Benefits of blockchain: How it can Transform an Industry
April 28, 2021
In many industries, business and technical leaders are investigating ways to transform and disrupt existing business models using blockchain technology. Here are the benefits of blockchain.
Blockchain is a special type of database technology differentiated by the way it stores and manages information using clusters or blocks of data. When the blocks have sufficient data, they are then closed and chained together using a unique cryptographic seal and timestamp before being distributed through a network of computers. Blockchains special features makes it an enabling and complimentary platform for IoT, AI, 5G and other disruptive and emerging technologies.
Some innovators are already achieving the significant business benefits blockchain can deliver including better security, transparency and traceability along with operational efficiency, improved reliability and cost reduction.
Blockchain technology is inherently more secure than other database systems and deals with issues of security and trust in several ways. First, new transactions are agreed upon before being recorded and stored in data blocks. The blocks are cryptographically sealed, timestamped and linked to the previous block. The blocks are then distributed across a network of computers, instead of on a single server. These features make it extremely difficult to interfere with the data and if compromised in any way, are evident to the other users. With data becoming increasingly sensitive and protection crucial across many industries, blockchain technology will become embedded in many applications to prevent any fraudulent activity.
With an increasing responsibility for the protection and use of individual and company data, transaction processes need to be transparent and auditable. Blockchain can help. Blockchain is a distributed ledger technology (DLT) which means there is a single, shared version of information instead of multiple individual copies. The data is only updated by consensus as an addendum – changing the original would require altering all subsequent records with the help of the entire network. This ensures transparency that no paper-based system can match, leading to more accurate, robust and auditable processes particularly for new entities to conduct business with a higher level of trust.
Supply chains are complex, challenging and varied even when working in their usual direction of travel. When trying to reverse the normal flow to trace items back to their origin it can often be a daunting task. When activities are supported on blockchain technology it provides a robust, chronological record of not only the origin but also all points along the journey. Products can be verified for authenticity, provenance and title. Food can be date stamped for freshness.
Most commercial processes have already started their digital transformation. Unfortunately, that often means using a fax machine instead of sending paperwork by post. Paper has advantages though: it is truly ubiquitous, it often gets directly to the hands of people that need it and necessary changes can be made instantly. On the downside, it is often lost, spoiled, or simply unreadable. It is prone to errors, either accidental or fraudulent and usually requires third parties. Blockchain technology provides the record-keeping, storage, security, trust and transparency needed to eliminate paper and third-party intermediaries. Processes can be completed sooner with fewer errors. It uses a single digital ledger that is shared and agreed so reconciliation and audit are much more efficient.
Creation, transfer, reconciliation or simply copying data is prone to error at every interaction. Ultimately any system relies on the quality of data first entered on the ledger but in blockchain’s case this is checked, agreed and changes only made by agreement or consensus. As the data is only created once, fewer errors are introduced and any changes are immediately signaled to all parties for agreement or rejection in the case of fraudulent activity. Overall, the quality and robustness of data give blockchain the trust the technology has deservedly earned.
No one likes to waste money and for many businesses reducing cost is a never-ending objective. One of the key benefits of blockchain is to reduce or even eliminate intermediaries. Historically, this third-party function was required for reasons of trust, or rather lack of it, between trading partners. With blockchain-based solutions, trading entities use a single version of the truth that they can rely on. There is less documentation required and reconciliation is easier and faster. Costs are reduced, suppliers paid sooner and the wheels of commerce turn that bit quicker.
Are you ready to get started with private blockchain technology for your business? Speak to an expert today to find out how we can integrate our blockchain technology to improve security, reliability and reduce costs.