
Blockchain technology was first created within the foundational layers of digital currencies, such as Bitcoin, but its scope has gone beyond cryptocurrencies. In fact, blockchain is already revolutionizing fundamental practices within various industries — from finance and supply chain industries to healthcare, real estate, and beyond. So, how is blockchain having an impact on businesses? Why is it called the revolutionary technology of our time?
Let’s explore how blockchain is transforming the future of industries by providing secure, transparent and efficient methods.
- Strengthened Security and Trust
The blockchain acts as a distributed ledger, which records transactions across a network (or nodes) of computers. Once recorded or verified and added to the chain, a transaction cannot be edited, offering strong security against fraud and the nuisance value of tampering. For businesses, this means:
- Greater protection again hack attacks or breaches from unauthorized parties.
- Trustless environments, where the involved parties do not have to fully trust each other, because the blockchain does that for them.
- Data integrity, particularly for industries that require secure information, such as healthcare, banking, and legal services.
- Transparency and Traceability
All transactions that occur on a blockchain are visible to anyone with the permission to view the blockchain’s ledger. These levels of transparency are beneficial in industries that require trust and accountability or an audit trail:
Supply chain and logistics – Companies can track the movement of their product in real time and verify any claims made by a company regarding their product (e.g. the freshness of food, the authenticity of luxury products, etc.).
Manufacturing – Companies can track the sources of their material inputs whether for responsible sourcing purposes or quality assurance.
Retail – Customers can know whether a product is legitimate or at least certified fair-trade by simply scanning a code connected to blockchain records.
- Smart Contracts
Smart contracts are contracts that act on the terms of the agreement between buyers and sellers in the configuration of coded lines of a computer program that self-execute. Like a standard contract, the executable terms of the contract are agreed upon and written for smart contracts, and then executed automatically when a specified condition is met, e.g. a payment is made, a good is delivered etc.
From a business perspective, smart contracts provide:
Automation: Automating a contract eliminates any requirement for humans once a given condition has been met.
Cost: Smart contracts reduce the cost of doing business by cutting out intermediaries that work with buyers and sellers (e.g. lawyer, broker, notary etc.).
Efficiency: Speed of execution of contracts decreases backlogs of work and improves cashflow and delivery time in long processes when determining an outcome of a transaction like real estate deals, insurance claims, supplier payments etc.
- Faster & Cheaper Transactions
One major drawback of traditional financial transactions, particularly during international transactions, is that they tend to be slow, very expensive, and prone to error. A blockchain enables:
Transfers between peers without the need for reliance on a central bank or payment processor.
Reduced transaction fees owing to no banking intermediary (especially helpful when sending cross-border payments).
Instant settlement without the wait of a few days that traditional banks often require for transfer.
This is especially valuable to small businesses or freelancers serving international clients.
- Decentralization and Ownership
With regular databases, there is always an entity, whether a corporation or governing authority, which owns and controls the data, but decentralization with blockchain technology means you own your data and contribution to web 3.0 can include:
“Ownership” of your data versus a corporation (i.e. Facebook, Google, or a bank, etc.) owning your data.
“Transparency” since it allows for decisions and actions to be public.
Distributing your power with decentralized apps (dApps), or decentralized business where the community owns a share with you.
Decentralized finance (DeFi), and Web3 platforms are early examples of how blockchain creates a new ownership model for an online service.
- Inter-Industry Effects
Blockchain does not limit itself to technology companies or banks. Its use is being noted across industries.
Health Care: Secure health records of patients, reduce fraud, and share patient information/records with other providers, assuming the patient gives their permission.
Real Estate: Reduce the time it takes to transfer property, reduce the paperwork, and more easily confirm ownership with blockchain titles.
Energy: More easily track the production and use of energy, especially in regards to renewable energy trading.
Voting: Create a voting system more efficiently and more securely to have a voting approach that is transparent, reliable, and prevents election fraud.
- Regulatory and Adoption Challenges
Even with this potential, blockchain faces some challenges:
The lack of regulation in much of the world creates uncertainty for companies.
Scalability issues could effect whether a network can be created, which will be in-demand.
The extreme technical complexity of the technology makes it expensive or impossible for small businesses to implement without someone who specializes and possesses knowledge of the necessary use.
Many uses of blockchain, particularly proof-of-work cryptocurrencies like Bitcoin, have raised serious environmental concerns about energy usage.
Ongoing measures to spur innovation to overcome many of these challenges includes newer technology, proof-of-work as the consensus mechanism, layer 2 scaling solutions [like polygons], private blockchains, and block network governance.