Mainstream investors and the business world as a whole are growing more interested in blockchain technology. But whenever a new game-changing technology is introduced, it can often raise more questions than it answers. For many investors, it can be challenging to understand what the actual benefits of blockchain solutions are. Aside from powering bitcoin and other cryptocurrencies, what good is it? Can it help you run your business better? Solve real-world problems? As CEO of a company that specializes in building enterprise blockchain solutions, as well as an early leader in the Bitcoin Teller Machine (BTM) industry, these are questions I deal with frequently.
Below I’ll cover some uses cases for blockchain tech, as well as questions you should ask if you’re considering blockchain solutions for your business.
Payroll And International Transactions
This is perhaps the simplest application for blockchains, and it might be the most immediately relevant. Legacy payment methods require transaction fees and can sometimes take days to clear, especially for international payments. With blockchain networks, payments can be made almost instantly. Whether you are sending or receiving payments in bitcoin or a fiat-currency-linked “stablecoin” like DAI or Libra, payments are cheaper and faster because there are no middlemen (banks) that have to process the transaction and take a cut for themselves (Full disclosure: Authors holds investments in Bitcoin and DAI.)
Blockchain technology can power “smart contacts” to fulfill transactions, something that could potentially make business owners’ lives much easier.
It is always wise to perform due diligence on any company you are considering doing business with. You don’t want to pay for something and have the other party take your money and renege on a contract. A smart contract is an automated, self-fulfilling contract between two parties. Payment is not released from one party to the other until both parties have fulfilled their terms of the contract. Once this is done, payment is released automatically.
A good analogy is a vending machine. When you put money into a vending machine and select a drink you want, you don’t have to worry: “Is this machine going to honor its end of the bargain?” No, it simply gives you the drink, automatically.
This will be applicable to business to business (B2B) and business to consumer (B2C) transactions, as well as hiring contractors for short term projects. It could eliminate the need for third parties to hold money in escrow, and allow for greater transparency between companies and individuals doing business.
Supply Chain Management
It’s no secret that supply chains are a complicated mess. When each link in a supply chain is in a different country with different software, legal systems and internal procedures, inefficiency and lack of transparency are almost guaranteed.
This is where enterprise blockchains come in. Because permanent, immutable records are an integral feature of blockchains, they are well-suited for solving problems of opacity, inaccuracy or fraud in the logistics industry. The solutions offered by this new tech are so promising that IBM and A.P. Moller-Maersk formed a joint venture to build blockchain networks for the shipping industry.
Energy Trading And Resource Tracking
The energy sector could benefit tremendously from blockchain technology. The decentralized, distributed ledgers that make up blockchain networks are perfectly suited for tracking and executing the trading of electricity. It will allow not only companies but individuals to buy and sell energy on a decentralized P2P marketplace.
Companies in the energy sector can also use blockchain-based systems to record and track how much energy is generated or commodities produced, eliminating the need for spreadsheets and thousands of man-hours spent on administrative tasks. Such systems would probably also lower costs relating to compliance since the data would be more transparent and easy to sort through.
Data Storage And Data Sharing
Cloud-based storage is a big business these days, but why should giant tech companies have all the fun? Decentralized data storage will be inherently safer due to the encryption built into blockchain networks, and cheaper than renting out storage space in massive data centers.
Other blockchain projects like FileCoin will allow companies and even private citizens to rent out unused storage space on their hard drives for data storage and receive compensation in return. (Full disclosure: Author holds investments in FileCoin.) And some projects like Golem will even allow users to be paid for renting out their computer’s processing power to other users. This could help businesses save money by not requiring them to upgrade to newer, faster computers as often.
Questions To Ask Before Using Blockchain For Your Company
While this is all very cool, you need to ask yourself a few things before adopting a blockchain-based fintech/IT solution.
What are your scalability and performance requirements? What how sensitive is the data you want to store on a blockchain? If it is highly sensitive information you don’t want to make public, using a permissioned rather than a permissionless blockchain is essential.
What about file size? How readily accessible does your data need to be? For many organizations, a combination of blockchain and cloud-based storage would be a better option. For certain specific use cases, a cloud might be sufficient for now.
The point is, you should figure out what your company’s needs are and make the blockchain solution you’re considering fit your needs, rather than just adopting a blockchain solution without a clear strategy.
In 1994, a few far-sighted individuals may have been able to identify some business applications for the internet, but most people were still struggling to understand it. A few decades later, the internet is so integral to how modern business is done that the modern economy simply wouldn’t function without it.
It’s quite likely that blockchains will have a similar impact on how we do business. While blockchain solutions aren’t right for everyone at this point in time, all companies who want to remain competitive in the years ahead should be keeping an eye on this technology. It is likely that over the next decade, it will benefit companies and customers alike in ways we can barely imagine right now.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.