is stored on potentially hundreds of computers, across the world. It’s this distribution that makes it harder for hackers to target.


The idea was first announced by Satoshi Nakamoto in October 2008 under the guise of a peer to peer payment system called Bitcoin. The platform developed to support this secure exchange of monies, resulted in a blockchain. Although it has many legitimate uses, Bitcoin has gained a bit of reputation as the ‘go to’ currency for cyber-criminals. However many companies such as Microsoft and Barclay’s Bank have been able to see beyond the reputation to the benefits that the technology underpinning can have.

How Does It Work?

A blockchain is a digital ledger of transactions distributed across a network run on computers (rather than a network of computers). Transactions are compiled into ‘blocks’ then joined together cryptographically and chronologically into a ‘chain’ using complex mathematical algorithms. This process is called ‘hashing’ and it is carried out by multiple computers. Should someone want to add to the ledger, all the participants of the network (all with copies of the existing chain) run algorithms to assess the new transaction. If all the computers in the network agree that a transaction is valid (identifying information matches historic transactions), it gets added to the chain. The details of the transaction are not stored – only that the transaction took place. Once updated the ledger cannot be changed, only added to, and is updated for all on the network simultaneously. For a hack to go undetected, the hacker would need access to every copy of the database within the network together at once.


The primary benefit of using a decentralised network is its security. The distribution of the network makes it near impossible to hack and once converted into a hash, cannot be converted back to the original set of data. Any alterations to documents or transactions would produce a different signature which would alert the network. This makes fraud and genuine error easier to spot. Another advantage is the ‘cutting out the middle man’ on payments. Because a blockchain can disintermediate an authority such as a bank, monetary transfers can be made much faster, 24/7 and at a greatly reduced transaction fee.


The biggest problems facing the distributed ledger are; cost, power consumption and user adoption. Although a great investment in the long run, a blockchain involves substantial cost to setup. To add to this, they also use huge amounts of energy. The larger the chain, the more transactions to process, and that, of course, means more computer power. According to Deloitte, the Bitcoin network attempts 450 thousand trillion solutions per second to validate transactions. Powering those computers consumes a lot of energy! In addition to funding and powering a blockchain, there is also the battle for hearts and minds. The de-centalised network that requires user buy-in raises questions with many people. Blockchains don’t integrate very well with most existing systems which is another factor for low user adoption. Ideally the switch would be made during an implementation, otherwise the transition must be well thought out. In addition to the user adoption conundrum, is a lack of standardisation. It’s thought that once a common technical standard has been devised, however, the tipping point of adoption will be close behind. The least common but most prominent flaw to the blockchain is that it cannot function without internet connectivity. However this is really no different to any other form of communication used in modern day manufacturing.

Example of a Business Using It

Apart from the obvious, Bitcoin, many companies and sectors are embracing blockchains. Tech company Everledger is allowing diamond miners to verify their rough cut diamonds are not being used to fund conflict and that they comply with the Kimberley Process – a government and community backed certification scheme for diamonds. Established financial institutions are also jumping on the  bandwagon. A consortium of more than 40 banks around the world, such as Barclay’s and UBS, are exploring the possibilities of a distributed ledger. Shipping firm, Maersk are working with IBM to replace the bills of lading traditionally used to document the goods on a ship with ‘custom authorities’ in an attempt to streamline the global shipping process and make criminal interception of containers more difficult.

What Does Blockchain Means for Manufacturing?

Any industry that deals with any sort of transactional data can be disrupted by blockchain and manufacturing is no different.

Repair and maintenance manuals can be made accessible to the relevant people at the right time with the use of the correct token. This is particularly useful when the information in the manual is classified, such as those produced by defence and aerospace manufacturers. These documents can be accessed anywhere in the world without getting into the wrong hands.

Supply Chain Management

Hosting data on adecentalised network reduces human error, waste, costs and labour at every point within the supply chain, at every tier.  The single network allows tier 3 suppliers to publish stock positions and the correct technical and testing documentation to be accessible to everyone in the supply chain. Should a tier 1 OEM need to trace a component, the information is easily and instantly available. Whether supplier, vendor, 3PL or manufacturer, distributed ledgers offer complete transparency and traceability.


The Role of Blockchains Within Industry 4.0

Industry 4.0 is no longer news. Granted, it’s definitely not obsolete either, but new – it is not – so a basic understanding will hopefully be shared by all forward-thinking manufacturers. An interconnected factory of cyber-physical systems, all communicating and relaying data to your ERP via the Internet of Things. These machines can predict breakages and failures so potential issues can be resolved before they even happen, but that’s just the basics. Add in a Blockchain between your ERP and parts supplier and your cyber-physical system can safely order its own replacement part to arrive just in time for an engineer to fit it. Under any other circumstances, trusting a machine or computer to make a monetary transaction unsupervised would be asking for trouble, however, a distributed ledger makes this arguably the safest way to minimise downtime.

A decentralised network of IoT connected devices, such as Adept from Samsung and IBM, disintermediates the communications handler between IoT devices, meaning software updates, bugs and energy usage could all be monitored autonomously.


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  1. […] Blockchain: IoT connected devices are being seen as the easiest point of entry into a computer system and with the rise of Industry 4.0, more and more IoT devices are making their way into the factory. An IoT platform built on a blockchain would mean you can securely automate your factory. The complexity of a blockchain is what makes it incredibly secure. For a cyber-attack to be successful, the hacker would need to have access to every copy of the database simultaneously. Spreading the database across a network on multiple computers makes this an almost impossible task. Ironically, Bitcoin – a favourite payment method of hackers – is the most famous example of a blockchain. […]

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