It’s been virtually impossible to avoid blockchain in recent months.
Investment in various crypto-currencies has been shooting up and down relentlessly, with people making and then losing fortunes in a single day.
However, the currency aspect of the blockchain technology is actually a bit of a red-herring. It’s the blockchain itself that businesses should be getting excited about.
Why? Let’s take a look.
What is the blockchain?
Put simple, a blockchain is a record of individual transactions. Once a new transaction is completed, it’s then added to the ‘chain’ of other transactions: hence the name blockchain.
However, the encryption used means that processing ANY transaction means having to solve some seriously tricky math problems (problems that get harder to solve as more blocks are added to the chain).
Why is the blockchain so secure, though?
We’ll let the guys at Fraedom tell you, as their summary is top notch:
“By storing financial information across a network of computers, the task of compromising data becomes much more difficult for hackers. Instead of having to breach just one server, falsifying a balance or making a fraudulent transaction on a blockchain can only be achieved if the majority of the network is compromised. Hacking a single server can be extremely difficult, even for the most accomplished cybercriminals. Being able to compromise enough servers to falsify records on the blockchain is practically impossible, especially as hackers would need to breach each node simultaneously.”
But how can this benefit businesses?
The perks of blockchain aren’t limited to just currency. There are a LOT of different business matters it has the potential to affect in a positive way.
Let’s go through some of the most interesting!
One of the most renowned companies working in Blockchain today is the Ethereum Project.
The project, in their own words, is a:
“Decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.”
What does this mean in practical terms?
Essentially, that the Ethereum project will allow for the development of self-automated computer programs capable of carrying out the terms of a contract.
In other words, an escrow-style trade that doesn’t require human intervention or, more importantly, an escrow-style trade that won’t rely on judgement from a middle man.
What is the benefit to business? Simple.
The ability to carry out contracts that function in-line with necessary regulations without the need for staff.
All financial transactions will be cheaper if carried out using the blockchain, in other words. Don’t believe us? That’s understandable, but you don’t have to take our word for it. Barclays are already heavily involved in the Ethereum project.
Security and anti-fraud
Cyber-crime continues to rise all over the world. Literally billions of dollars each year are stolen by online criminals.
And, unfortunately, nearly every industry now stores some financial information about customers online. It doesn’t matter if it’s a mom and pop store flipping books on eBay or an international bank trading on the Dow Jones.
Needless to say, then, it’s essential for modern businesses to find a way to ensure greater digital security.
Here’s the key, then:
Blockchain has incredible security potential.
Ameer Rosic, founder of Blocgeeks, said:
“Blockchain technologies make tracking and managing digital identities both secure and efficient, resulting in seamless sign-on and reduced fraud.”
Why does this make it effective in terms of online security?
Simple: it comes down to identity.
A huge percentage of online crime comes down to this: a criminal pretending to be someone they aren’t to get access to that person’s money.
Blockchain handles this issue by enabling a person’s identity to be uniquely verified in a way that is immutable and irrefutable.
Essentially, blockchain uses ONE method to evaluate user identity: their unique private key.
And that private key is, essentially, almost impossible to fake.
It’s certainly many times more secure than the ‘complex password’ approach modern banks use.
Here’s Alex Tapscott, the CEO and founder of Northwest Passage Ventures, a venture capital firm that invests in blockchain technology companies, to explain why:
“In order to move anything of value over any kind of blockchain, the network [of nodes] must first agree that that transaction is valid, which means no single entity can go in and say one way or the other whether or not a transaction happened.”
“To hack it, you wouldn’t just have to hack one system like in a bank…, you’d have to hack every single computer on that network, which is fighting against you doing that.”
Modern businesses lose millions to security each year, and can be held liable for losing customer data. (Plus, of course, they can suffer brutally bad PR and lose thousands of customers as a result.)
Any system that allows for greater increased security is almost certain to be adopted industry-wide…and blockchain IS that system.
Any business worth its salt relies on constructive feedback and tracing problems to their source.
The series of electronic ledgers that form blockchain link every single facet of the supply chain: every transaction is linked, one after the other.
What does this mean in practice? Simple: that, were something to go wrong, blockchain will allow you very quickly trace the problem right back to the source.
To take an example: let’s say a company that makes sandwiches for a major supermarket realizes one ingredient has been contaminated. You would be able to immediately see exactly where the resulting sandwiches had gone.
The days of ‘mass recalls’ would be over, saving the company – and the supermarkets – from having to destroy acceptable products.
This ability to rapidly see every part of the chain can save businesses a huge amount of time and money.
Anyone over a certain age in America remembers the dispute surrounding the presidential election of George W Bush in 2001, so we won’t go into detail here.
The point is that, for a number of years, many people on the democrat – and losing – side continued to believe that there had been some kind of mismanagement in terms of votes.
The only reason this belief is acceptable is that, at heart, the voting process can still fall victim to human error – many votes are posted and counted manually.
A purely blockchain based vote would be – for the reasons we’ve illustrated already – incorruptible.
It would allow for all voters to be supplied with a ‘Delegated proof of stake’ that would protect all participants in any kind of vote from regulatory interference.
Like all forms of blockchain adaption, it would be essentially incorruptible, which is obviously the principle concern in matters of voting.
How would this relate to businesses? Simple: all businesses carry out voting in some capacity.
It could be used to allow shareholders to vote on the new CEO, board members to vote on future policy or even something as simple as allowing employees to vote where they wanted to go on the Christmas party!
Whenever there is any kind of dispute internally and it’s put down to a vote, blockchain will allow for an indisputable result, thus speeding up any major decision making process.
One of the primary benefits of blockchain technology, as we’re sure you’ve gathered by now, is the potential it has for speeding things up.
This is definitely the case when it comes to the financial sectors, and auditing in particular.
As we’ve said, blockchains provide an incorruptible, permanent record of transactions. Auditors could request to see any piece of financial information – from tax payments to foreign purchases to expenses claimed – and the company concerned would be able to provide this information quickly – usually on the same day.
Under the current system, it’s not uncommon for auditing to take months, especially in the case of a larger company.
Blockchain technology could improve speed of process by hundreds of per cent, thus saving the companies concerned a huge amount of time and – as a result – money.
Put simply, any company with more than 20 staff or so could save a huge amount of money by carrying out their payroll using blockchain.
Because banks charge reasonable high amounts for carrying out electronic transactions – and charge companies even more as a rule – simply removing those additional costs could save very large firms thousands – and maybe even millions – every single payday.
This is also true of any business that regularly uses freelancers, consultants or any other kind of third-party in order to complete their work.
Most are well aware of how vital cloud computing is to modern businesses.
And, of course, one of the biggest potential issues with cloud storage is security. It feels like there’s a new celebrity hack every week or more.
So, there is the potential for blockchain based cloud storage to offer all the perks with none of the security risks.
But, that’s not all. There have already been whispers of the potential for a ‘peer-2-peer’ cloud storage space.
Essentially, by using blockchain’s secure technology, businesses would be able to ‘lend’ their spare hard drive space to other users, earning extra money as a result.
The technology is definitely in its infancy, but the potential for such an idea is huge: it would stop the reliance on one or two major providers that – despite their market dominance – still can’t always guarantee the level of security most users would like.