Enspir(ation) Blog

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Blockchain: Changing the Way We Do Business

Blockchain, the technology behind bitcoin, promises to improve efficiency in numerous processes and create new business opportunities. It is a backend database with a distributed ledger and an exchange network for transferring value between trading partners. It doesn’t require a middleman to validate transactions. While it is still on the early stages, it could affect customers and the society by creating openness and providing a new level of freedom and empowerment.

In terms of thinking and activity, financial services is the most popular industry that the blockchain threatens to disrupt because it impacts everything that a bank does – money, contracts and movement of assets. Other industries that the technology is set to change include:

  • Healthcare
    Its application to healthcare would be on medical records. The blockchain could verify if a specific procedure has taken place, share data and ensure encryption, and authorize others to access parts or your whole medical records.
  • Government
    The blockchain has an embedded trust component so you don’t have to go somewhere to prove your identity. For instance, you need to make a transaction with the land registry, motor vehicle registration or property ownership. You don’t have to be somewhere to make that transaction.
  • Real Estate
    Blockchain gives a good historical record of anything, including time stamps, service or ownership. With the technology, you don’t have to erase the previous state to make room for the new one. You just add a line below like a ledger. The blockchain can store the history of who owned a particular house since the time it was built, and that record cannot be tampered with.

How will it change the way we do business? In this era of Big Data and Internet of Things, assigning a digital signature to each data can be useful. Recording and verifying each stage of the business process help improve the reliability and quality of products and services. It will affect not just your bottom line but also the top line – creating new revenues, growth and services. By allowing customers to check everything on the blockchain, they will have a new level of freedom, too.

The blockchain is about trust, transparency and the truth. It enables greater visibility by allowing you to know what has happened, when it happened and how true it is. In the future, services and applications will use the technology and we will use it to verify records and authenticity.

Blockchain Disrupts Business Models

Most companies wait for a certain technology to mature before investing on it. That’s why fin-tech companies have their eyes on the blockchain. They are investing huge amounts of time and money on its development. The technology is believed to disrupt business models by making financial services more efficient. Soon, companies will be able to execute financial transactions in entirely new – and secure – ways.

What is exactly a blockchain? It is a geeky term for a digital ledger or bank vault that participants can access and make changes with. It is popularly known as the technology that underpins the Bitcoin, providing indelible record of its transactions with high levels of cryptographic security. It has many features that fin-tech companies find compelling:

  • It’s decentralized. It doesn’t have a single point of failure.
  • It’s secure. It utilizes cryptography to validate all transactions.
  • It’s has an immutable history. It has a write-once, spend-only attribute.
  • It’s efficient. You can exchange information fast and easy.
  • It’s transparent. Everything is documented in the blockchain.

The blockchain technology has the potential to streamline and accelerate business processes. It can also reduce or eliminate the roles of intermediaries, and increase cybersecurity as well. While it has some challenges, it will be extremely powerful and will change how businesses operate. Instead of relying on a third-part clearing house, financial companies can use the technology to execute and verify transactions safely and discretely among themselves.

However, financial companies face a number of challenges in using the blockchain:

  • The main roadblock is that the industry is heavily regulated. This means that many of its transactions have to be regulated by a third-party and must be transparent.
  • There is also the question of privacy. It can be difficult to satisfy participants who want to conduct safe transactions without an intermediary, but do not trust one another.
  • Lastly, there is the issue of Due to high volumes of financial transactions, the system can slow down or stop – even for just a second. This limits adoption in cases where speed and volume are important.

Despite these limitations, the blockchain is becoming a significant part of the financial services industry. Today, it is being used by banks to streamline and automate their back-office operations. It is also spreading to other industries, such as the healthcare, IoT, real estate, insurance, cloud storage and supply chain management. Hopefully, it will transform the inefficient ways of conducting transactions. A lot will depend on which consensus mechanisms will be adopted. Some transactions may find this technology beneficial. Others may not. It is up to companies which works best for them.

What No One Tells You about the Blockchain

Many consider the Internet as the most important invention in the last two decades, but the Blockchain steals the spotlight today. What makes it so interesting is it provides us with a completely new way to carry out transactions that are too complex and that involves multiple parties. It eliminates the need for middlemen. One day, it will power our money transfers and subsidy schemes. But, let us not get too excited about the technology.

Initial Disadvantages of the Blockchain

  • Throughput capacity
  • Scalability
  • Permissioning
  • Storage limits
  • Challenges of integration

As the blockchain is further developed, many of these initial disadvantages are closing. The fast developing ecosystem is addressing them to drive further deployment and adoption. But, there are still some serious limiting factors that can mess up the technology’s potential to change the world:

  • It is not environment-friendly. The Bitcoin might be the most carbon-polluting technology invented in the last three decades. While it has great potential in its use outside the cryptocurrency world, it also has a negative effect on the environment. It is estimated that a single bitcoin transaction uses the same amount of electricity as 1 and ½ households over 24 hours. In other uses, the blockchain could burn more fuels in other countries.
  • It lacks transparency. The modern trend is greater openness and tracking in communication and commerce. But, the blockchain is a closed shop by design. Generally, it is an efficient system for data exchange, but data is only visible to somebody who chooses to mine it. This means some of the data is hidden and the rest are massively distributed, which defeat the purpose of migrating to businesses that offer transparency.

The blockchain has entered a hype cycle. But when we get past that hype, you will realize that there is something fantastic going on in the technology. It is a revolution in the making. Its potential as a technology makes it so exciting in so many ways. In fact, it is being considered to be adopted to the Internet of Things – to take it to the next level. There is no denying that the blockchain will change our lives in the future. While it has some serious limiting factors, the overwhelmingly positive ones are what we are rooting for. 

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