By now almost every industry has adopted blockchain technology. From real-estate to online gaming. Despite the multiple success stories of organizations that are saving millions the true potential of blockchain remains untapped. Though blockchain service providers are abundant, there is still an incomplete understanding of blockchain is and its potential advantages to businesses. Many people still believe that its use is limited to mere record-keeping and powering cryptocurrency. Blockchain is more than that, it is a complete solution to various problems businesses face every day.
What is blockchain?
It is a type of distributed ledger technology. Much like a database, blockchain keeps track of information. However, unlike a database information is encrypted and stored in blocks that are then linked together in chronological order. Each piece of information stored in the block has an immutable cryptographic signature called a hash. Owing to these features and the timestamp of the information once it’s stored in a blockchain makes it a transparent and secure form of record keeping. Though, Blockchain is not implemented in the same way across organizations. Depending on the requirements of an organization, blockchain service providers integrate a different variety of features to best suit their client’s requirements.
Types of Blockchain
There are four different types of blockchain.
- Public Blockchain: also known as a permissionless distributed ledger system, it allows anyone and everyone with internet access to become a participant in the blockchain. They have access to all previous records and participate with the rest of the members to verify transactions. This type of blockchain is used to power cryptocurrencies such as Bitcoin.
- Private Blockchain: is a permissioned distributed ledger system. Only authorized individuals have access to the data in the blockchain. Security, permission, and accessibility of each member are controlled by a single organization. An example of this type of blockchain is Hyperledger Sawtooth.
- Consortium Blockchain: it is very similar to a private blockchain. The only difference is that more than one organization has control over the blockchain and acts as a node. It is usually used by banks or governments.
- Hybrid Blockchain: combines features from both public and private blockchains. In this, some of the data is visible to all participants, and the other portion is kept confidential and only authorized entities have access to it. Either way, information can be verified by public or only private participants.
How has blockchain changed businesses?
It was the popularity of Bitcoin that introduced the world to distributed ledger technologies. Though launched in 2010, it was not initially seen as a solution for businesses. Instead, it was considered to be inseparable from cryptocurrency until 2014 when blockchain service providers began emerging and businesses began separating blockchain from currency and began exploring its potential uses outside the financial sector. It was then when the adoption of blockchain itself began picking up speed, with its popularity exploding in the year 2017. Organizations rushed to develop and integrate the nascent technology into their workflow.
This was largely thanks to the collaboration between large organizations. One such project was an ecosystem solution to improve the traceability of food, the IBM Food Trust. When Walmart was attempting to improve its tracing process for fresh produce, it would take weeks to trace an outbreak of salmonella to its root. It was then when IBM suggested the use of blockchain. Though the solution was developed in no time, they realized that to truly make products traceable participation of all retailers was necessary.
This was how large corporations such as Nestle, Kroger, Dole among many others chose to join and even help smaller firms adopt the technology to achieve end-to-end traceability. In the end, the IBM Food Trust resulted has more than 28 members and more than 40 million transactions and, as of 2021, there are many blockchain service providers that are currently competing with the IBM Food Trust.
The use of blockchain today
The precedent set by these massively successful projects led by organizations and blockchain service providers of all sizes to see that blockchain could be more than just the powerhouse behind cryptocurrency. Hence, businesses choose to develop their own solutions or seek the services of blockchain service providers who offer a variety of services: providing the environment needed, develop applications, or provide custom solutions to current problems.
Since 2017, blockchain service providers have shown considerable growth yet, Blockchain adoption has stagnated considerably over the years. Some of the reasons why the adoption rate has slowed down are because of government regulations, business models, and governance. Though one of the biggest reasons behind the slow uptake has been that businesses are still exploring the uses of Blockchain. After the frenzy died down and many firms began to explore the different uses of the technology. Nowadays, companies are focusing on how they can integrate the blockchain to best suit their business needs.
How the pandemic has increased the adoption rate of blockchain
During the year 2020, the world was forced to slow down and to rethink and remake existing processes and collaborate with blockchain service providers to tackle the ongoing global pandemic. One of the biggest challenges before the pandemic for every business was a successful collaboration. This is because traditional processes used to utilize resources, gathering information, and sharing it are not suitable to make decisions quickly or effectively. Sharing information and coordinating it to be consistent is challenging particularly if multiple parties are involved in the collaboration.
Unfortunately, a large proportion of the information exchange occurs through paperwork that is easy to misplace or emails that cannot be organized easily. Moreover, it is very easy for partners to hide information such as the quality of products being delivered. All of these factors lead to frustration, delays, and misunderstanding between collaborating individuals. During the pandemic, these issues were heightened.
