Much like how the technology used in microwave ovens was stumbled upon whilst developing radar, blockchain too was brought into the world as a means to an end rather than an end in itself. The technology was originally created as the underlying layer to the first cryptocurrency, Bitcoin. It fulfilled its purpose admirably, making Bitcoin the first hack-proof, sustainable digital alternative to fiat currency. Arguably more importantly though, it proved that decentralization in the digital era was achievable.
Gradually blockchain came out of the shadows and assumed an identity of its own. Instead of playing second fiddle to cryptocurrencies like Bitcoin, the technology emerged as an interesting, if the somewhat provocative solution to a vast array of applications and use-cases across a number of industries, many of which are yet to be explored and many more which simply don’t exist yet.
Indeed what started as ‘the Bitcoin revolution’ in the late 2000s has very much evolved into ‘the blockchain revolution’, and it’s a revolution that is still very much in its infancy. An increasing amount of people now recognize Bitcoin as simply the first application to be built on a blockchain and that it is by no means the best one. Several of those people are business owners and decision makers eager to carve out an edge for their companies, operations, and products. In this article, we’ll be exploring a few ways blockchain technology can be used to do just that.
Blockchain is a subcategory of the broader term ‘Distributed Ledger Technology’. To learn more about the distinction please visit the nakamo.to Knowledge Base. For the sake of simplicity and brevity, I’ll be using the word ‘blockchain’ throughout this article.
It’s Magic, You Know
The double-edged sword for most new technologies is that they’re, well, new. Anything novel in an industry which evolves, changes and disrupts at the rate that the tech industry does is bound to attract all kinds of attention very, very quickly. To outsiders, this creates somewhat of a smokescreen. All new tech gets a similar reaction, so how is one to tell between the gold and brass before the opportunity to gain an advantage dissipates?
This has been a daunting task for companies of all sizes when sizing up blockchain technology. On the one hand, it is the deafening criticism of blockchain paired with a seemingly endless list of scams, fads and marketing stunts, and on the other, talk of the technology potentially completely revolutionizing businesses and industries. This leaves decision makers with a tough dilemma. Either take the plunge and risk jeopardizing the company’s image while burning though goodness knows much money, or do nothing at all, and risk your competitors running away with the first mover advantage while you sit and contemplate what might have been.
So blockchain, gold or brass? No prizes for guessing what I’ve gone with in this article. After over eight years in the cryptocurrency and blockchain space, I’ve seen, tried and tested enough to be sure. Blockchain is the first form of ledger to eliminate the need for a third party. It makes it possible for a ledger to be distributed among all those using it, putting the responsibility to maintain and validate it in the hands of those using it. The result is a decentralized system of data registry where transactions are instant, transparent, reliable and incorruptible. It is the first system to bypass the need to trust one another when conducting transactions of value — the implications of which will be profound and far-reaching.
Let’s not get carried away, though. Blockchain will not solve all of our problems. It’s a powerful tool yet still has a long way to go before its true impact can be felt. It’s functional, but it’s not yet refined. However, it’s time will come and we can predict with reasonable accuracy what that will look like and where it might be applied. With that in mind, decision-makers the world over are exploring what problems blockchain is best suited to solving, how it can be applied and measured and where it would be the best fit.
Blockchain: Does it fit?
As with most things, to understand whether blockchain is a fit for a business, one must start by asking the right questions. Possibly the most important one to get right is ‘does blockchain fit my business needs?’ rather than ‘how can I fit blockchain into my business?’. But before one can even begin contemplating how blockchain can be used to one’s benefit, we first need to fully understand what the technology is capable of. To see how blockchain can help businesses we can start by looking at blockchain’s capabilities and characteristics:
1. Record Keeping
As a distributed ledger, a blockchain records events such as product shipments, sales, and transactions of all sorts, and ensures each user in the network always has the same, immutable version of the ledger and its records.
A blockchain is not only distributed but also decentralized. In other words, no single entity controls the blockchain – in the case of public blockchains, at least.
The blockchain confirms ownership of any asset recorded in its ledger. It maintains a record of past and current ownership, and the changes in ownership throughout the asset life from the start of the blockchain.
Information and/or value – whether events, transactions, assets or other, recorded on the blockchain cannot be changed. At most, new information can be recorded to change the status of the record, but previous information will still be held in the ledger.
Although it exists in multiple identical copies (one per blockchain node/user), there is only one ledger for the blockchain. What goes into the ledger is decided by consensus between the nodes. Once recorded, it becomes the one and only source of truth.
6. Autonomous Applications & Contracts
Distributed applications (Dapps) and smart contracts running on a blockchain can automatically trigger actions such as buying, paying and making access available, when predefined conditions are met.
Reaping the Rewards
Businesses need more than just novelty to compete and remain profitable. They need tools that give them practical assistance in meeting their business needs while being sufficiently affordable and easy to use. We should start by asking what our businesses need and what difficulties they experience in operating and performing today – and then see what blockchain can do to help.
Enterprises typically aim to do four basic things: grow their business, improve their profits, avoid going bust and stay within the law. For most of or even all these objectives, solutions of sorts already exist. If they don’t, then the companies in question have likely already stagnated, been bought out, or shut down, or are on that path. However, these solutions, like most things in life and business, can be improved upon. With the aforementioned four main objectives in mind, we can explore what blockchain technology may do to change, improve or completely revolutionize business operations and services.
