Blockchain for Business: What is it and what’s in it for your company?
Blockchain… reads like a familiar situation?
So, you heard about this thing called blockchain for business. Efforts to research it left you frazzled by the tech-heavy jargon. Reading about the features is great but you are still trying to understand what’s the benefit for your company or institution. More and more you’re feeling left out as you see it pop up in your news and social media feeds.
Well, you’re not alone.
The world of digital currency and blockchain tech is a web of anagrams understood mostly by financial traders, data scientists, cryptographers, and techies — how could that not be confusing for the rest of us? This no-fuss to the point article is meant to help you understand what blockchain is and why your company or institution should care about it.
But let’s start at the beginning — what is blockchain anyway?
Blockchain, like most tech enabled solutions, is about doing an old thing in a new and better way. In this case, the “thing” is storing and transferring financial value in the form of transactions while the “old” are the inefficient and outdated processes that make it happen. This process relies too heavily on intermediaries, like banks, insurance companies, clearing houses, etc., that provide the trust to validate the operations. Although this has become absolutely necessary, their presence adds transaction time, costs, and errors.
The “new” is an approach that allows us to decentralize those processes with the use of blockchain tech, substituting intermediaries with instant mathematical consensus . This change opens up a set of benefits — the first being speed! Getting rid of intermediaries makes this process much faster. Secondly, blockchain reduces transaction fees to a bare minimum given that we no longer have to pay out to all of those pesky intermediaries. And last but not least, security. The ledger is no longer in one physical or digital location that can be easily attacked. Instead, it is shared publicly among network users making it less vulnerable to alterations or hackers. In summary it is faster, cheaper, and way more secure.
Let’s Look At A Real Life Example
Okay, you’re probably starting to feel like you have some abstract idea of how this works so let’s make things clearer.
Suppose your company needs to pay an invoice to an international supplier in China. You contact your bank and initiate a traditional wire transfer — only to pay a huge fee and wait several days before getting confirmation that your money has been successfully received.
The reason for this is that banks use SWIFT transfer protocols which require a lot of third party involvement — a minimum of four but sometimes up to eight intermediaries to be specific. This means your money transfer does a lot of circulating before it makes it to the supplier — all the while hitting you with big fees and longer wait times.
Now let’s play out that same scenario with a blockchain- enabled payment system.
You initiate the same transfer as before but this time you pay out only a small transaction fee. The request is then sent to the blockchain network where the nodes do a series of computational processes to verify that the transaction can be completed. Once verified, the money is then sent directly to the receiver and the transaction is filed anonymously on the blockchain.
This method brings several significant advantages. For starters, your transaction can be carried out in a matter of seconds given current speed rates. Secondly, you retain more anonymity and security since the blockchain does not list the names of senders or recipients. And most importantly, your company saves time and money!
Is blockchain then a solution for financial transactions only?
Remember what we mentioned earlier in the introduction text about blockchain as a ledger for transactions? Well, it’s not just limited to financial transactions — anything of value, be it information or physical goods can be stored and transferred digitally. Blockchain tech has the ability to make this happen better than in the traditional method or with any other tech.
Less expand the knowledge just a nudge. Have you heard the term Smart Contracts?
If you have, you might then know that they are automated contracts running on the blockchain that are programmed to self-execute themselves when all the conditions of the contract have been met. To put it in the context of the previous example, a smart contract can be programmed in a way that when you receive the good or service from your supplier, the contract will self-execute itself and make the money transfer to the supplier automatically. Again the benefits are greater speed and less costs, as we would be getting rid of intermediaries like lawyers and administratives that now have to manually take care of executing those with the legacy systems.
So what’s Bitcoin then?
Many think that blockchain is synonymous with Bitcoin — but this is not true. Blockchain is the underlying technology that makes digital currencies like Bitcoin possible. So in this sense, Bitcoin is an application of blockchain tech, one dealing with electronic money that is decentralized from a central bank, from a country, and from politics. Therefore calling Bitcoin blockchain (and vice versa) is like saying your computer and the programs you run on it are one and the same.
See the difference?
Blockchain can be used in a variety of ways for different purposes but the gist is always the same: it decentralizes power over the network. By doing that, your tech infrastructure becomes simpler and less costly, but most importantly, it enables quicker and more secure transactions. Whether you are trying to make your business more competitive or gain that competitive advantage, blockchain tech promises to deliver.
In our next few articles, we will be looking at blockchains ability to improve most major industries including e-commerce, insurance, supply chain, identity, energy, education, government, and even agriculture. Just look at what Africa has been doing to improve their farming sectors with blockchain.
The takeaway is that it’s a pretty amazing technology with a lot of potential to disrupt the messy ways some industries currently work and make their money. Furthermore, some of these industries have evolved into monopolies that have proven untrustworthy. Therefore the decentralized nature of blockchain tech will not only make life better, but fairer.
Still in doubt? This video below might finally solve the remaining doubts. If not, please leave your questions, tips, comments, or suggestions of industries to analyze in the comment section below. We are excited to solve those!
Over the next couple of weeks will be posting different articles outlining the benefits of blockchain for different industries — so stay tuned to find out about yours, and don’t forget to follow us!