Applications of Blockchain Technology in Business
Blockchain technology has gone beyond its original association with cryptocurrency and has become a powerful tool for businesses across various sectors. Its inherent security and transparency offer an effective solution for safeguarding data and streamlining transactions.
Although the full range of potential applications of blockchain technology in business is vast and continuously evolving, this overview delves into a selection of both established and emerging uses of blockchain in the business landscape.
The purpose of this comprehensive overview is to provide you with valuable insights, regardless of your current awareness of blockchain. Whether you’re just curious about its potential or actively considering its implementation within your organization, this analysis serves as a starting point for further exploration and informed decision-making.
Blockchain Technology—A Brief History
Exploring the application of blockchain technology in business necessitates a foundational understanding of the technology itself. Blockchain emerged in 2009 with the inception of Bitcoin by an individual or group under the pseudonym Satoshi Nakamoto. It functions as a digital ledger, storing information in blocks linked together sequentially. Each block retains data about the previous one, ensuring transparency and security.
A significant characteristic of blockchain is its transparency. Processes on public blockchains like Bitcoin are visible to all online participants. This encompasses operations such as creating new cryptocurrency units and executing financial transactions.
Moreover, public blockchains operate in a decentralized manner, overseen by a distributed network of individuals globally. This decentralization enhances the network’s security and transparency. Additionally, blockchain technology offers notable advantages in terms of speed, security, and scalability compared to analogous technologies.
Mainstream Application of Blockchain Technology in Business
While cryptocurrency has dominated the conversation surrounding blockchain technology for the past decade, recent years have witnessed a significant shift. Enterprise blockchain is emerging as a powerful tool for businesses, offering a wide range of applications. Here, we explore seven key areas where enterprise blockchain is transforming the way companies operate.
- Digitalization
- Web 3 Application
- Inter-Bank Transfer
- Decision Making (Vote)
- Smart Contracts
- Asset Tokenization
- Supply Chain Management
Blockchain technology is still an en explored territory with new applications to be discovered every year. Here are some of its mainstream applications for diverse industrial sectors.
Digitalization
The digital age has seen a surge in online services and products, making our lives more convenient. While a business may have a significant presence in the industry, online influence has become an overriding factor in its growth.
However, building an online presence necessitates addressing data security. Businesses grapple with the constant threat of data leaks and breaches. Blockchain technology provides a solution by securely storing data in a digital ledger linked to its preceding block, effectively mitigating the risks of data leaks and breaches.
You can use it for automating tasks with smart contracts and reducing dependency on intermediaries saving time and enhancing security, we will talk about it a bit later.
This is true for private and even more for government entities that hesitate to digitalize only because of security issues. Sensitive document processing takes a lot of time and dependency can be digitalized to save time and cost.
Various countries have successfully implemented and practiced digitalization with concepts like CBDC, making digitalization a possibility for large enterprises and governments.
Web 3 Applications
The future of the internet is shifting towards Web 3, a decentralized web where users have more control over their data and online interactions. Traditionally, big tech companies controlled vast amounts of user data, often without complete transparency.
Web 3 disrupts this model by placing users in control. Data becomes more secure and users can choose what information they share and with whom.
At the core of Web 3 applications lies blockchain technology. As we transition to Web 3.0, prioritizing user control over data becomes paramount. Blockchain’s secure storage and sharing capabilities play a pivotal role in realizing this transformative vision.
Inter-Bank Transfer
The utilization of blockchain technology in inter-bank transfers represents a notable advancement in modern finance. This application streamlines the process of transferring funds between different financial institutions, offering enhanced efficiency, security, and transparency.
A recent Bloomberg report highlights the significant strides made in this area. Major financial institutions like Goldman Sachs, BNY Mellon, and others are testing an interbank blockchain network to mainstream blockchain technology. Over 350 simulated transactions were conducted on the Canton network, covering various financial activities such as tokenized assets, fund registries, digital cash, repo, securities lending, and margin management.