If only to combat inflation, businesses must achieve some growth. Most enterprises strive for more growth than this though, whether to serve their market better, make more money or compete more effectively against competitors. Blockchain’s contribution to this can be multifaceted.
Sell more. To grow, businesses can sell more of their existing offering, add new products and services, or do both. Blockchain enables enterprises to extend into a whole new world of ‘Product as a Service’. For example, renting industrial machines on a pay-per-usage basis, instead of asking customers to buy them outright. A smart contract can automatically unlock access to a machine, after initial rental payment has been received, and calculate final charges according to usage. Blockchain integrity ensures billing and payment information is always correct.
Go global. Like it or not, business is being globalized and has been for a while now. A blockchain provides business partners in different places with one standard way for recording transactions in which no single party has a monopoly of control. Whether companies source materials in Argentina, do their manufacturing in Bulgaria or use a distributor in Canada, blockchain keeps the books straight and streamlines operations.
Engage customers. Customers who are positively engaged with a solution or a business tend more loyal and give better recommendations about the solution or business to their peers. Blockchain can be used to increase engagement by allowing customers to do more for themselves and save money, without eating into the profitability of an enterprise. As one example, insurance companies have developed micro-insurance solutions powered by blockchain for making claims. These not only enable better service for claimants but also help the companies save on staff costs internally. Tailored options are the natural next step.
Attract investment. Blockchain also provides a safe, efficient, and trustworthy platform for recording funds collected from many smaller individual investors (crowdfunding), instead of having to go cap in hand to one bank or large investor.
As the saying goes, ‘sales are vanity, profit is sanity’. More than just selling more, enterprises must ensure that they also achieve suitable levels of profitability. Efficiency is at the heart of profitability. It also happens to be a key strength of blockchain.
Save on costs. Proven, effective blockchain technology helps link legacy systems with business networks without large system integration bills. The possibilities for automation in and over blockchain mean savings on manual operations that are often more expensive and less efficient.
Accelerate transactions. Financial transactions using conventional methods such as SWIFT interbank transfers may take days. For today’s pace of business and with current rapid fluctuations in exchange rates, this may be too long. By comparison, depending on the blockchain technology used, financial transactions via blockchain may take only minutes, and one day possibly no time at all.
Improve visibility. Complex supply chains are part of many enterprises. They have many moving parts and risks of errors that are multiplied when suppliers and business partners join in. Blockchain makes it easier to track supply-chain progression, allowing users to easily identify all kinds of manipulation and fraud.
Whether you call it resilience, business continuity or some other related term, it’s all about enterprises being able to prevent or recover quickly from adverse incidents. A big advantage of blockchain is in prevention. As an immutable record of all past events and transactions, it can be used for recovery too.
Prevent fraud. Trustless blockchain systems use cryptography to ensure that records are unfalsifiable and that digital money can only be spent once. For example, the blockchain powering Bitcoin was designed on the assumption that nobody could be trusted and that it was up to the blockchain system to be intrinsically accurate and tamperproof in its operations. This lives on as a viable, powerful advantage to using blockchain.
Protect assets. Intellectual property (IP) is an increasingly important part of enterprise assets. Businesses depend on their IP for competitive advantage, sales, and profitability. Blockchain with its immutability can record details of IP and ownership, providing incontestable proof when required of the sole rights of a business to use its IP.
No single point of failure. Because blockchain is decentralized and runs over multiple distributed nodes, it does not matter if one node disappears, either by choice or because of a breakdown. The other nodes continue to run the blockchain protocol and record events or transactions by reaching consensus among themselves. If the other node reappears, it will simply start again with the most current version of the blockchain ledger. One supplier failing in a supply chain blockchain will not stop the blockchain from working correctly for the others.
No business is completely free to do what it wants. Somewhere, whether for employee safety, environmental protection, product quality, or other aspects, there is a regulation to be respected. Blockchain’s accountability and immutability are an auditor’s dream come true and a smart solution for proving a business is on the right side of the law.
Traceability. Government agencies require it and customers often demand it. Were materials sourced ethically from suppliers respecting workforce safety and reasonable wages? Were perishable products like food or pharmaceuticals systematically kept at the right temperatures? Events and transactions logged on a blockchain can show unequivocally what happened.
Financial probity. When accounting and financial systems log each event and transaction to a blockchain, clean financial conduct can be demonstrated and scandals like Enron avoided on all scales, large and small. Regulatory sanctions such as fines or jail sentences are not the only items at stake. The reputation of a company is also critical in determining whether customers want to buy from it. Blockchain can show the truth and help honest enterprises to maintain or restore their good reputation.
It’s just the beginning
Properly utilized, blockchain can do businesses a world of good. The examples above are just a few of the wide-ranging applications of blockchain in business. Naturally, there are many things that it cannot do. For example, don’t look to blockchain to help you figure out market trends or optimize product or service design. There are other tools to answer those questions.
Choice of Distributed Ledger Technology is also a crucial factor. While blockchain, in general, can bring a business the advantages listed above and many more, different designs exist which are suitable for different needs. You may need to make tradeoffs between transaction speed, transaction transparency, and identification of the participants in a blockchain – at least for now.
With that in mind, you’d be well advised to proceed as we have done here. First, clearly identify your business needs and objectives, which themselves are likely to be driven by market trends, customer expectations, and regulatory obligations. Next, examine blockchains and their specific characteristics to see which one fits your needs best. Then, plan your business blockchain system, implement it, and reap the benefits. Keep in mind, however, this is just the beginning.