However, all of these issues have been tackled by organizations by using blockchain. For example, the logistics of shipping and storing the Pfizer Inc and BioNTech vaccine were too complicated. The vaccines needed to be stored at extremely low temperatures on dry ice and could only last at standard refrigerator temperature for five days. In order to tackle these two hospitals in the United Kingdom, Stratford-upon-Avon and Warwick worked closely with blockchain service providers to integrate the technology into their existing work systems to monitor the temperature of their vaccine supply and other drugs. It was also used to ensure that the information on the drugs is accurate, up-to-date, and unchangeable.
Another example of an organization using the same technology is the blockchain network founded by IBM. In addition to NorthWell Health one of the largest healthcare providers in the state of New York, the Worldwide Supply Chain Federation, and many more paired up with the blockchain service providers to address the shortage of medical equipment during the peak of the pandemic by providing access to alternative suppliers. The initiative allowed for validation checks and inventory information in real-time making a more efficient supplier onboarding process. The best part? Joining the network took only 30 minutes.
The importance of blockchain for business organizations
If data is shared once in a blockchain, it is immutable which makes the time-consuming process of finding the source of errors take days and not weeks. It also prevents manipulation of information since the approval of every single entity in the blockchain is required to make a change. As a result, it increases the levels of trust between organizations collaborating on the blockchain.
In addition to transparency, blockchain is also secure. Organizations can hire the services of blockchain service providers to set up private blockchain networks (or permissioned networks) that can be modified to allow only authorized individuals to participate in the blockchain. Control can be provided to every member or it can be limited to a single individual as well.
Eliminating the need for middlemen
Many industries are swamped by old-fashioned paperwork, lengthy procedures which in turn lead to high administrative costs. One of the features that can be integrated into blockchain makes it possible to get rid of this problem. Blockchain service providers integrate self-executing contracts between buyers and sellers by integrating smart contracts into blockchains. They work by writing down the conditions that must be met for the lines of code. If they are not met, the transaction cannot take place. This is an excellent mechanism to not only hold participants of the blockchain accountable but also to remove the need for middlemen reducing costs and saving time
Difficult to carry out illegal transactions
Since blockchain transactions cannot be changed, collaborating with new and old partners becomes easier. Moreover, the information exchange can be viewed in real-time. This not only makes it easy to keep track of perishable items that may require a specific condition to stay intact but it also leaves very little room for cheating as errors can not be buried under paperwork.
Encourages cross border collaboration
Not only does blockchain help organizations set up successful partnerships but it also provides them the security needed to collaborate across borders. Larger corporations have always had the upper hand at accessing the global market. This is particularly true for the financing of companies. Thanks to blockchain service providers many platforms can now offer small, privately owned businesses the ability to obtain funds from global players.
What can we learn from Blockchain?
Blockchain has been around for more than 10 years now, during this time it has taught organizations and business leaders worldwide some very valuable lessons.
Cryptocurrency is here to stay
From the investment of Elon Musk, large-scale projects by the Chinese Government have shown that the widespread adoption of the technology in the financial sector is showing no sign of stopping. Blockchain service providers, through the explosive popularity of digital marketplaces that can be accessed via smartphones, digital trading platforms, loan platforms, and the like have encouraged even more individuals to harness the power of blockchain. Moreover, because of the virtual currency payment system adopted by Visa, cryptocurrency payments will eventually become commonplace.
Blockchain is a process, not a race
Integrating Blockchain is a trial-and-error process. Firms need to take their time and not move quickly from one blockchain project to the next. Understanding how the technology fits into the businesses’ overall picture and collaborating closely with blockchain service providers is the key to preventing costly and unnecessary projects. It is important for firms to stop worrying about the technical aspects of blockchain and start thinking in terms of value-added to business processes. This way, security, and regulatory compliance can be tackled.
Trust is everything
There is no doubt that blockchain has increased trust because of its tamper-proof nature. However, many believe that the more information shared the more reliable blockchain solutions are. That is not true as making detailed information available can endanger the organization’s confidential records. Instead, the secret to having a robust blockchain backbone is to ensure that there is proof that a specific sequence of events occurred. By doing so, organizations can ensure that the information they share is authentic but does not compromise any trade secrets.
Though blockchain adoption has slowed down considerably since 2017, its popularity has yet to decrease. It remains an important technology for organizations thanks to its ability to provide businesses with reliable, tamper-proof data records, the increased security it provides, and making cross-border collaboration much easier. It also eliminates middlemen and prevents participants from carrying out illegal transactions. The only difference now is that businesses are now taking their time to explore the various uses blockchain can have in their organization and industries which experienced explosive adoption are now expanding on its uses.
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