7 Key Advantages of Utilizing a Blockchain Platform

Using blockchain for trading purposes opens up several possibilities we think are invaluable. Here are 7 key advantages of utilizing a blockchain platform.

Most people think of blockchain as a vehicle for bitcoins. Now that the bitcoin fever has died off a bit, people are taking a harder look at the potential of blockchain.

There are some uncertainties about it how long it will take to integrate blockchain into daily life. Even so, the technology may very well reshape the way the entire world does business.

Before we jump into the advantages of blockchain platforms, a quick look at blockchain itself is probably in order.

Let’s go!

Blockchain Platform Essentials

At its core, blockchain is a record-keeping database. It keeps track of transactions.

What makes it different is that the database gets distributed across a network and encrypted. Functionally speaking, every computer attached to the network holds the database.

Every transaction gets recorded, in sequence, then encrypted as a “block.” No one person can change those blocks. They can’t access every instance of the database on every computer in the network.

The core software that drives blockchain is open source, meaning it’s freely available to anyone. A blockchain platform is a specific version of that core software that someone built to serve their needs.

Improved Efficiency

Given how fast computers run now, there is a lot of inefficiency in business transactions. The problem isn’t the computers or their speed, but the people in charge of those computers.

The gatekeepers create inefficiency and it’s for their own gains. For example, buying and selling food or raw materials often happens through exchanges. The exchange sets the rules for who can sell when and at what price.

Then they charge you a fee for the privilege.

A blockchain platform allows the people who produce the food or raw materials sell straight to the buyers. The middlemen and their fees go away. It also means that no one waits around for the exchange to move the money.

Sellers get their money faster and more of it. Buyers get their products at a better price.

Fraud Prevention

A lot of fraud revolves around manipulating, altering, or deleting financial records. The Bernie Madoff case is an excellent example. Madoff’s Ponzi scheme worked by taking money from new investments to pay out to old investments.

Using blockchain, it would be very difficult to pull this off and almost impossible to hide it. Every transaction gets recorded when it happens. Then it gets encoded to prevent anyone from tampering with the record.

So the money gets recorded coming in. Then any transfer of the money and where it went gets recorded. With a blockchain platform in place, investors could insist on an independent review of the transaction record once a year.

Just as important, no one can fiddle with the transaction record because the record stays distributed across a network.

In fact, the next section will talk about another benefit that could improve fraud prevention.

Smart Contracts

Smart contracts set up a series of protocols for when transactions can happen. If the conditions don’t get met, the money doesn’t move in the blockchain platform.

To prevent fraud, the smart contract protocols could dictate that transactions can only move on specified paths. For example, money can move from investor accounts to an account that pays for securities transactions. Money can never move from one investor to a different investor account under any circumstance.

The rules for those transactions would need more sophistication, but it would make fraud tougher.

Data Security

As of November, 2017 has seen an estimated 1140 data breaches that exposed around 172 million records in the US alone.

Some breaches happen due to poor security management. Networks or databases get left unsecured and the data gets exposed. Many breaches happen in spite of rigorous digital security.

In short, the old ways of securing data and networks can’t keep pace with the ingenuity of hackers. While nothing connected to the internet is 100% secure from hacking, blockchain is much less hackable.

The distributed nature of the database and native encryption makes it much tougher to crack. Digital signatures can bolster that by requiring several users to authenticate data access.

Transparent

Traditional financial transactions get shrouded in mystery by banks. Banks have good security reason for keeping transactions opaque, but it can slow down a deal.

Everyone is party to the details when using a blockchain platform. If one side says they issued payment, the seller just needs to check the transaction record. They don’t have to take it on faith.

Favors Auditability

Business disputes often boil to questions of who did what and when.

Megacorp insists they issued payment on time. Minorcorp insists they shipped on schedule.

To really work, the blockchain platform will need to accommodate things like shipment tracking or at least proof of shipment. Assuming the platform gets designed the right way, it’s a very reliable record for all parties.

It’s also a good way for securities companies to show their records are accurate in the case of an investigation. Smart contracts will also help with that because the company can say:

“This transaction happened because that’s the way the client set up the contract.”

Performance Review

The fixed nature of the blockchain record may even change performance reviews for entire elements of a business. You could adapt a blockchain platform for supply chain management.

It could prove an excellent tool for exposing the weak points in a supply chain. The record would show exactly when and where delays occurred.

It could also show which parts of the supply chain are performing well. It would reduce the overall amount of uncertainty involved in reviewing company performance.

Parting Thoughts

Blockchain isn’t just a new app. It’s a new approach to transaction management and record-keeping. Given time, it could supplant most of the current approaches.

It also offers tremendous benefits.

It’s a more efficient method for transactions. Its native features offer better data security and reduce the potential for fraud. It’s transparent to all parties and should streamline auditing at all levels.

It may even change the way companies conduct performance reviews for business units. Even if global blockchain platform use isn’t happening tomorrow, the benefits make it worth exploring.

ChainTrade offers blockchain trading for commodity derivatives. If you’d like to share your thoughts about blockchain trading or blockchain advantages, please comment below.