When people hear the term “blockchain,” they typically think of cryptocurrency. However, crypto is simply one potential application for blockchain — and this represents one of the many misconceptions about this technology. Part of the reason blockchain is so misunderstood is because the explanations tend to be understandably heavy on jargon. In reality, we can break down what blockchain is in a way that any business leader can understand.
In essence, blockchain is a database that allows businesses to store data in a decentralized way. There are different copies of a blockchain stored in multiple locations, and no single party is considered the blockchain’s “owner.” All participants have an equal stake. The information contained in a blockchain is also immutable, meaning it cannot be altered — only added to. This process creates a lasting record of every change made and offers complete transparency into the actions of all parties involved. By design, blockchain automatically creates an ongoing audit trail.
Likewise, the only people who can view or add to the information in a blockchain are those with permission. Blockchain’s cryptography keeps that information — including bank account numbers, medical data, or personally identifiable information — secured from all outsiders. Lastly, blockchains are more than simply distributed ledgers. In fact, they contain a type of business logic called smart contracts: They apply this common logic to all transactions processed by the blockchain, automatically triggering actions all participants have agreed upon. Think of them as dynamic ledgers.
In practice, applying blockchain to startups’ operations tends to be simpler than people realize. Paradoxically, it’s also a lot more transformative. This isn’t a technology that’s maturing slowly or confined to niche industries. Considering all of blockchain’s uses, it’s a solution that’s poised to change business as we know it.
Dispelling More Misconceptions About Blockchain
The gap between perception and reality is quite wide when it comes to blockchain. This is unfortunate, especially considering the positive impact it could have for early adopters.
Due to that gap, people often assume this is a completely novel technology — one that’s promising but unproven. In truth, blockchain combines many existing technologies and processes (including distributed computing, cryptography, game theory, and so on) that, when used together, enable an entirely new paradigm. It’s also just one component of a much broader and already well-developed solutions architecture. The bottom line here? Blockchain is ready for deployment now.
Speaking of blockchain deployments, they actually require far less power than advertised. The public blockchains that enable bitcoin and other cryptocurrencies have significant power requirements owing to the massive number of miners required to operate them. Permissioned blockchains, which are only open to those invited, have far fewer users and significantly less power and computing requirements as a result, which enables the kind of speedy performance that business users require.
Perhaps the biggest misconception is one we’ve already addressed: the association with cryptocurrency. Alternative currencies may have proven that blockchain works, but they don’t represent the full potential of blockchain for startups. In the same way that the internet matured beyond the first generation of basic websites, blockchain will soon factor into every kind of transactional relationship. Get ready, and get excited.
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How Can I Use Blockchain for My Business?
Startups must be lean and effective by default, meaning they’re ideally suited to leverage the solutions blockchain offers. Here are some of the common problems blockchain can solve for entrepreneurs and other business owners:
1. A lack of supply chain visibility: Blockchain allows users to track supplies going into products, shipments leaving factories, or any aspect of the supply chain in more granular detail than was ever available before. By recording exactly what happens in a blockchain that can’t be altered, startups can prevent supply chain issues ranging from fraud to quality control.
Greater visibility leads to improved trust and coordination between everyone in the supply chain: you, vendors, suppliers, and distributors all working in concert. Tellingly, Ford and Walmart — two companies with massive supply chains — are already investing in order to develop more use cases for blockchain.
2. Silos among data sources: Because companies share a blockchain, they have access to the exact same information. In this way, blockchain acts as a single source of truth that each company can rely on to develop a common understanding and eliminate the kinds of errors and inefficiencies that arise from having disparate data.
Think of how much time and money the average company spends entering, verifying, and reconciling data. Blockchain has the potential to eliminate much of this work while improving it at the same time. It’s not an overstatement to claim blockchain will revolutionize business administration as we know it. In fact, it’s already making a significant mark in the online advertising industry, where shared datasets lead to more competitive costs and highly accurate targeting.
3. A lack of innovation: Many startups exist to disrupt legacy industries, which is certainly easier said than done. Blockchain offers an innovative way to approach this task. In the energy sector, for example, blockchains paired with connected devices enable various operational efficiencies and are facilitating the smart grids of the future. Similarly, the smart contract capability of blockchains makes energy trading vastly simpler. Blockchain has the means to spark innovation in other industries in the same way.
4. Complicated IT asset management: In the same way that blockchain extends visibility into supply chains, it makes managing IT assets much more seamless. Consider all the IT networks you handle, whether they’re related to third-party providers or part of your internal systems. Blockchain can ensure participation and collaboration across these disparate networks simply because they provide one source of truth — something a single app or platform can’t achieve. Likewise, these systems can pave the way for more robust IT asset management thanks to their immutability and diligent record-keeping.
Just take IBM and Maximo’s partnership as an example: In the asset-management sphere, businesses often carry out transactions using their own systems and interfaces, which can cause trouble if said systems aren’t accessible by certain parties. As a leader in the asset-management sphere, Maximo wanted a way around this in order to capture data that previously wasn’t shared or stored and ensure painless compliance. IBM created its blockchain-powered IBM Maximo Network, which combined its preexisting capabilities with blockchain’s array of benefits.
5. Overwhelming payment processing: Even major companies struggle to manage payment processing, so this is a particular struggle for startups — especially when international payments get involved. Blockchain removes the major hurdles by automating much of the process and creating a record that all parties can trust. It cuts payment intermediaries out of the equation so payers and payees can interact directly, access payments immediately, and lower transaction fees.
Every business needs a ledger. And before long, every business will also need a distributed ledger — better known as blockchain. This is a fundamental solution that can be useful to startups and applicable to many common and consequential problems they face. What businesses wouldn’t want to reap blockchain’s benefits?
To learn more about the myriad benefits blockchain has to offer businesses across the board, download my company’s free whitepaper: “Blockchain Is Reinventing the Way Business Works.”