Everyone has heard of blockchain by now, although most people don’t know much about it beyond its name and its association with cryptocurrencies. But cryptocurrencies are just one of the many potential applications that exist for blockchain. You can think of the relationship between blockchain and cryptocurrencies as being analogous to the relationship between email and the Internet. Email is just one thing that you can use an internet connection for, but without the internet, you wouldn’t be able to have email.
As a technology, blockchain has an enormous amount to offer some businesses, many of whom remain oblivious to its potential. Entrepreneurs who are looking to the future should brush up on their understanding of blockchain technology and the potential uses and benefits it has for their business.
What Is Blockchain?
In short, a blockchain is a decentralized distributed public ledger that is shared and updated via a P2P system. Every member of a blockchain network holds a copy of the ledger but it can only be updated via consensus. This means that in order for a single entity to update the ledger on their own, they would need to control the majority of the network power. Otherwise, the other participants in the network will disagree with the update and it won’t be accepted.
Once new data has been added to a blockchain, it cannot be altered after the fact. This is known as immutability and is one of the key selling points of blockchain technology. It is because of this immutability that blockchain can potentially be used to create much more reliable records and could serve as a powerful auditing and authentication tool.
Cryptocurrencies are probably the best-known application of blockchain technology and are the one that most entrepreneurs have their sights set on. They have the potential to be a majorly disruptive technology; they aren’t just a potential digital alternative to fiat currencies, but are also business opportunities in their own right.
For example, there are cryptocurrencies like Solar Coin that are mined (created) by users generating their own solar power. Other cryptocurrencies use a variety of triggers to mine more coins. These triggers can be users solving math problems, or they can be tied to events on the network.
Businesses that enable their customers to pay via cryptocurrencies will be increasing their reach and providing their customers with more choice about how to pay for products and services. Cryptocurrencies are also gaining popularity as a truly international payment method. There are no conversion or transaction fees associated with international transactions. Cryptocurrencies have also proven to be a viable alternative to fiat currencies in areas suffering from major economic disruption.
Key Features of Blockchain
There are several features of blockchain that make it of interest to businesses and entrepreneurs and which separate it from the similar technologies and concepts that have come before it:
- Incorruptible: Blockchain networks are maintained via consensus. Each network utilizes different techniques for maintaining the integrity of the ledger and ensuring that any invalid updates are nullified instead of being distributed around the entire network. Once an update has been made to the network, it is then impossible to go back and alter existing entries in the ledger without corrupting or seizing control of the network itself.
- Decentralized technology: Unlike a database, a distributed blockchain ledger is decentralized. A database is stored in a single location. If that location or the server hosting the database is compromised, then the integrity of the data will also be compromised and can no longer be trusted. More importantly, everyone who is drawing data from that database has to implicitly trust the entity or organization that maintains it. Blockchain solves this issue through decentralization. Every member of a blockchain network holds a copy of the ledger and its integrity is maintained via consensus rather than trust. Because there is no central organization that has control over a blockchain, users can freely story information and data on the network without having to worry about another organization seizing control of it.
- Enhanced security: Removing the centralized authority from the equation has significant implications for the security of a blockchain network. Part of the reason that blockchain is able to offer better security than other solutions to similar problems is that blockchains make extensive use of strong cryptography. Any information that is added to a blockchain network first goes through a process called hashing. Hashing doesn’t tell you anything about the data itself, but it can be used to verify whether data is valid and the integrity of the network has been maintained. You can think of hashes as being like identification numbers for the blocks in a blockchain. Every block has its own hash and also contains the hash of the previous block in the chain. If any of the data within a block is changed, it will result in an entirely different hash. Were a user to attempt to go back and alter a previous entry in the chain, they would have to not only alter the hash of the block that they wanted to alter, but they would also need to change the hash of every subsequent block in the chain before the network noticed. This is basically impossible without an arbitrary amount of computing power.
What Are the Benefits of Blockchain?
Now we have established exactly what features define a blockchain, it’s time to look at how those features translate into tangible benefits for businesses.
Benefits to Businesses
- Better transparency: The immutable nature of blockchains means that they are the perfect tool for recording and auditing data. One of the most-often touted potential uses of blockchain for businesses is as a means of auditing supply chains. There are many industries today that need to send components across borders and through numerous different entities. Using blockchain, it is possible to automatically record the journey of individual components as they progress through the supply chain. These records can be produced automatically and can be trusted by all parties.
- Enhanced security: With blockchain, businesses only need to trust math and cryptography; they don’t need to entrust their most important data to other businesses and aren’t dependent upon other businesses being honest and thorough to keep accurate records.
- Reduced costs: With easier and faster auditing comes massively reduced costs for many businesses. As businesses grow, loss prevention often becomes a much more significant concern and also a much greater cost. If businesses need to manually audit their databases and their data-processing partners, it becomes time-consuming and expensive to identify potential issues. On the other hand, blockchain almost entirely eliminates the potential for bad data to enter into the chain to begin with, which makes auditing much easier.
Is Blockchain a Good Business to Be In?
The range of opportunities surrounding blockchain technology is growing by the day, and this trend looks set to continue well into the future. More industries are waking up to the potential of blockchain and identifying new opportunities to utilize the technology to enhance efficiency, increase trust and accountability, and ensure the integrity of supply chains and data. Forward-thinking entrepreneurs with one eye on the future should seriously consider pursuing business opportunities around blockchain.
Of course, investing in nascent technologies before they have been fully integrated into existing markets is always going to involve a degree of inherent risk. However, with our understanding of blockchain and the potential that it has for businesses growing by the day, the risks are decreasing and entrepreneurs are able to make decisions with more certainty.
You can even choose to get involved in the research and analysis that informs the future development and integration of technologies like blockchain into current fields and industries by studying for a doctorate of business administration (DBA). DBA courses prepare students to not only work as executives, but to play an active role in shaping future research and investigation. You can even study a DBA course while you continue to work in your usual role thanks to the advent of distance learning courses. For example, you can click here to find out about Aston University’s part-time distance-learning DBA course.
Regardless of the industry or field that you work in, blockchain could soon be disrupting your profession. In many cases, this disruption will be for the better, albeit with a potentially difficult adjustment period. As consumers take an increasingly keen interest in the journeys that the products they use go on in order to make it from production to their hands, more reliable auditing is potentially a very valuable tool for businesses.
Even if your industry doesn’t require any supply chain auditing, you can still benefit from the improved reliability and security of data that is stored using blockchain. For lots of businesses, there are potentially huge savings to be had if they can devise a more efficient way of storing, processing, and auditing their data. Any forward-thinking entrepreneur looking for knowledge and skills useful for the future should seriously investigate blockchain technology. Not only can it turbocharge existing businesses, but it can also offer business opportunities itself.