The benefits of using a blockchain
Transparency: In my opinion transparency is the biggest advantage of using blockchain technology. The economic consequences of using blockchain technology is tremendous. Transparency is achieved by all users having access to identical copies of the blockchain with all events occurring on chain being available for all users to see at any time. Data cannot be falsified as blockchains are distributed and events are agreed to have happened through consensus. This means that all users of the network (the majority technically) have to agree for information on chain to be correct preventing the falsification of information and also the enhanced availability of information to all users - when in traditional ledgers or networks, centralised entities would have sole access to information, and the ability to publish or share that information correctly or incorrectly, if they so choose, with others. This very much ties into traceability as i will touch on later.
The combination of transparency and traceability allows for trustlessness within the network. This is to say that organisations or individuals no longer need to place faith in one another when dealing with each other either in the form of a financial transaction, provision of goods/services or general cooperation between stakeholders within a network or economic ecosystem.
Trustlessness allows for increased economic activity resulting in more transactions bolstering economies, marketplaces and entire industries. From a business perspective the ability to be able to facilitate business with individuals or organisations which you do not need to trust broadens horizons and creates far more business opportunities. This is an inter-organisational benefit of trustlessness, in which companies can benefit from a greater number of options when looking for partnerships, suppliers and customers, where previously they may not have been able to trust these stakeholders with reduced transparency. The transparency allows for a company such as a fast food supplier to select suppliers knowing the processes and ingredients used by each supplier. Choosing the supplier which most closely fits their business model, their target market and their business ethics. This largely links into the traceability of the ingredients explained later on as well.
Another example of transparency and trustlessness being of benefit to companies on an inter-organisational level is the elimination of the need for intermediaries between two parties doing business together. Transparency allows both parties to ensure that the other is fulfilling their side of the bargain to a standard that is acceptable to the other. All processes can be seen by each party on a transparent blockchain.
Transparency also allows for a vastly improved business model in house. Intra-organisational functions can be greatly improved allowing for departments throughout the organisation to be able to efficiently and effectively communicate without the need for timely and costly processes such as sharing information or validating information to be correct because every individual will have the exact same transparent copy of the blockchain to access at any given time. This efficiency and speed will be explained later on.
On top of this, transparency allows for companies to greatly improve their ability to perform quality assurance and control. This is because through the transparency of the blockchain companies will be able to monitor all information, including transactions and processes used by employees. This will protect the company against neglect or manipulation from employees such as an employee choosing suppliers that they will get a personal gain. The transparency allows the company to see the processes the employee used for selecting a supplier and ensure a supplier was picked that was of the greatest benefit to the company.
Transparency also allows for employees and employers to deal with each other in a trustless manner as well, employers no longer need to trust and employee to do the work they say they will, and employees no longer need to trust employers to pay them when their work is done. Instead a smart contract can be put in place whereby upon the completion of work, tasks or objectives, part or whole payments of an employees wages can be made in a self executing way. Fascinating isnāt it? This is of course of great benefit to a company who does not want to be paying employees for poor stadards of work and greatly reduces costs of monitoring the business processes.
Truely there are so many more benefits of transparency to businesses not touched on in this article.
Security: Blockchain offers much improved security compared to traditional ledgers. It removes single points of failure on the network. This is because information is stored across all nodes on the network replacing centralised servers for data passing through or being stored on. In traditional ledgers if the centralised server was compromised so too was the information recorded and stored on the server, meaning information could be taken, altered or malware could be placed on the server. Due to the distributed nature of blockchains, the combination of encryption & hashing of blocks & the proof of work algoirthm & network consensus provides a 3 part security function to the network. Encryption and hashing means that in order for an event to be changed on the blockchain, first the information must be decrypted and all previous blocks altered in order to for an event to be changed on a particular block. Next the hacker will need to successfully mine the current block using proof of work competing against other nodes, a high difficulty means that more processing power is needed to compete against other miners. Lastly even with the next 2 steps being achieved when the information is broadcast to other nodes consensus needs to be reached for the event changes to be accepted. In order for this to happen the hacker would need to gain control to 51% of the network nodes to validate the changes.
This is a huge advantage to organisations handling sensitive information such as health records, transactional data or even classified information such as what is held by government organisations. Security is very important. If a companies data is hacked even in the case of just users personal information it can be extremely costly in the way of lawsuits, business reputation and brand as well as the cost of fixing the exploit or changing all users information. Clearly it pays to have better security.
Improved traceability: When an event happens on a blockchain there is finality, all information of events that took place on a particular block is recorded & broadcast to other nodes. This information is immutable meaning that a permanent record is created. This information can be viewed by all of its users meaning trails of information can be followed back along the blockchain at any time. Because everyone has access to the same copy of the blockchain these trails are easily followed meaning transactions can be traced all the way back to the beginning of the chain. It is not just transactions that can be traced, companies can use blockchains to trace work processes and workflows allowing them to trace faults back to the part of the process where the error is made.
It is essentially this traceability that allows for transparency, not just at the present moment but also the transparency of past transactions or events on the blockchain. Traceability allows transparency and trustlessness to be key benefits to blockchain networks. That is why I personally would consider traceability and transparency to be one of the same when it comes the benefits of blockchain technology with traceability being achieved by the permanent recording of transparent events (be it exchanges/transaction/data input) happening on chain.
