6 BUSINESS BENEFITS OF BLOCKCHAIN
Blockchain was born to provide legitimacy to its Bitcoin master after the financial cataclysm of 2008. At its heart is a rebellious disdain for central authoritative control, offering instead a decentralized network of self-compliance and regulation. But the servant has become the master, offering business benefits not envisaged during its conception. In fact, it’s nothing short of a game changer for those who can master it.
WHAT IS BLOCKCHAIN?
BitcoinBlockchain is a secure distributed electronic ledger, connecting multiple parties in a network of trust and integrity, facilitating the transfer of assets and the information pertaining to those assets. It was initially created as the means by which Bitcoin could be legitimized as genuine electronic currency after the seismic events in the financial world that lead to the global financial crisis in 2008.
It does this by securely recording digital transactions in a sequential chain using cryptographic digital keys, which are verified by the network as authentic. Duplication, editing or removal of transactions is prevented by the chain, which is held on everyone’s computer on the network. The longer the Blockchain and the wider the network the more complex the digital key, and hence the more secure the Blockchain.
A NEW TRADING PLATFORM
Any type of trade requires exchanging assets between two or more parties, and unless the trade follows the bartering system, there is always at least one central third party that is brokering the deal, providing trust into the trade and seeking their own compensation for the role that they undertake ($1.7Tn in 2014 according to the economist).
Blockchain alters this trading platform by bringing parties together in a trusted network without a third party and by recording each transaction sequentially and securely. This is illustrated succinctly in this two-minute MIT video, Blockchain – A short introduction.
Utilizing this new trading platform can bring many business benefits, but most are centered on delivering one or more of six competencies:
Benefit #1: Efficiency
As transactions are completed directly between the relevant parties with no intermediary and with digitized information, settling the transaction can be quick. Added to this is the ability to operate ‘smart contracts’ which automatically trigger commercial actions based on satisfying the criteria laid out in the contract. This can dramatically streamline processes and in doing so, remove time and cost from transacting. The article, “How Utilities Are Using Blockchain to Modernize the Grid,” by Oliver Wyman Consulting outlines how this is being utilized currently in the energy industry.
Benefit #2: Auditability
As each transaction is recorded sequentially and indefinitely, it provides an indelible audit trail for the life of an asset even between parties. This is especially important if source data is essential in verifying an assets authenticity. Currently, this benefit is being realized by the company Everledger to track diamonds as summarized in this article in Wired magazine, “How the blockchain is helping stop the spread of conflict diamonds.”
Benefit #3: Traceability
Tracking goods forwards in a supply chain can be advantageous when seeking to trace where components are currently residing. Information relating to the component can then relayed to or from the new owner for possible action. This benefit is succinctly described in this Harvard Business Review article, “Global Supply Chains Are About to Get Better, Thanks to Blockchain.”
Benefit #4: Transparency
Lack of commercial transparency can sometimes lead to delays in commerce and a breakdown in relations. By providing details of transactions against the commercial construct, further trust can be enlisted within the process and so provide a more stable relationship based on transparency rather than negotiation.
Benefit #5: Security
As each transaction is verified within the network using independently verified complex cryptography, the authenticity of the information can be assured. Assured information is one of the fundamental keys to unlocking the benefits of the Internet of Things (IoT), which is a closed loop cyber autonomous process linking assets to actions. A version of this is currently being used in the defense Industry for verification of instructions and protection of IP, as illustrated in this article by Ascent, “Securing 3D-Printing: Could Blockchain be the Answer?”
Benefit #6: Feedback
With full traceability throughout the lifecycle of an asset, the asset designers and manufacturers can accommodate through-life asset management into their products to make them more effective. This can allow for information returning from shipping, installation, maintenance and decommissioning.