If your company in any way deals with storing sensitive and important information, which most, if not all, modern businesses do, then implementing blockchain could be an important step in streamlining and securing its operations.
Blockchain technology is commonly associated with Bitcoin and other cryptocurrencies, and this is indeed one of the most important ways that the blockchain is being used today. But while investing in crypto with highest potential could be an important step for your business, that doesn’t begin to touch the bounds of what the power of blockchain could do for you.
We’re doing a deep dive into how business owners should think of blockchain and its unique benefits, risks, and practical use cases. Let’s get into it by defining how blockchain really works.
What Exactly Is Blockchain?
As mentioned, the application of blockchain technology has a far wider reach than just Bitcoin. To understand how blockchain can be used, we need to first take a look at what it really is and how it works.
Let us first clarify that there’s no such thing as the one blockchain, as blockchain is a type of technology. You could compare it to a database – there are lots of them out there – but a type of database that functions very differently from a traditional one.
There are two main aspects that we need to consider to understand its potential.
The first one is that the information in a blockchain isn’t stored in just one central location. Instead, the database is distributed across many different databases. This creates a whole new level of security, as well as immutability. You can’t just change the record in a central database – the other peers also have to agree to the change. That makes it difficult to hack blockchain, as you’d need to hack more than one server at the same time.
The second distinguishing characteristic of the blockchain is that, as the name implies, information is stored in a chain of blocks. Each block has to “agree” with the previous one, and information is always just added, never deleted. This means you have a full record of previous changes made, which is another trait that’s important for reliable traceability and transparency.
While there’s much more to know about how the blockchain works, this basic knowledge will be enough for you to understand that blockchain has potentially wide-ranging applications. It can be useful anywhere where verification and immutability matter in data storage.
Opportunities: Benefits of Blockchain in Business
As mentioned, blockchain is essentially just technology for storing information. That means a potential wide range of applications. Among the benefits of blockchain technology are the following:
- Distributed copies of important data. When your data is decentralized, no single server failure or corruption can cause a problem. There are always copies of your records and data, both protecting its stability and its authenticity.
- Added security and protection from hackers. You and your customers can rest easy knowing that blockchain technology can prevent unauthorized changes or ownership transfers from occurring.
- Traceable, tamper-proof records. You can implement blockchain to ensure that no one, whether authorized employees or anyone else, can tamper with important records where any changes need to be carefully recorded at every turn.
- Improve your brand image as forward-thinking and integrity-focused. By communicating to your customers that you’re implementing new technology that makes the operations more secure, you’re presenting yourself as both modern and reliable, as you’re taking great measures to ensure the protection of data.
To sum up, you can improve both business operations and trust from your customers by taking advantage of blockchain.
Challenges: Risks and Common Issues
Blockchain also comes with some unique challenges you need to be prepared for.
Conflicts With Data Privacy Laws
According to data privacy regulations, businesses must allow for the total deletion of customer records when they’re no longer needed. Depending on how blockchain is implemented, the inherent traceability changes in records could cause a compliance problem.
Addressing blockchain data privacy requires careful planning to ensure immutable records can coexist with evolving data protection requirements.
Similarly, the fact that blockchain data is distributed equally across servers could also be problematic when regulations require one accountable owner.
Technology Costs and Technical Complexity
Blockchain is, by conception, complex, and can introduce technological costs and issues that are hard to foresee. Even small errors in the smart contracts that blockchain is based on can cause massive problems that are hard to correct without a central authority.
Limitations in Speed and Storage
Since data isn’t simply stored in a database but instead distributed across several, and requiring authorization at each step, the number of transactions per second is limited. Each transaction also uses much more processing power and hence energy. This creates issues with scalability and can lead to high costs. The high energy use is also ethically questionable.
Vague and Incomplete Regulations
The regulations for crypto, in particular, are not yet established all over the world. In some countries, it’s a legal grey area, and in most, clear rules are not yet established. The future of regulations around how blockchain-based payment methods like crypto can be used is not yet clear, and introduces difficulties in areas like tax collection.
Implementation: Practical Ways of Using Blockchain
Now that we’ve looked at both the undeniable benefits of blockchain and the unquestionable challenges and issues, it’s time to look at how the implementation of blockchain could practically look. Here are some great examples of how a business can use blockchain to improve its operations:
- Introducing payments through cryptocurrency. Payments with crypto boast many benefits, including accessibility, easy payments across borders, and anonymity for those who want it. You can also avoid fees from third parties and currency conversions by allowing for crypto payments in your business, and the automatic transactions can speed up cash flow.
- Supply chain management. Blockchain can help improve the traceability of items in a supply chain, making it possible to track each step and trace each item in the case of a problem with one batch.
- Tokenization of rare or unique items. By making non-fungible tokens out of unique and rare items, their authenticity, as well as rightful ownership, can be established and proved.
- Instant action through smart contracts. Business operations can be streamlined by setting up smart contracts that ensure things happen without the need for authorization by personnel, saving resources and costs if implementation is done right.
To get the most value out of blockchain, a business needs to consider its own unique challenges and how they might be solved with blockchain, and then discuss implementation with an expert who can guide them through the best methods of doing things and advise them on the feasibility of a plan.
The Importance of Future-Thinking in Business
Transparency and trust are important in any business, as is security and immutability. With the promise to improve both of these in a business, blockchain is often a great asset that shouldn’t be looked past. While not all companies will benefit from introducing crypto – that is, the pros don’t always outweigh the cons – many do.
Being open to new technologies and thinking about the future is a crucial part of running a business. Just because others in your industry haven’t yet implemented something, that’s not a reason for you to ignore it if you know it deserves your attention now. It’s by taking bold steps towards improvements and embracing novelty in operations that you can get a competitive edge and enjoy the upper hand – until others copy your moves.
It’s important to be aware of the risks and challenges, but it’s equally important to dare to take calculated risks that move things forward. For many business owners, the implementation of blockchain could be just that.