Increased efficiency and speed: Due to the trustless and distributed nature of blockchains, businesses are able to benefit from increased efficiency and speed by deploying a blockchain infrastructure within the business and also from a blockchain based infrastructure within the industry and economy. I will talk about these 2 key aspects seperately.
The Distributed Nature
This allows for all users of the blockchain network to be able to access the exact same information at any given time due to the blockchains high availability. Each user has a copy of the blockchain containing the exact same information - reached through consensus as discussed previously. This distributed nature allows for increased efficiency and speed intra-company meaning communication between departments to be minimised and time spent discussing progress, verifying work or progress or better put the time spent sharing of information to be greatly reduced. Imagine waiting for 2 days for a sick employee who has the information on his departments progress to come back to work before you are able to continue with the next stage of production. This is just inefficient and slow. The distributed nature of the blockchain allows for information to be shared and accessed in an extremely efficient manner, thus improving both efficiency and speed.
Now take this concept and apply it to the inter-organisational fluidity of a network or ecosystem, such producers -> suppliers -> Your business or a joint venture whereby information is shared between companies. It does not take long to realise that the distributed nature of the blockchain allows for improved efficiency is information sharing between organisations. Information is shared much quicker and ingredients and processes used can be verified by any parties. Could you imagine needing to find out from a producer of wheat what pesticides were used on the crop when you as a business only have contact with your supplier? The distributed copies of the blockchain vastly improves the efficiency of communication, following the chain of communication without this technology is timely and inefficient. The easy verification of materials and processes used in supply networks is achieved through trustlessness which I will be discussing next.
Trustlessness & Efficiency
Following on directly from what I have just detailed it is not only the ditributed nature of a blockchain network that vastly improves efficiency and speed but also the ability for inter-organisational networks and ecosystems to be able to transact and work together in a trustless manner. Trustlessness is achieved through transparency and traceability as detailed previously in this article. This trustlessness facilitates a quicker process when choosing suppliers and relying solely on the data on chain as verification rather than a sales pitch or good brochure. No investigation or research is needed into a supplier or their suppliers and so on and so forth, and as you can expect this leads to quciker and more speedy business decisions being made. Furthermore due to the trustless nature of blockchains you do not need to consider a suppliers credibility as payment to that supplier will only be executed by a smart contract on delivery of the product or service exactly as described using not only all the materials as promised but also all of the processes as well. A by product of this is also the payment for reciept of products is executed automatically which once again greatly improves speed and efficiency of transactions. This transactional efficiency can also be described when looking at the business -> consumer with the same principles of trustlessness applied to an efficient transaction with the customer.
Now very briefly I would like to touch on the benefits of trustlessness and transparency intra-company. In a very similar fashion to what is described for inter-organisational trustlessness, intra-company trustlessness can be applied to internal processes from the design of products, to the marketting campaigns all the way through to the delivery of the product or service to the customer. Trustlessness & transparency allows for quality control as well as assurance in all of these business processes and products ensuring the highest levels of efficiency take place at every step of the process. Businesses would not have to worry about verifying work done by an individual at the company or a particular department before providing bonuses or wages as it can all be verified on chain before paying any wages to the employee. this is yet another example of how blockchain is able to improve efficiency - including the reduction of HR tasks and potentially even managerial tasks as well. In fact a lot of internal processes and tasks many middle layers of businesses currently account for may become obsolete.
Reduced cost: Lastly as Iām sure this article has more than covered fully in its explanations, businesses are able to greatly benefit from reduced costs as a direct result of incorporating blockchain networks into their processes as well as an industry as a whole.
By eliminating the need for intermediaries between two parties in a network as discussed in transparency, businesses can greatly reduce their costs giving a competitive advantage against other market participants still requiring intermediaries to facilitate joint ventures, and trade between organisations.
The reduced need for intermediaries can also be extended to the need of governing bodies and regulation in markets to be reduced. Transparency allows for governments or governing bodies to oversee processes which previously would go on behind closed doors leading to audits. This reduction in regulation of certain markets or industries will lead to a reduction in businesses costs increasing profitability.
Some of the costs businesses are able to protect themselves against are losses incurred by central points of failure within centralised networks such as the loss of data/values/information and in some cases even money from an attack on a centralised server, the manipulation/alteration/falsification of records a centralised server by an employee or admin. Information lost can be a huge cost to a company just in the inherent value of data on its own as we enter an age where information and data is king. Coupled with the cost it may have on future enterprises current processes etc. That data may have been market information which needs to be re conducted or perhaps a work flow for the current manufacturing processes of a company.
I believe that this section is another endless section about how business costs can be reduces and i have only given limited examples of how blockchain technologies can greatly reduce costs for businesses. I believe it essentially comes down to the ability for blockchain networks to facilitate and supplement trade & cooperation between companies without the need for an intermediary, the protection it offers to data stored by the company and also the greater and faster access to a wider range of information for the company as well as its smaller components that allow for a great reduction in costs compared to standard models.
