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EDI and Blockchain – A match made in heaven?

Blockchain technology has quickly become a major Buzzword, spurred on by the recent media attention on Cryptocurrencies. In fact, Blockchain technology has been around since the early 1990’s, originally proposed as a way to handling documents securely, but only with the advent of Bitcoins did it reach the hype that it has today.

I am often asked if Integration Wizards works with Blockchain technology, since we specialize in data integration and electronic transactions.
It is a valid question and no doubt would block chain technology make significant improvements to electronic B2B transactions, some of which I will discuss in this article.
However, I do not believe it will happen overnight, because EDI (Electronic Data Interchange) technology is a slow-moving ship and there are no benefits for a single company in a partner network to change, unless other trading partners also follows. This was one of the main reason XML (eXtensible Markup Language) never really took off, although it was (and still is) a far superior format for electronic business transactions than the clunky 30 year old flat file formats used by traditional EDI standards, such as EDIFACT and ANSI X12.

So how could blockchain technology benefit EDI?
Before I answer that question, let’s take a look how it actually works, without getting too technical.

At the heart of blockchain technology is a public distributed ledger, through which all the transactions or “blocks” of information passes. Think of it as similar to the transaction feed that shows up on you online banking account. The ledger is replicated and preserved on multiple servers in a P2P (Peer-to-Peer) network and all participants authorized to a specific blockchain receives a copy of it. This means that you’ll have a very high level of data redundancy, no central point of failure and very low risk of losing any data.

The “blocks” of information are organized in a chain and each has a unique ID, through which it is linked to the next block. If any information in any particular block is changed, this unique ID also changes and breaks the chain,  so much like a bank transaction, a single block cannot be changed, without also changing all the blocks/transactions that follows. This means the whole chain of blocks would need to be re-calculated and also approved by 51% of the participants in the chain, so making changes to an existing transaction is very difficult. Instead in a B2B scenario, changes would be added on as a new “corrective” blocks. This immutability and required consensus, together with strong encryption of the data are some of the corner stones of the block chain’s security characteristics.

Another feature is something called  “Smart Contracts”, which allows the participants of a particular block chain to agree on a set of specific rules, which are automatically executed when a certain condition is met. These will come to play a significant role, especially in electronic trading to eliminate exceptions and validating the data.

So without further ado, let’s take a look at what Block Chain technology can do for EDI.

In contrast to current EDI transactions, which are one-way and point-to-point messages, with a blockchain you would have a shared information flow with transparency, auditability and visibility by all participants in a supply-chain process. This would eliminate the need for functional acknowledgements, used extensively in EDI today, to confirm that a particular transaction have been received or not. It would also safeguard the sequence of the transactions in a particular business process. Furthermore, any new transactions would be validated in real-time by smart contract rules, which would reduce or maybe eliminate any exceptions altogether.

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Since the ledger is distributed on multiple servers and shared by all trading partners in a particular business process, the risk of losing any transactions would be next to none.
The inherent nature of the blockchain, with its immutability, encrypted data and consensus of changes across all participants would make it next to impossible for hackers to fraudulently manipulate the data, which is also one of the reasons banks are adopting the technology.

Looking ahead it would also be possible to add on additional non-traditional EDI information to the block chain in real-time, such data from various IoT (Internet-Of-Things) devices, such as scanners and delivery trucks, to further improve real-time visibility across the Supply Chain.

It is definitely an interesting technology and expect to hear more about how this will improve B2B transactions in the coming years.

About the Author
Mathias Wallgren has worked with data integration for the past 15 years, both overseas and locally.
He currently works with Integration Wizards, an Infor Partner specializing in Infor M3 MEC™, Infor ION™ and Infor Cloverleaf.