- You’ve heard the buzzword for years, and it’s not going anywhere: Blockchain is alive and well in 2021, with business benefits to boot.
- Big companies have blockchain success stories galore. And yes, there are use cases for your growing business, namely in the realms of contracts, cloud storage and cross-border payments.
- Get with the times — it’s not optional! — by considering the use of blockchain technology where it makes sense for your business.
Before you roll your eyes at the premise of using blockchain at your young company, take a walk down memory lane. Has your attitude toward the internet changed since 2000? Are you still glued to your BlackBerry, or have you replaced it with an iPhone? Does your company have a social media strategy with a team dedicated to solving customer problems via direct message (DM)?
Technology evolves, and as it does, our attitudes toward it change. When people think about blockchain, they most commonly think of cryptocurrency — which is understandable, since Bitcoin hit an all-time high late last year and countless media channels are debating its future. But blockchain is more than cryptocurrency, and it’s coming for the business world.
Remind me: What is blockchain?
Simply put, blockchain is a database that stores transactional data. It’s an ever-growing list of records, or blocks, that are linked together using cryptography to form a chain, or a sequence of recorded transactions.
I already have a database. What are other business benefits of blockchain?
Back in the days when mainframes roamed the earth, those computers were built with redundant everything, because they were the central repository of everything. They were super-reliable but also expensive and slow, and every now and then, they broke. Blockchain, on the other hand, maintains speedy performance while using low-cost computing hardware and yet ensures data availability by decentralizing everything. Data is spread around the internet: Even the maps of where data is stored are decentralized. The result is speedy performance and high data availability even while using low-cost servers. It also results in security, because that data is spread around a vast number of network members vs. housed with a single party or just a few key parties.
2. Distributed ledger
One word here: transparency. A distributed ledger allows transactions and activities to be shared between parties. Each computer in the blockchain network maintains a copy of the record to ensure transparency and that all copies are updated and validated at the same time. (We’ll talk about what happens when these copies aren’t updated nor validated simultaneously later on.)
3. Unalterable, i.e. secure, records
Accountants love audit trails, because they can see who changed a record or transaction, and that creates controls. But what if you, as a single person, can’t change a transaction? By design, blockchains don’t let you modify data once that block of data is recorded and validated. If you need to modify the data, you create a new block that supersedes the old one, and that change will be traceable to you. Also, your change requires consensus, or agreement, between all other parties in the network. So changing a contract, numbers on the general ledger and “cooking the books” becomes basically impossible. Auditors aren’t out of business just yet, however. There is going to be significant testing associated with blockchains, and the Big Four are already on board.
OK, so there are many business benefits to blockchain. But is anyone actually using it?
Yes. Beyond the Bitcoin hype, companies have been quietly embracing blockchain for years.
In 2018, for example, Walmart announced it would be using blockchain to make its supply chain more transparent. Ensuring food safety in a decentralized ecosystem is tough. Tracing E. coli to a specific food item from a specific source is nearly impossible with products coming from farms and factories all over the country, let alone the world. This is where blockchain technology comes in. Imagine each node, or collection of blocks, on the blockchain representing an entity that has come into contact with the food as it moves from the farm to the Walmart store. Because blocks can’t be changed without consensus, the risk of covering up issues or changing data is slim to none, making Walmart more sure that the food it receives isn’t contaminated or infected. Transparency in this case isn’t an abstract concept; it’s the ability to easily identify unsafe goods and issue a recall to protect the consumer.
Walmart isn’t the only company using blockchain. LVMH is also an early adopter, having launched a blockchain to prove the authenticity of goods across its brands including Louis Vuitton, Dior, Hublot and Dom Perignon. Shipping carriers and logistics companies like FedEx and Maersk are also testing out the technology to track high-value cargo and are debating expanding it to all packages.
You may be thinking: “My company’s revenue is less than .005% of Big Wally’s, and I’m not concerned about stamping luxury goods or freight ...”
How could my business use blockchain?
If your company is a bit smaller than Walmart with its $403 billion market cap, there are still several advantages to being an early adopter of blockchain.
Besides Bitcoin, “smart contracts” is probably the other best-known term associated with blockchain. Smart contracts aren’t exactly new, but they’ve been made increasingly possible since the release of the Ethereum Project in 2013. In concept, smart contracts are pretty much what they sound like. Instead of using third parties, contracts can be facilitated, verified and enforced based on computer protocol. While they aren’t extensively used, they’re becoming more popular because they’re faster, cheaper and more secure than using a law firm or another party.
If you wanted to enter into a contract with a vendor, for example, you would deposit ETH (Etherium’s native cryptocurrency), and they would agree to a protocol to fulfill that requirement and earn the ETH. If all obligations are met, you receive your goods at the specified price at the specified time, and the seller receives the ETH when the criteria is met. Since the entire contract is executed based on protocol, there isn’t room for interpretation. Either the performance obligations are met or they aren’t. Breach isn’t up for interpretation, and no middleman is needed. For proof that this works, check out the work Maersk is doing with logistics. They’re eliminating paperwork and instead using blockchain throughout supply routes.
Blockchain is also in a unique position to improve cloud storage for any size of business and even individual users. Not only is blockchain as fast or faster than traditional cloud storage, reducing costs by sometimes as much as 50%, but it’s also more secure. Blockchain’s architecture allows it to store encrypted data and authenticity hashes across the decentralized network, making it nearly impossible to hack or tamper with. For example, have you ever lost a document on a file-sharing platform? For blockchain storage companies like Storj and Sia, the decentralization and redundancy of data inherent in blockchain architecture prevents file loss.
The cloud storage market is valued at $50 billion, mostly spread among large businesses. If you’re in the business of cloud storage, blockchain could open up a new market among individual users. And if your business absolutely can't lose data and needs to store new data frequently, blockchain might be an antidote to traditional systems.
This one may seem sketchy if you’re used to banking with big banks, but hear us out. If you’ve had to perform them, then you know that international payments are a pain for businesses, banks and individuals. There are a lot of steps involved, fees that no one quite understands and often delays. Transacting on blockchain, however, is fast. Bitcoin takes approximately 10 minutes to validate, which means international payments are basically happening in real time with no surprise costs. Blockchain also simplifies the process and reduces any dubious middlemen, with its decentralized ledger and a peer-to-peer network validating transactions.
And big banks are getting in the game. JPMorgan Chase backed blockchain company Ripple’s goal to remove the friction behind global payments and allow for immediate and trustworthy cross-border transactions.
On top of speed and security, cost represents another benefit to using blockchain for cross-border payments. Deloitte found that making payments on blockchain could reduce up to 80% of transaction costs.
So, how can my business practically use blockchain without building our own blockchain network?
You can start by seeking out solutions that meet your everyday business needs via use of blockchain. For example, many businesses are using those blockchain-based storage companies to reduce cloud storage costs. Plus, anyone can join Ripple’s network to move money around the world, no IT department needed. And there are multiple other offerings for companies looking to build on the software and interface of a robust blockchain and see benefits, regardless of their size.
The bottom line: Technology is changing fast, and the onus is on your business to keep up. Could blockchain be the solve for your current needs?