How Do the Benefits of Blockchain Tie into Realworld Business
It’s been some time now since the applications of blockchain have moved out of mere theory and into real-world practical use. Across various industries around the world, from food to finance, the technology has been helping businesses move forward.
Blockchain’s main draw is its publicly distributed ledger. With everyone having access to the same information, there’s a great sense of trust and transparency. Beyond that, this proves to be a more efficient way of communicating information as it cuts out the middleman.
A report from Deloitte in 2019 surveyed over 1 300 business executives and found that more than half of them have prioritised the move to blockchain as critical. With its hype starting to fade, it’s clear now that businesses are recognising the true value of blockchain beyond just standard cryptocurrencies.
The technology’s focal point lies in its consensus, immutability, and transparency. When transactions on the blockchain are added, they are done publicly and must be approved by the parties involved. There’s no central authority required to confirm or reject new transactions, or safeguard existing ones. Every user on that network will be able to view a single source of truth. Moreover, transactions of the blockchain are immutable, meaning they can be added but not removed or
So then, how do these benefits tie into real-world business use?
Distributed and Decentralised
A blockchain is distributed and decentralised. What does this mean? Well, in short, the technology is designed to remove all reliance on third-party intermediaries and make transactions directly between the two parties involved.
For example, in a traditional banking process, remittances are not transferred directly from the remitter to the beneficiary in a single-step process. They tend to follow a multi-step process like this:
1. The remitter communicates with the local bank that they wish to make a cross-border payment.
2. The local bank transfers the money to an intermediary bank.
3. The intermediary bank transfers the money to the beneficiary’s bank.
4. The beneficiary’s bank finally transfers the money into the beneficiary’s account.
In reality, this transaction will contain many more steps, and at every step, each of the intermediaries will charge a service fee for processing the transaction.
If one were to conduct the same process through a blockchain, the money would be transferred directly from the remitter to the beneficiary in a single-step process—thus greatly reducing fees and efficiency.
Cryptography is the foundation upon which blockchain was built. And the internet is the foundation upon which everything else today is being built upon.
Last year, the total cost in global cybercrime damages reached $6 trillion, and figures expect this number to reach $10.5 trillion by 2025.
Given that a blockchain is by decentralised, transparent, and, most importantly, immutable, it’s able to guarantee better security over transactions. Blockchains are at their weakest when they’re fresh off the ground, because there aren’t many users on the network. This means that a 51% attack can occur much more easily, as it’s much easier to take control of 51% of a small network than it is a larger network. However, once any blockchain finds its footing, it becomes almost mathematically impossible to tamper with a transaction on the blockchain, and even more difficult to tamper with older transactions on the chain. The technology is pushing safer and more verifiable transactions. To read more about the security and vulnerabilities of blockchain, see: The Benefits and Vulnerabilities of Blockchain Security
Here’s where blockchain gets really interesting for businesses. Through the use of programmed rules, or “smart contracts”, businesses can remove the need for financial intermediaries such as brokers and escrow agents.
How do these smart contracts work? Simply put, when a predetermined condition is met, the smart contract will trigger an appropriate response to automatically take place. A good real-world use case of this is Axa, insuring their clients against delayed flights with a
“smart contract [that] is connected to global air traffic databases, so as soon as a delay of more than two hours is observed, compensation is triggered automatically.”
And once your compensation has been selected, your money will be returned directly into your bank account. The blockchain is then updated and the contract automatically fulfilled with no third-party intervention.
This is only one example of how blockchain technology is being used today. And moving forward, businesses can break up complex processes by combining simple self-fulfilling contracts together. By doing so, they can automate and seamlessly execute anything from basic admin and payroll management to more complex financial procedures like remittance payments.
With blockchain technology, businesses can improve oversight over their products by bringing added transparency to their supply chains. With valid records, it’s easier to trace the movement of products. Across the world, businesses in the food industry are partnering with blockchain projects to keep track of their products. Two examples of these are VeChain, from the blockchain side of things, and Walmart, from the industry end.
By partnering with blockchain projects, or deploying their own, businesses can digitise and easily track records, improving overall traceability and transparency, and reducing product loss.
From supply chains to administrative functions, the applications of blockchain technology could have a revolutionary effect on how businesses today are operating. As a matter of fact, they already have had such an effect. Although the technology is still very much in its early stages, with lots of space to grow and be adopted, it’s clear that industry leaders have recognised its significance beyond benign used in money and finance.