The advantages outweigh the disadvantages of implementing blockchain in your business
The launch of Bitcoin in 2009 introduced blockchain technology to the real world, highlighting the use and functionality of a digital distributed ledger technology. Today, the disruptive implications of the functions are far-reaching. Blockchain technology can displace intermediaries, such as brokers, notaries and banks, whose business models rely heavily on providing independent third-party verification. Several reputable companies, government agencies and non-profit organizations rely on blockchain technology to improve existing operations and enable new business models.
What is blockchain technology?
Blockchain technology is a decentralized ledger system where there are blocks with unique properties. Each block is connected to another block to form a chain-like structure. These blocks contain information, and the connections in a chain-like structure indicate the linking process. Participants authorized to access the network can view and add information, but not make changes to existing records. All information in a block is cryptographically secured.
What makes the technology special?
The value of blockchain lies in its ability to share data quickly and securely without a single entity having the burden of protecting the data or facilitating the transactions. Blockchain eliminates the role of a central authority that controls all data stored in a given database and creates a single source of truth where parties can read and write to a common database.
Currently, many companies are willing to adopt blockchain technology. However, every technology has a number of advantages and disadvantages, and blockchain is no different. While most companies try to unlock the value of technology, they neglect the challenges and problems. Consequently, they make mistakes and waste resources and time.
When executives and managers consider a business case for blockchain adoption, they should focus on the following questions:
What are the sources of value that blockchain can deliver?
There are four primary sources of value that blockchain use cases can deliver. Companies can mix and match these sources in different ways.
New business models
Using blockchain-supported innovation, businesses can generate new revenue streams. For example, in the energy sector, blockchain platforms allow entities to trade excess energy stocks autonomously over the web.
Operational efficiency
Blockchain automates processes, eliminating unnecessary intermediaries to enable organizations to improve productivity and performance. For example, the technology enables smart contracts that do not require human interaction to enforce contractual obligations and instead use predefined software.
Risk reducing measures
Blockchain-related applications help companies improve tracking and authentication across the supply chain. The effects of better transparency throughout the supply and distribution chain reduce the chances of health and safety issues due to counterfeiting and fraudulent parts. As a result, financial and reputational damage is reduced.
Social impact
Businesses can use blockchain applications to support a wide range of initiatives, such as election management, voting and ethical procurement.
How will the use of blockchain align with the organization’s goals and strategies?
Blockchain has the potential to become a game-changing force in all industries. To fulfill the organization’s goals and strategies, the use of blockchain helps with cost reduction. Blockchain eliminates the need for third-party assistance, and when businesses transact data without intermediaries, they save huge costs.
In addition, delivering a satisfactory customer experience is an organizational goal companies can fulfill with the help of blockchain. The technology can track goods throughout the supply chain, offering clear and immediate visibility to industrial companies. By leveraging this feature of the technology, companies can create greater transparency with their customers, who are increasingly demanding it.
Will blockchain enable the organization to compete more effectively?
With blockchain gaining more acceptance worldwide, it can help businesses get ahead of the competition in various ways. Blockchain is kick-starting the next automation revolution. Task automation will cut costs and increase productivity, thereby increasing revenue. That in itself is the core ingredient to compete more effectively.
Also, blockchain adoption allows businesses to include various cryptocurrencies in their payment gateway. The more payment options an organization offers its customers, the greater the chances of success. Speed is also of crucial importance in e-commerce. Sales through decentralized blockchain are relatively faster than traditional systems. As a result, businesses can speed up high-volume transactions.
Benefits of implementing blockchain in your business model
Blockchain and its properties can bring a number of benefits to businesses, regardless of whether they adopt a public blockchain network or a private blockchain-based application. Blockchain’s capabilities support end-to-end automation and easy data sharing across organizations. It establishes trust between different entities willing to engage in business relationships. It significantly reduces manual reconciliation work. Also, it provides anywhere, anytime access to past transaction records, which can greatly improve regulatory and audit compliance. As a result, associated costs are reduced and response times are improved.
Another leading advantage of this new technology is security and privacy. Due to end-to-end encryption, the transaction record cannot be changed, which shuts out fraud and unauthorized activity.
Disadvantages of implementing blockchain into your business model
For a successful implementation of blockchain technologies, everyone in the process ecosystem must adopt the system. Many companies are skeptical about investing in the technology and do not believe it is ready to deliver a high enough return to cover the costs of replacing existing systems.
Another main issue concerns uncertain regulations. Due to the lack of central control, there is no clarity as to who will deal with breaches of trust and protocols. Also, the lack of regulation results in the concept of ICO scams.
The bottom line
Blockchain can create benefits in all sectors of the economy, not just the financial sector. The impact of blockchain technology extends to any business that acts as an intermediary between two parties, such as a buyer and a seller, and earns economic rent from an intermediary position in the value chain. Therefore, managers are advised to track blockchain technologies to assess their effectiveness and exploit their benefits for new value creation. If they fail to do so, they will lose their competitive edge to leaders of firms that understand blockchain and are willing to aggregate its capabilities into tangible and sustainable sources of value.
Author: Milan Ganatra, Founder and CEO, 1Silverbullet
