Mr. Prinz, what is behind blockchain technology?
Prinz: Basically, blockchain is an electronic register for digital data records, events or transactions. The special feature is that the blockchain is managed by the participants in a distributed computer network. This makes the technology attractive for companies and cooperation networks because it enables a distributed consensus to be reached on transactions accepted by all partners in a network and therefore has the potential to replace centralized authorities. Networks or trading partners no longer need a central trust authority to process transactions. The role of intermediaries can therefore be transferred to a blockchain. In addition, values and rights can be transferred from one partner to another as a transaction, whereby the blockchain fulfills a notary function.

How is a blockchain structured?
Prinz: From an IT perspective, the technology is a very interesting combination of various existing technologies from the fields of cryptography, distributed systems, peer-2-peer networks and agent systems. The combination of the blockchain data structure, i.e. the linked list of blocks with a peer-2-peer network in conjunction with consensus procedures for the orderly linearization of transactions, results in a technology that makes it possible to store and manage transactions in an unchangeable and decentralized manner in a distributed network. The addition of smart contracts offers further possibilities. These are program modules that are also irreversibly linked to the transactions and transform the passive ledger into a distributed ecosystem that is able to link transactions to conditions and thus automate simple processes. Tasks and functions that are currently performed by intermediary organizations or intermediaries and that guarantee the proper processing of transactions can thus be carried out via a blockchain.

"The blockchain can replace central authorities," says Wolfang Prinz.

© Fraunhofer FIT

Where did the technology originate?
Prinz: Blockchain technology has its origins in the white paper 'Bitcoin: A Peer-to-Peer Electronic Cash System' published by Satoshi Nakamoto in 2008, which in turn cleverly combines various IT concepts as described above.

Is it also suitable for industries other than finance and banking?
Prinz: The exchange of transactions or the secure and irreversible storage of data, such as measured values, plays an important role in many branches of industry. In an Industry 4.0 environment, for example, the technology can be used in the simplest case to store quality-relevant production data and measured values. Other applications are also possible, for example to securely document orders from machine to machine and automatically settle them once the order has been fulfilled. The processing of micro-transactions in the IoT, secure, irreversible storage of quality or billing-relevant data in a production network or the certification of machines and people are further fields of application.

To what extent is blockchain already a topic in industrial initiatives?
Prinz: The Industrial Data Space initiative aims to create an international standard for data sovereignty. In terms of the decentralized architecture paradigm that the Industrial Data Space is aiming for, blockchain technology as a concept for the decentralization of payment transactions represents an interesting variant for the implementation of data transaction management. The use of blockchain technology in the initiative is also promising because, in particular, requirements regarding data origin and traceability can be covered. The Industrial Data Space initiative is currently evaluating its use in various use cases for data networks.

What is the status quo? How far along is the technology? Where is blockchain technology already in use?
Prinz: There are already different platforms for different purposes that also meet different company requirements in terms of scalability, multi-client capability and access control. Examples include Hyperledger Fabric, which offers good support for business processes, and IOTA, which scales very well compared to other solutions in terms of transaction frequency. Proof-of-concepts can already be developed and productive systems can already be implemented.

How long will it take for the technology to become established?
Prinz: We will continue to see proof-of-concepts this year, but they will also be transferred into operational systems this year and in the next two years. At Fraunhofer FIT, for example, we are working on a solution for managing certificates for people and machines, which can be used to prove that an applicant has the relevant training or that a machine can check whether the maintenance technician is certified for a specific maintenance task. Various initiatives have already been launched in the energy sector, ranging from blockchain-based payment at charging stations to the automated delivery and payment of electricity in a smart grid. In the production environment, solutions are most likely to be found that exploit the blockchain's ability to store data irreversibly in order to store quality-relevant data in a verifiably secure manner.

How should users approach this? What do they need to get started with the topic?
Prinz: First of all, a basic understanding of the technology is required, then existing processes can be analyzed for their blockchain suitability or new business models can be identified. We have developed a corresponding method for this, as not all initially obvious use cases ultimately justify the use of a blockchain, but can often be implemented just as well with classic IT systems, meaning that the blockchain does not add any value.

A proof of concept should then be developed for a selected and suitable process, which can later be transferred to an operational system. We have developed a procedure for this process in the Fraunhofer FIT Blockchain Lab that enables companies to gain valuable experience in the use of blockchain technology in just a few months.

Blockchain in the supply chain

© Fraunhofer IML

Supply chain management is an interesting field of application for blockchain. Various service agreements exist between a large number of value creation partners consisting of suppliers, manufacturers, retailers, logistics and financial service providers. Blockchains allow transactions to be processed independently of invoices via smart contracts. The blockchain acts as a distributed data repository and publicly and irrevocably secures all relevant information. As the executing computer program, the smart contract uses this information to check compliance with the content of the contract and independently legitimizes financial transactions when certain contractual conditions are met.

Partner wanted

Together with other partners, Fraunhofer FIT is launching the consortium project 'Blockchain for Industrial Applications' in March 2018 - for which further partners are still being sought. Information can be found on the Internet.

Blockchain Summit 2018

On June 19, 2018, Markt&Technik is organizing the Blockchain Summit together with NürnbergMesse. The summit is an information and interdisciplinary communication platform for an exciting exchange between innovation drivers and technology experts from various industries. More information is available on the Internet.