Blockchain is not just about cryptocurrency; it’s a technology that allows optimizing countless processes in business. Blockchain allows verifying authentication of goods, tracking supply chains, making fast financial operations, etc., within a few seconds. In 2020, Pandemic boosted blockchain integration into businesses. According to PwC, in 2030, world GBP will grow to 1.76 trillion dollars due to blockchain employment. This article will tell you how to implement blockchain technology in business, what opportunities it creates, its pros and cons.
The necessity of blockchain in business
Blockchain is a continuous chain of blocks with specific data. The information that blocks deliver can’t be changed or deleted; it's only possible to add new information. Numerous computers store block copies worldwide, i.e., decentralized, without a central server. Hence, even if some computers break, the data is still present on others.
The main opportunities that the blockchain technology provides for any kind of business:
The technology provides its full potential only if there are hundreds of participants. Therefore, blockchain is not suitable for local employment within a small company. Companies with enough suppliers, clients, franchisees, and other parties requiring control get the maximum benefit of the technology.
- No intermediaries;
- High transaction speed.
The blockchain models and principles allow solving numerous tasks in business:
Blockchain implementation helps to save funds, automatize many processes, and reduce risks in business.
- The technology is riskless, making it possible to find compromise solutions during deals with unreliable counterparties. Blocks within a chain link with the previous ones, and new blocks automatically go to a register; therefore, no one can deceive the company. Also, there are no risks that any party will not comply with the requirements.
- Transaction speed. Any transfer will take under three minutes regardless of the sum, while traditional methods can take up to several days.
- Lower fees. Blockchain offers low costs since there are no intermediaries involved. Dealing with many transactions employing classical technologies might result in significant expenses, while blockchain is more cost-effective.
- Total privacy, the blockchain is hard to hack, technically impossible. The blockchain technology helps businesses to remain confident about the security of their data.
Blockchain employment industries; who will benefit from the technology
Basically, any industry can employ blockchain, there are no limitations, yet it is worth determining whether a particular business will benefit. It’s essential to get answers to several questions:
If a business requires one of the points mentioned above, then the company needs to integrate blockchain for specific processes.
- The number of parties involved in storing and sharing data.
- The number of intermediaries that complicates the process and makes operations expensive.
- The importance of transactions and decision-making speeds.
- The necessity of data authentication.
The industries and regions employing blockchain
The blockchain will benefit the following industries:
The list above names only a few sectors of business for blockchain. Furthermore, blockchain helps to use money faster, get benefits, and send and store data, including agreements, contracts, etc.
- The financial sector, namely this industry, includes the stock market and securities. Primarily, a blockchain focused on these sectors. Small companies and individuals actively trade assets without intermediaries on exchanges.
- Logistics involves numerous clients and suppliers that require supervision and the completion of many tasks. Integrating blockchain with logistics reduces additional document flow and optimizes many working processes.
- Real estate is a sector of massive capital, frequent transactions, and countless documents.
- The power industry employs blockchain to reduce the expanses of the entire infrastructure and simplify processing documents. As a result, entering the business is more straightforward and provides profitable conditions for trades.
- Insurance uses blockchain to automatize processes and increase the communication between clients and companies.
The cost of any project will depend on the country, team, industry, targets, and other factors.
A smart contract is an application that processes agreements automatically following particular conditions. The price can reach 1000 dollars while integrating an extensive application on a blockchain; for example, Uber costs above 220 thousand dollars. If developing an application DApps, the price will start at 1 thousand dollars and create a token — a dozen-fold more.
The real asset, with material form, is the most expensive blockchain product. The reason is that the projects will be large-scale, and the customers are often large corporations and states.
Common issues while integrating blockchain into business
There are some common problems while integrating or employing blockchain in business projects.
The reason is that technology is young and new. Common issues are:
- Ignoring all network capabilities and employing the technology for purposes that a regular database can manage. It is essential to understand where blockchain will provide maximum benefit and where classical instruments will do.
- The complexity of integrating it with existing technologies and the myth of the versatility of networks. Blockchain is a separate base that requires applications for particular sectors. For example, it’s critical to have a user interface and other interaction mechanisms to enhance supply chains. Also, some platforms focus on specific tasks. For instance, some are necessary for tokenization, others for privacy, etc.; there are no versatile solutions for all functions.
