Six ways to use blockchain
Marc Emmer is president of Optimize Inc. and an author, speaker and consultant specializing in strategy and strategic planning.
In light of the FTX crash and the giant suction sound that followed, some investors and business leaders are wondering whether crypto and blockchain are truly disruptive technologies or a made-up Ponzi scheme.
When markets get out of balance, they reset. So it seems that both extremes can be true when it comes to blockchain. While I and many others see blockchain as the future of the transaction ledger, it is also a space where legitimate traders currently coexist with fraudsters. A crypto correction could be just what the market needs.
But even with setbacks, blockchain appears to be rapidly gaining adoption. Blockchain’s practical applications and implications extend far beyond just crypto trading. It is a decentralized ledger where all records are permanent and can be accessed by users across multiple computers. IBM specified four characteristics of blockchain – including consensus, security, immutability and validation of data – that make it a unique solution for business ledger and transaction management.
From financial services to supply chain management, blockchain is revolutionizing many industries with its trustless system of record keeping. Here are some useful approaches firms can take advantage of when using blockchain as a business ledger.
1. Digital Identity Management
Accenture identified five core areas where blockchain-based digital identity management can have an impact.
• Fast and secure verification for international travelers.
• Storage of health records.
• Ensuring and maintaining accurate records for proof of ownership.
• Background and training verification.
• Know your customer verification (KYC) for sensitive data and financial institutions.
Today, verifying someone’s identity and professional history generally requires third-party validation, which can be time-consuming and expensive. Blockchain identity verification, on the other hand, would ideally work through a registration station for recording and storing biometric information in a blockchain-based identifier. Users can visit the registration station and get their blockchain identity as a QR code. They can also get their public and private key for secure data sharing.
This individual blockchain identity will continue to accumulate new information as the user moves through different stages of life; for example, it will reflect new associations with institutions such as universities or employers.
With this form of identity management, when your business interacts with the user, you can easily access up-to-date, credible information and improve process efficiency.
2. Smart contracts and business automation
According to The International Association for Contract & Commercial Management (IACCM), businesses typically spend upwards of $6,900 (paywall) to draft and finalize legal contracts. Costs include consultation and documentation fees to comply with local legal authorities. A significant part of the expenditure goes to preventing fraudulent activities and ensuring effective contract management.
As blockchain ledgers allow for automated transaction validation and processing, businesses can cut contract administration costs by implementing smart contracts.
Smart contracts are computer programs that run autonomously on the blockchain network, meaning you can execute them without the intervention of third parties. Implementing smart contracts means that a business no longer needs to hire a broker for contract validation, ensuring that every transaction is secure.
According to Future Market Insights, smart contract management was a $183.1 million industry by 2022, representing 10.2% of the entire blockchain industry, so there is certainly room for growth.
3. Supply Chain Management
Blockchain technology can also be used to monitor and track the movement of goods through a supply chain. In this way, companies can track the total journey from production, shipping, receiving and delivery of products more accurately than with traditional methods.
The Harvard Business Review identified how the blockchain could revolutionize supply chain management and help with things like accuracy.
When your business implements blockchain governance, individual blocks will add to a product’s blockchain identity as it moves through various stages, ensuring that all stakeholders can accurately track it at any time – as is often used to ensure food safety.
4. Financial services
Businesses can also benefit from blockchain’s improved transaction security and individual trusted identity management in the following areas.
• Sales, trading and custody management in the capital markets.
• Capital management fund administration.
• Issuance of letters of credit and financial trading.
• Insurance management.
• Cross-border payment settlement.
In all these processes, blockchain has the potential to help reduce transaction costs and provide better security.
5. Data exchange and interoperability
Using distributed ledger technology, companies can easily share information with other parties in a secure way. It enables them to access each other’s databases without manual intervention from the respective organizations.
For example, Microsoft developed the Coco Framework, which allows users to build private networks on top of Ethereum or Quorum. As an increasing number of businesses move to subscription-based cloud software and hosting; such blockchain frameworks can help businesses adapt different levels of privacy while storing important data securely on the blockchain network.
6. Audit and Compliance
Many companies use blockchain to ensure transparency and compliance in their operations, as it allows them to keep a permanent record of all transactions through a secure and immutable system.
Crypto trading and speculation do not define the entire blockchain industry. It has the potential to be far more than that, and many companies are already using it to revolutionize their business. As can be seen, the practical applications of blockchain technology for businesses include streamlining processes, building customer trust, improving data security, and much more.
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