The implementation of blockchain technology in Interbank Transfers offers several benefits. Firstly, it enhances the speed and efficiency of transactions by eliminating intermediaries and automating processes through smart contracts. Additionally, blockchain ensures the immutability and integrity of transaction records, reducing the risk of fraud or errors.
Decision Making (Vote)
It’s possible to utilize this technology for facilitating various types of voting scenarios, ranging from micro-shareholders in companies to employees’ decisions within organizations, and even asset holders participating in critical decisions. This versatile application extends beyond local or governmental elections and encompasses a broader spectrum of decision-making processes within communities, businesses, and governance structures.
Blockchain technology presents a promising solution in this domain. Its inherent transparency and immutability ensure a tamper-proof record of votes, eliminating the possibility of duplicate votes. Furthermore, blockchain networks can implement robust verification mechanisms to allow only eligible participants to cast their votes, thereby enhancing the integrity of the process.
Attempts to manipulate or influence outcomes become significantly more challenging with blockchain-based voting systems compared to traditional paper-based methods. Each block in the blockchain contains comprehensive information, including timestamps and user data, which not only simplifies the auditing process but also reinforces the security and trustworthiness of the system.
Also Read: Polygon vs. Ethereum: Why Choose Polygon for Scalable, Low-Cost DApps
Smart Contracts
Smart contracts, which are programs or protocols designed to automate processes according to the terms of a contract or agreement, find frequent mention in discussions about blockchain applications for business. They facilitate control or documentation over events or actions and can fully execute these events.
Businesses are increasingly turning to smart contracts due to their ability to streamline operations. By reducing the need for intermediaries, mitigating the risk of both malicious and accidental errors, and lowering arbitration costs, smart contracts offer significant advantages.
This growing recognition of smart contracts’ potential is reflected in market trends. The global smart contracts market, valued at $397.8 million in 2022, is projected to reach $1460.3 million in the next seven years.
Asset Tokenization
Asset tokenization, a significant application of blockchain technology in business, addresses the challenge of incentivizing creators by providing innovative solutions. It involves converting rights to an asset into a digital token on a blockchain, representing ownership or a stake in the underlying assets. This process enables creators to establish new revenue streams and enhance liquidity for traditionally illiquid assets.
One compelling example of asset tokenization is the tokenization of artworks, such as paintings. Historically, investing in artworks required significant capital and expertise, making it inaccessible to many potential investors. However, with blockchain-based asset tokenization, fractional ownership of artworks becomes a possibility. Investors can purchase and trade digital tokens representing shares in valuable artworks, democratizing access to art investment.
Asset tokenization also enables creators to receive direct compensation and royalties for their work through smart contracts. These programmable contracts automatically execute payments to creators whenever their tokenized assets are bought, sold, or utilized. This direct and transparent compensation mechanism ensures that creators receive fair rewards for their contributions, fostering a more equitable ecosystem.
Supply Chain Management
Concurrent with our previous application, modern supply chains are also beneficiaries of blockchain technology.
Let’s take the example of multimodal transportation, a logistic approach that combines multiple modes of transportation to streamline reaching the destination. The world has been consistently striving to achieve such seamless transportation, but challenges like inventory management and goods loss have persisted.
Blockchain can serve as a thread that tracks every step in the supply chain, preventing delays and detecting issues early on. The transparency it offers ensures goods are never out of sight, enhancing the efficiency of the process.
Enterprise Blockchain Technology: Fast and Transparent.
Enterprise blockchain technology, distinct from traditional blockchain, represents a non-decentralized version tailored for enterprise use. Unlike decentralized blockchain networks, enterprise blockchain is governed by a singular entity capable of modifying its rules and managing the chains.
This technology emerged to address the needs of enterprises seeking to leverage the benefits of blockchain while retaining control over their systems. Although not decentralized, enterprise blockchain offers a plethora of use cases, some of which have been discussed in the blog.
Summing Up Our Learnings
Blockchain technology offers vast and expanding potential for business applications. As adoption grows, it drives innovation and the development of more sophisticated solutions. While the list provided is not exhaustive, ongoing advancements suggest that blockchain’s capabilities will continue to evolve and surpass current limitations, shaping the future of various industries.