Description: Blockchain technology has already gone through a period of formation, with hype and dramatic falls. Now, it seems to have entered a phase of practical comprehension and development. In this article, we look at what benefits business owners can get by implementing blockchain technologies.
How can businesses benefit from blockchain?
Blockchain is the most innovative and groundbreaking financial technology since the invention of the internet. It provides a whole suite of new applications that large and small businesses can take advantage of. The technology is still developing in many ways, but savvy business owners are using blockchain right now in rather creative ways.
Case study 1: Payments
There are many passionate bitcoin and cryptocurrency users on the internet, and some businesses are cashing in on this passion. Companies like Overstock and airBaltic have both boosted profits by accepting crypto. There are still limited places to spend cryptocurrency online, which is why businesses that accept crypto attract more customers.
Case study 2: Raising funds
Initial coin offerings, or ICOs, have brought startup investing out of the private boardrooms of investment funds and into the world for everyone to be a part of. Businesses and organizations raise funds by offering a new crypto token used in a future project. So far, billions of dollars have been raised by crypto businesses this way.
Case study 3: Decentralized finance
Decentralized finance, or DeFi, is set to become the new way of doing finance in the internet era. The financial sector in many developed countries is highly centralized, and the control usually falls in the hands of just a few large organizations. DeFi is mixing things up by decentralizing financial networks and operations. The uses of DeFi include sending money anywhere in the world, borrowing funds without collateral, and accessing stable currencies without a bank.
Case study 4: Smart contracts
One of the most important innovations of blockchain tech is smart contracts. These are somewhat similar to regular contracts. The main difference is that they are computer-programmed and automatically execute themselves when certain criteria are met. For example, you could set up a smart contract that is loaded with funds. The contract will release these funds when an agreement is settled between the parties of the contract.
These contracts are part of a movement of blockchain-based business process transformation. The idea is to take business tasks that usually follow slow and expensive manual processes and put them into smart contracts. This way, the processes will run faster and more securely.
How does the technology work?
Blockchain technology works by storing information, such as transactions and account data, on a public ledger. The information on the ledger is encrypted using public and private keys. This encryption means that the blockchain can function properly and securely without revealing the identity and personal information of those using the network.
It is an ingenious way of allowing decentralized payments and other financial procedures. However, it does come with some drawbacks. As payment systems, blockchain networks are slower than Visa or Mastercard, and it may take minutes for transactions to go through on a blockchain.
Moreover, on a blockchain, you are entirely responsible for your own funds. If something goes wrong and you lose your money, there is no bank to refund it.
Who needs blockchain?
Blockchain technology is making its way into all industries. However, it is instrumental in business areas that use decentralized trade. Another blockchain use case is decentralized accounting and settlements.
For example, blockchain is helpful in global supply chains and cross-border transactions. Any business that requires identity management and secure data storage can also benefit. An example is the healthcare industry.
Another group of businesses that are benefitting from blockchain is those in developing countries. They are using blockchain to access many financial services that they can’t normally reach. For example, stable currencies, loans, and banking services aren’t available in some countries. Currently, this DeFi trend is taking off in Africa.
Some businesses don’t actually need blockchain
While some in the cryptocurrency sector say that crypto is the answer to everything, it is not. There are many business problems that a decentralized blockchain does not solve.
Such business matters as consumer goods manufacturing, data analysis, and internal document flow are often best done with traditional database technology. The implementation of blockchain here is not necessary. Using a platform like Ethereum for these applications would slow down operations significantly while greatly driving up costs – all for little benefit.
Why is blockchain better than a centralized database?
Blockchains thrive where trust and audibility are needed. The technology is designed to make it impossible to change data in the blockchain after being created.
You can look at the blockchain of a cryptocurrency like bitcoin and see all the transactions that have ever been made. If a single transaction has been altered in any way, even by one number, you will be able to tell. So will everybody else that uses the blockchain.
It gives blockchain a huge advantage in cases that require secure data storage and verifiable history of changes. These cases include insurance, sensitive document storage, and legal proceedings like evidence management.
Whenever there is a risk of accidental or deliberate altering or destruction of data, blockchain can help reduce or even remove this risk. Anyone can audit the blockchain in real-time and get to the truth of the matter. Businesses are just now starting to see the power of immutable data technology for their operations.
Data is quickly becoming the most important asset globally, and Blockchain is a whole new way of storing and exchanging that data.
Businesses should be taking advantage of this new era of internet technology, whether for payments, raising funds, or decentralized financial applications. Be aware of the strengths and limitations of blockchain for your business, and you will be able to take advantage too.