Blockchain is a popular topic in technology circles. But, what does it actually do? And, should business leaders care? Before we jump into how organizations can benefit from blockchain, let’s start by defining this technology. Blockchain is an online database used to record and distribute digital information. However, users don’t have the ability to edit that information. A network of peer-to-peer computers verifies transactions. In this process, even if one computer makes a mistake, the others compensate.
Over fifty percent of the computers on the network would have to make the same error to make it part of the validated blockchain — a near impossibility with growing blockchain networks. Finally, once transactions are verified, they become part of a block in the chain, and the transaction is complete.
In short, blockchain presents people and organizations with a way to complete transactions with total strangers securely. It’s easy to see why businesses are interested in this technology. So, let’s dive a little deeper into the benefits of blockchain.
Businesses should care about blockchain when they need to establish trust with customers quickly. Organizations and customers who use blockchain in their transactions don’t need to worry about who they are interacting with. That’s because a network of distributed computers (machines not owned by a single entity) verifies everything by using sophisticated algorithms to confirm the transfer of value and record transactions. What does blockchain look like in practice?
Every company works with assets and processes, and blockchain can securely verify each step in its workflow. For example, if a company wants to assure customers that they source their tea from China, they could certify different steps using blockchain to securely record process details. Other companies throughout the supply chain could use specialized scanning tools to check in and track various components, like leaves, tea bags, and packaging — backing up their claims of origin.
However, this is just one example of how companies can use blockchain. Other use cases include:
- Processing of financial transactions
- Reduction of processing fees with currencies
- Storing medical records securely
- Recording property rights quickly
- Creating smart contracts
- Oversight of supply chains
Blockchain helps create trust between peers that don’t have a relationship. It can also reduce the time it takes to conduct business, as lengthy legal processes used to establish trust may be unnecessary with blockchain. Blockchain also helps companies save money by speeding up cumbersome processes and making those same processes more secure. Despite the benefits, some organizations are wary of implementing new technologies.
Blockchain has moved past the new technology label and has become an important tool for various institutions to establish trust where it didn’t exist before. Its importance is highlighted in a 2020 Deloitte report, where 86% of respondents said their executive teams believe there is a compelling business case for using blockchain technology in their organization.
The same Deloitte report indicated that 55% of respondents place blockchain in their top five strategic priorities. These statistics aren’t surprising considering the technology’s many benefits, which include:
- Verifying many different business processes and assets
- Providing a trustless system that doesn’t require participants to know each other in order to work
- Increasing security through blockchain’s dispersed infrastructure
Many businesses consider blockchain to be a priority. So, how can they get started with this technology?
Blockchain has many advantages, like increased accuracy, cost reductions, decentralization, and transparency, to name a few. However, there are also disadvantages that companies must overcome before getting started with blockchain — the most notable being the cost to implement this technology.
The key to using blockchain? Companies need to have a clear reason for implementing the technology to justify its cost. Otherwise, this investment will result in wasted money and resources. And, even though blockchain is an exciting and potentially profitable tool, not every business has a viable use case. Here are a few questions to help you determine if your business can benefit from blockchain technology:
- What processes or assets need to be verified?
- What impact will this have on your business’s profitability?
- How hard will it be to implement in your current business?
- Can implementation be broken down into smaller steps?
- Will it hurt your business if you don’t implement this technology?
These points are by no means an exhaustive list of questions to consider when deciding if it’s the right time to implement blockchain technology. However, these questions can help start the conversation with internal stakeholders and highlight the benefits of using blockchain for your business.
Our team at Coherent Solutions has experience helping organizations like yours. If you’d like to discuss what it would take to get started, set up a time to chat with one of our experts today. Connect here.