As blockchain technology continues to grow in popularity, it’s only natural that we will see it in more industries. And with all the blockchain buzz, we have been asked, “How can this technology be applied to the travel industry and will there be any perceived benefits?”

What is a blockchain?

When most people hear “blockchain,” they think of Bitcoin. These blockchains are known as proof-of-work systems. Proof-of-work is a concept where a collective group of people/systems work together to verify the data they are storing. In the case of Bitcoin, this works very well because Bitcoin has an extremely high limit on the number of coins it can generate and the lack of central authority requires users to work together to create those coins. So how do we know that the amount of Bitcoin in a given wallet is valid?

This is where proof-of-work comes into play. Every person mining for bitcoins is at the same time validating other users’ data. Once a block of data is “mined/verified”, it is added to the chain. This is a very time-consuming process and takes a large pool of users about 10 minutes on average to mine a single block. This 10-minute limit is primarily done for security purposes and can be different depending on the cryptocurrency.

Now that you have an understanding of how blockchains work with cryptocurrencies, you are probably asking, “How can I apply this to my business?” For starters, proof-of-work systems work great in the public domain where all parties must agree on the validity of new blocks. However, when you are an enterprise agency and have a finite set of products to sell, proof-of-work systems are counter-intuitive. You will find that their security domain is not fit for enterprise needs, because if there is no central authority, we cannot guarantee that we are actually selling anything or worse, giving products away for free.

Say hello to distributed consensus-based ledgers. This is where enterprise systems will really benefit because they maintain the concept of “trusted issuers”, or simply put, people who are allowed to add assets/products/inventory to the chain. However, because the system is distributed and there is a collective group of trusted servers validating our data we still get the “consensus-based” inserts. Finally, distributed consensus-based ledgers take a lot of features of blockchains (cryptographic signing, distributed networks, p2p, etc.) and apply them to their products. Hyperledger is a great example of this practice.

Blockchains for hotel reservations

Let’s take the hypothetical example of a reservation blockchain where we want to develop a blockchain that manages reservations between hotel suppliers and OTAs.

The hotel supplier would be considered the trusted authority who generates the security certificates that its “trusted issuers” (OTAs) will sign their data with. This means we can always guarantee a request is coming from a given issuer because the data sent from them is signed with a unique certificate that only they have access to. Unless the certificate is shared or comprised, this data will remain unreadable by other participants.

After the hotel supplier has generated its certificates and given them to the appropriate OTAs, the supplier will now need to generate assets. Logically, assets are the same as a “bitcoin” or unit of value within the blockchain. Once the assets are generated, the hotel supplier can then perform a series of transactions to distribute their hotel inventory to the other OTAs. At this point, we have a cryptographic trail that tracks where the given hotel inventory originated from and who is selling it.

Once an OTA has a booking for that particular inventory, the OTA will then submit a request to book it. At this point, the blockchain application will perform several logic checks. Collectively, these logic checks are referred to as a smart contract. Smart contracts allow us to define business rules and requirements on how our issuers (OTAs) can perform transactions. These contracts can contain any type of logic; for this example, we would want to validate that the given hotel supplier who created the hotel inventory still has that room available and that the check-in date and stay length won’t conflict with other reservations.

If the smart contract passes, the new data is sent to the network and distributed across all the issuers. Similar to Bitcoin blockchains, the issuers validate the new data in a consensus-based model. If the data is valid, it gets inserted into the blockchain.

How will blockchains benefit enterprise companies?

Enterprise companies will benefit from blockchains in areas such as reservation systems, payment processing, and data sharing. However, it is good to note that it is easy to over-architect a solution using a blockchain.

If your company requires a distributed network of resources and has a digital inventory that needs to be tracked in real-time, blockchains can prove a great use case. Loyalty programs could benefit as hoteliers might experiment with providing reward points as a cryptocurrency. There is a multitude of options that we will start to see as this technology matures.

Where do we go next?

At Koddi, we are constantly experimenting with new technologies and applying these technologies to the needs of our clients. We expect enterprise blockchains to take hold and continue growing in use especially as global security requirements become more strict. It won’t happen overnight, but we’re looking forward to seeing how the technology unfolds in the industry.