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Understanding the Basics of Blockchain Technology

Picture of Himanshu Gautam

Himanshu Gautam

Founder | IT Advisory and Consulting | Product Innovation

Blockchain in the supply chain affects four functions in the following ways; sourcing of raw materials, manufacturing process, transport, and payment processes in the supply of goods. In addition, it cuts down on fraud and errors since all the records of the transactions are public. Smart contracts enable the execution of different contracts and help adhere to contractual obligations and provisions which in turn make steps easier and cheaper. Blockchain technology, with which people are familiar from its connection to virtual currencies like Bitcoin, is steadily rising to prominence in supply chain systems. 

However, it has brought significant changes across all industries and supply chain domains. Blockchain will revolutionize supply chain management because it guarantees security and transparency in the network it generates. 

Blockchain solutions use finance, healthcare, property management, and other areas besides the supply chain, potentially providing increased security and openness to digital relationships. As market size increases and regulatory issues, the opportunities for using blockchain in various sectors deepen, promising a better future. 

What is Blockchain Technology? 

A business organization’s network uses blockchain technology, a sophisticated database tool, to share information and create openness. A blockchain is a structure where data is organized in blocks that are chained to each other. It is synchronized by time because you cannot remove or alter the chain without a consensus of this network. 

Blockchain is a decentralized, distributed ledger technology that records transactions across multiple computers. Moreover, it ensures that the record of transactions is secure, transparent, and tamper-proof. Key components of blockchain include: 

  • Blocks: Electronic files containing transaction information. 
  • Chain: Blocks arranged chronologically in a chain-like structure. 
  • Decentralization: Maintained by a network of nodes, not governed by any single entity. 
  • Consensus Mechanisms: Rules used by nodes to verify transactions (e.g., Proof of Work, Proof of Stake). 
  • Cryptographic Security: Enhances the credibility of the information. 
How Blockchain Works in Supply Chain | AppVin Technologies

How Blockchain Works in Supply Chains 

Blockchain is a distributed ledger technology that enables secure and direct exchanges without third parties. However, it is open-source software operating on a peer-to-peer network, with nodes containing current transaction information. Every block in the Blockchain contains a string called hash which gives a unique identity to the respective block. After making a transaction, the system adds it to the blockchain as a new block with a unique hash. To achieve this, various nodes on the network validate the transaction through complex mathematical computations called mining. 

The workers who perform these tasks are motivated through means such as tokens of other digital currencies to ensure that they perform their duties well on the web.  When it comes to supply chain management application of blockchain technology yields benefits concerning transparency, traceability, and efficiency.  

Here’s how it works:  

Recording Transactions:

Each movement of goods in the logistics chain is documented within the platform in the form of a specific transaction. 

Immutable Ledger:

Once the transaction is recorded, it cannot be modified or erased, which improves the overall accuracy of the system. 

Smart Contracts:

Smart contracts that encode the terms of the contract directly into the contract language of a digital platform. They ensure and implement contractual provisions each time predetermined specifications are witnessed.  

Real-time Tracking:

Product tracking can be done in real-time, and all consumers can monitor the status of the product going through the supply chain. 

Benefits of Blockchain in Supply Chains | AppVin Technologies

Benefits of Blockchain in Supply Chains 

Transparency and traceability are crucial characteristics of blockchain. Copying each transaction on a blockchain makes manipulating or falsifying data difficult. Decentralizing blockchain, with data stored across multiple nodes, makes it hard for hackers to infiltrate the system. Smart contracts automate supply chain aspects, saving time and money while ensuring compliance. 


The system records each transaction in a public ledger, accessible to all participants, eliminating fraud and ensuring accountability. 


It publicly records every transaction, minimizing fraud and ensuring accountability. 


Reduces intermediaries and introduces automation, leading to efficiency and cost savings. 


Cryptographic security and consensus mechanisms ensure data integrity. 


It is easier to meet regulatory requirements and provide tangible paper trails of transactions and products. 

Applications of Blockchain in Supply Chains 

Applications of blockchain in the supply chain include: 

  • Food and Agriculture: Validates organic produce, traces food from farm to table, and identifies contamination sources rapidly. 
  • Pharmaceuticals: Coordinates drug supply chains to prevent fake products and monitors storage conditions. 
  • Luxury Goods: Authenticates high-value items like diamonds and designer products. 
  • Automotive Industry: Tracks parts and components, ensuring quality and regulatory compliance. 
  • Retail: Assists in stock control, reduces theft and corruption, and enhances customer confidence through better product visibility. 


In conclusion, Blockchain in supply chain can be effective by offering transparency and security, ensuring tamper-proof records, reducing fraud, and building trust. Its use also extends to finance, healthcare, and property. However, scalability and regulation remain key issues as blockchain in the supply chain becomes a feature of the digital economy. 


What is blockchain technology?  

An open, distributed database, blockchain manages transactions between parties through several computers without intermediaries. 

How does blockchain improve supply chain management? 

Blockchain makes supply chain management more efficient by offering transaction transparency and immutability to minimize fraud and incorporate smart contracts in transactions. 

What are smart contracts? 

Digital contracts automatically execute when specific conditions are met and are coded into a computer program. They implement and perform contractual obligations when specific scenarios occur. 

What is the classification of blockchain? 

There are four main types of blockchains: and these include public blockchains (anyone can join), permissioned blockchains (select parties can join), consortium blockchains (multi-party blockchains), and hybrid blockchains (which possess the characteristics of both public and permissioned blockchains). 

How does blockchain ensure data security? 

blockchain in the supply chain employs techniques such as cryptography, decentralization, and consensus which makes it almost impossible to manipulate the data stored in the blocks. 

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