The unique characteristics of a blockchain address a wide range of business issues. Here are ten key benefits of blockchain, as well as examples of industries that are utilizing them.
The introduction of Bitcoin in 2009 moved blockchain from theory to practice, demonstrating that this digital distributed ledger technology works. Since then, businesses have been experimenting with how they can make blockchain work for them.
Blockchain technology is used by well-known corporations, government agencies, and nonprofit organizations to improve existing processes and enable new business models.
The value of blockchain stems from its ability to share data among entities quickly and securely – without requiring any one entity to take responsibility for safeguarding the data or facilitating transactions. Whether using a public blockchain network or private or permissioned blockchain-based applications, blockchain and its characteristics can benefit businesses.
Advantage of using blockchain technology
The following are the top blockchain benefits, according to experts:
Trust in blockchain technology
Blockchain fosters trust between entities where trust is either absent or unproven. As a result, these entities are willing to engage in business transactions or data sharing that they would not have done otherwise or would have required an intermediary to do. One of the most frequently mentioned advantages of blockchain is the facilitation of trust. Its worth can be seen in early blockchain use cases, which facilitated transactions between entities that did not have direct relationships but needed to share data or payments. Bitcoin and cryptocurrencies, in general, are iconic examples of how blockchain enables trust between strangers.
Decentralized Structure in blockchain technology
Blockchain truly demonstrates its worth when there is no central actor to facilitate trust, according to Daniel Field, head of the blockchain at UST, a global provider of digital technology and services. As a result, in addition to enabling trust when participants lack trust because they are unfamiliar with one another, blockchain enables data sharing within an ecosystem of businesses where no single entity is solely in charge. A good example is the supply chain: Several businesses, ranging from suppliers and transportation companies to producers, distributors, and retailers, want or require information from others in the supply chain, but they need someone in charge of facilitating all of that information sharing. Blockchain, due to its decentralized nature, solves this difficulty.
Greater security and privacy
Another significant advantage of this emerging technology is the security of blockchain-enabled systems. The increased security provided by blockchain stems from how the technology works: With end-to-end encryption, blockchain creates an immutable record of transactions that prevents fraud and unauthorized activity. Furthermore, data on the blockchain is distributed across a network of computers, making hacking nearly impossible. Furthermore, by anonymizing data and requiring permissions to limit access, blockchain can address privacy concerns better than traditional computer systems.
Cost savings in blockchain technology
The nature of blockchain can also help organizations save money. It improves transaction processing efficiency. It also reduces manual tasks like data aggregation and editing and reporting and auditing processes. Experts emphasized the savings that financial institutions see when using blockchain, explaining that the ability of blockchain to streamline clearing and settlement translates directly into process cost savings. In general, blockchain helps businesses save money by eliminating the middlemen (vendors and third-party providers) who have traditionally provided the processing that blockchain can do.
Speed in blockchain technology
Blockchain can handle transactions much faster than traditional methods because it eliminates intermediaries and replaces remaining manual transaction processes. In some cases, blockchain transactions can be completed in seconds or less. However, times can vary; how quickly a blockchain-based system can process transactions is determined by several factors, including the size of each data block and network traffic. Nonetheless, experts have concluded that in terms of speed, blockchain typically outperforms other processes and technologies. In one of the most visible blockchain applications, Walmart used the technology to trace the origin of sliced mangoes in seconds, a process that had previously taken seven days.
Transparency and traceability in blockchain technology
Walmart’s use of blockchain is about more than just speed; it’s about tracing the origin of those mangoes and other products. This enables retailers such as Walmart to manage inventory better, respond to issues or questions, and confirm the histories of their products. If a farm’s product must be recalled due to contamination, a retailer using blockchain can identify and remove the produce from that farm while leaving the remaining produce for sale. Blockchain, according to experts, can help track the origins of various items, such as medicines, to ensure they’re genuine rather than counterfeit and organic items to ensure they’re truly organic.
Unchangeability in blockchain technology
Immutability means that transactions cannot be changed or deleted once they have been recorded on the blockchain. All transactions on the blockchain are timestamped and datestamped, creating a permanent record. As a result, blockchain can track information over time, allowing for a secure and reliable data audit. (This contrasts with error-prone paper-based filing and legacy computer systems that may become corrupted or retired.) As an example of the potential of this benefit, Omar cited Sweden’s use of blockchain to digitize real estate transactions to keep track of property titles even as they change hands.
Data control on an individual basis
According to experts, blockchain enables unprecedented levels of individual control over one’s digital data. “In a world where data is a very valuable commodity, the technology inherently protects your data while giving you control,” said Michela Menting, research director at ABI Research. Individuals and organizations can choose which parts of their digital data to share, with whom, and for how long, with limits imposed by blockchain-enabled smart contracts.
Tokenization in blockchain technology
Tokenization is converting the value of an asset (physical or digital) into a digital token, which is then recorded and shared via blockchain. Tokenization has gained popularity in digital art and other virtual assets. Still, it has broader applications that could facilitate business transactions, according to Joe Davey, director of technology at global consulting firm West Monroe. Tokenization could be used by utilities, for example, to trade carbon emission allowances under carbon cap programmes.
Leaders in various industries are investigating and implementing blockchain-based systems to solve intractable problems and improve long-standing inefficient practices. As an example of such innovation, Field cited the use of blockchain to verify the information on job applicants’ resumes. According to studies, many people falsify their resumes, leaving hiring managers with the time-consuming task of manually verifying the information. However, pilot programmes that allow participating universities to store data about their graduates and their degrees on the blockchain, which can then be accessed by authorized hiring managers, help to solve both issues: getting to the truth and getting to the truth quickly and efficiently.
Examples of industries that can benefit from blockchain technology
The benefits of blockchain technology extend across industries, but some industries and businesses are better suited to this technology than others. Businesses that, by definition, have multiple parties requiring access to the same data and require a better way to ensure that data has not been tampered with are piloting programmes or bringing test cases to full production. The following are a few industries that are benefiting from the blockchain.
Their customers are benefiting from faster and less expensive clearing and settlement.
We are discovering that blockchain can ensure the security of patient records and privacy while allowing them to share a patient’s data only as the patient permits.
Nonprofits and government agencies
These have begun to use smart contracts and other blockchain-based applications to create immutable records that enforce predefined terms.
‘Blockchain technology is not a short-term technology.’
Given these warnings, executives should carefully consider where they invest in blockchain, according to experts.
They emphasized that blockchain’s true value is realized when it is used in situations where a traditional database would fail, and there is no central control or trust.
“There is no problem for blockchain to solve if there is a high level of trust. However, the greater the lack of visibility or the potential for corruption, the greater the use cases. This is where blockchain technology can help, “Omar stated.
According to him, blockchain technology-based applications benefit from combining with artificial intelligence, machine learning, or another decision-making layer.
Nonetheless, experts believe blockchain will cause disruption and business transformation, even if this revolution takes time.
“It’s important to understand that while blockchain technology is revolutionary in theory, it’s not going to transform society today,” Menting said. “Perhaps in 10 to 20 years, but it’s not a short-term technology.”