- High expectations for smart contracts. Smart contracts are a significant benefit of blockchain. These are conditions in code within the network that automatically execute the agreement if all requirements are met. However, there are issues with scaling and control since there is no unified regulatory base for states; therefore, employing smart contracts is complicated.
An example of processes within a consortium blockchain network
If you plan to implement blockchain in business, it is essential to understand smart contracts and consensus. There are three consensus models for selection:
After understanding the consensus models, the next step is to figure out the smart contract features since they are critical fur employing blockchain in business. Smart contracts connect business management and blockchain technology logic.
- Proof-of-Work (PoW) — involves risk with machine idle time. Also, the model has large expanses of equipment and power.
- Proof-of-Stake (PoS) — mane risks concern money, yet it doesn’t require energy-hungry computing. Miners only provide the signature, while the success depends on the token volume of stakers. It's a handy model for public networks. Potentially, the consensus comes to centralization; hence, the network becomes vulnerable. To support the stakers' motivation, you can employ Leased-Proof-of-Stake (LPoS). The model will reward the stakers with an interest rate for their tokens. Most public networks grow thanks to stakers motivation.
- Proof-of-Authority (PoA) — is one of the best options for private networks and businesses. It doesn’t require tokens to increase financial motivation. The model picks random active networks to support decentralization and reduce validators, which allows for scaling management. The prime risk concerts the reputation.
It’s essential to know how to record data and store it:
- Programming languages are helpful for records. For example, Ethereum employs the Solidity programming language. It allows the creation of any contract and distribution to all nodes, thus allowing them to execute the contracts and add output information. The prime issue is bandwidth and its capabilities. Smart contracts for corporate employment frequently have complex logic. The next problem is the language since only specialized professionals know it.
- Smart contracts can also connect the node and the contract, thus providing high transaction speed, yet the mechanic might be poorly efficient if it requires changing the business contract. In this case, the concern is the continuity of operations.
- Smart contracts function within docker containers and are accessed via REST API or gRPC. This approach allows writing smart contracts in a specific programming language for a particular company. Hyperledger Fabric company employs this technology.
The example of smart contract functioning
Blockchain technology is rich in solutions, which makes it versatile for particular industries. The companies can determine their option and adjust personalized settings according to their activity. For example, Bitcoin offers transparent transactions visible to anybody. Many projects in business do not want this system since it violates their corporate secret. Therefore, there are four blockchain types: public, partly public, private, and sidechains.
Blockchain types and risks of implementation
Bitcoin, Ethereum, and other very first cryptocurrencies represent the classical blockchain. All transactions are public and transparent; hence, anyone can view the history since the first block, the addresses of receiver and sender, sums, time, etc. It allows confirming financial operations. Public blockchains benefit authorship and businesses that manage valuable assets, copyright, etc. Public blockchain allows knowing the age of a car, its breakdowns, and information on former owners.
Partly public networks allow managing rights and picking users that can access specific information in the blockchain. The approach might differ; for instance, the voting and ratings can help determine the authority. Each user will have its power. ZCash provides users anonymity; no one can track their financial operations.
Private blockchains are similar to the public, yet only particular people can access data. The blockchain is centralized; the company owner defines all rights. It’s an excellent solution for health care institutions.
Sidechains are networks that function as a bridge between two blockchains to avoid intermediaries. It’s perfect for storing confidential data if the main blockchain can be hacked.
Information System Audit and Control Association and other institutes conduct global research on the risk of blockchain employment.
According to their study, there are five groups:
Blockchain introduces a change to numerous business processes and changes the work models through integration. The solutions that corporations couldn’t access earlier are now available, simplifying and making the work faster.
- The development phase involves protocols and algorithms. When deviations occur, the entire system's integrity is compromised, making the network vulnerable to intruders.
- The data exchange is not always efficient; hence, some processes in business are unstable and cause issues.
- Data volume in blockchain always grows, and violating the limits causes data reset. Wrong update coding also might result in losing information.
- Different countries use smart contract transactions. There are no unified regulations and standards for blockchain. Therefore, the conflicts are troublesome from the law's point of view.
- Blockchain relies on security keys; still, the networks are decentralized, there is a chance for the human factor, and storing the keys on a PC might help hackers to steal funds and data.
