Five Ways Companies Benefit by Using Blockchain Technology
1. Increased Transparency
Because a blockchain keeps transparent and immutable records of every transaction, all parties connected to the same network have access to identical records instead of separate copies. In a low trust society, having separate copies provides no certainty to any party that the copy they have is the correct one.
Additionally, information on the blockchain can only be updated if everyone in the network agrees to it by consensus. Because no single entity can alter a single record on the blockchain without anyone else knowing about it, it provides greater transparency in ensuring accurate and consistent transaction records.
2. Enhanced Data Security
Because decentralization eliminates single points of failure, using a blockchain is more secure than any other form of data storage or recordkeeping. Every transaction is authenticated using cryptography before it enters the blockchain as a confirmed block. Fraudulent records cannot be added to the blockchain because they won’t get confirmed by other nodes.
For this reason, any data or transactions on the blockchain are permanent, tamper-proof, and secure. Plus, if companies do not wish to expose any of their data to outsiders, they can opt to use a private or consortium blockchain.
3. Improved Supply Chain Traceability
Any product you buy may come from a complex supply chain spanning the entire globe. There is always a risk that the product could be defective, contaminated, or even counterfeit. As you can imagine, this is a huge issue for companies selling food produce, pharmaceutical products, automotive parts, and aerospace equipment.
When vendors use blockchain to improve the traceability of every item traversing through their supply chains, they eliminate these aforementioned uncertainties, thereby reducing the risk of costly recalls, safety accidents, and public health hazards.
For example, when you buy medication from a pharmacy, you can check its information on the blockchain. You would know where, when, and by whom it was manufactured. You would also know whether the medication was created with the correct dosage under strict quality standards.
4. Higher Efficiency
Have you ever tried to pay someone using a personal check? If so, you have a pretty good idea how long banks take to clear it. Under strict regulations, banks have to go through a lot of red tape to just verify a single transaction. Companies in all kinds of industries also have to deal with red tape and paperwork, particularly when it involves legal agreements between multiple parties. This has a significant impact on speed, efficiency, and costs.
Using blockchain can automate many of these business processes, eliminating a lot of red tape and paperwork, thus reducing the time needed to get work done. Because everyone has access to the same information on a single shared record-keeping ledger, blockchain increases trust between the parties, and in turn, removes the need for a third-party intermediary.
5. Reduced Costs
Every company wants to reduce costs while boosting productivity. Fortunately, many business functions can be automated using smart contracts on the blockchain—asset management, payments, contracts, compliance, and more.
They could also reduce costs even more by eliminating intermediaries and third-party middlemen. They would not have to spend resources checking whether all parties have abided to the terms of their agreements. Increased efficiency, traceability, compliance, security, and transparency all act to reduce operating costs for many businesses.
You’d have to be living under a rock to not realize that we are living in a low-trust society. Mistrust between individuals and companies are at an all-time high. The good news, however, is that we live in an exciting time with a budding technology that can potentially change how we work, spend money, and interact with each other.
As distributed ledgers with tamper-proof records, blockchain technology has the potential to not only restore trust between individuals and businesses—but also increase transparency, data security, and cost efficiency while eliminating unnecessary paperwork and bureaucracy.
There are different types of blockchains: public, private, and consortium—each with pros and cons. The best type to use depends on what a company needs, how private they want their data to be, and how they plan to scale in the future.