Blockchain solutions for solving tasks in business
Blockchain technology simplifies many payment processes, providing credit and financial institutions benefits. Registry payments are cheaper than traditional methods. For example, Ripple Corporation works with numerous clients. Santander and Western Union are among them. With xCurrent, the company's internal platform, real-time payments are made.
The next popular area of use is managing supply chains and control. For example, IBM and Accenture are developing blockchain-based enterprise solutions for different clients. In 2018, IBM made a successful launch, the Food Trust Network. It gave large stores like Walmart the to track products at any stage of their journey. The next successful project was the TradeLens platform. It made it possible for transportation companies and freight owners to exchange transaction data and send documentation to each other.
The simplified form of work is as follows:
There can be any number of participants in this scheme; for example, customs are added to international shipments. The procedure does not change; all participants receive software from working, and the data are recorded on any transaction at all stages. Anyone involved confirms all actions with an individual key.
- The customer puts documentation requirements.
- The sender leaves them online.
- The blockchain is populated with data about where the documents are stored.
- With a personal encrypted signature, the warehouse employee confirms the actual delivery of the goods.
- The recipient also confirms the delivery of the shipment.
There are several everyday tasks that blockchain helps solve:
Blockchain is being implemented worldwide, but the technology is not yet as perfect as it may seem. Some experts believe there are applications where blockchain can be a hindrance to reliability. A high degree of reliability cannot protect against legal imperfections during transactions. In addition, several digital tokens are not backed by real funds or paper, so they have little connection to the real world.
- Confirming the authenticity of an asset and its origin. This is especially useful for commodity groups. Blockchain helps combat counterfeit goods and counterfeiting. By doing so, retailers with many suppliers can build customer trust. The technology helps control the entire supply chain from production to the final recipient and comply with environmental or other standards.
- Security of financial transactions, full transparency of transactions. Blockchain protects against fraudsters, hackers, and other attacks, reducing costs and payment timelines. It makes financial services more accessible for people.
- Dispute resolution becomes more manageable because records in the network cannot be corrected or deleted. The authenticity of data will confirm any conflict situation data.
The blockchain value for business
Experts believe that the use of technology in business will increase significantly in the coming years. This innovation is considered a breakthrough because blockchain can change many existing business processes, increasing efficiency, reliability, and security.
Among the main advantages for corporations:
Blockchain in business is considered a new development. Still, the technology has been used for several years, meeting specific needs, the work of other technologies in AI, IoT, etc.
- Parties trust, allowing them to work together and exchange information and other data.
- The absence of different data with the introduction of information into a single system utilizing a distributed registry with access only for those with the appropriate permissions.
- Security of data storage at a high level.
- Absence of intermediaries and their services.
- Generation of all records in real-time.
- Guarantee of authenticity and integrity of products
- Control and full tracking of goods or services in the supply chain.
Classical IT systems cannot process a large flow of information due to low speed, volumes, and a wide variety of information. All this negatively affects corporate strategies and the ability to make quick decisions based on the received data. On the other hand, integrating blockchain into a business can eliminate many of the scalability issues while maintaining transparency and a high degree of security.
Blockchain is modern technology but does not provide a universal solution or solve all possible business problems. Its implementation unambiguously simplifies many processes, makes them cheaper and faster, and automates some areas. For specific tasks, blockchain is necessary and improves work generally, while for others, it remains a useless implementation. Any solution must be considered personally, being created for a specific type of activity. The development and implementation of blockchain for business is a promising area with more pros than cons.
Predictions for business use of blockchain in 2023
Industry experts predict that blockchain technology will continue to grow, with significant impact on businesses by 2023. Here are some forecasts:
- Blockchain adoption in supply chain management is expected to provide transparency and accountability previously unseen in the industry.
- Blockchain-based payments and settlement systems are predicted to become mainstream in banking and finance, increasing efficiency and reducing intermediaries.
- The healthcare industry is set to benefit from blockchain-based solutions for secure storage and sharing of patient data.
- The rise of decentralized finance (DeFi) is expected to continue, providing greater financial inclusion and an alternative to traditional banking systems.
Blockchain technology is poised to transform various industries, offering greater security, transparency, and efficiency in business operations.