In the past few years blockchain technology, sometimes referred to as distributed ledger technology, has shown its value in finance-related sectors. Whether it is the banking sector, trade finance, or inter-institutional settlements, people understand blockchain’s value in transactions-based business. But how does this distributed ledger technology benefit the rest of modern industry? There is a catchy phrase that our R3ers use: “The distributed ledger technology builds a pipeline that achieves data parity.” But how does it apply to non-transaction-based sectors? This article will discuss some of the potentials and possibilities of blockchain use in the wider business world
- Distributed storage of data: Stronger data privacy, distributed data management, accurate data traceability
Blockchain provides a distributed way to achieve data communication and utilization. Participating within a closed business network no longer means giving up your data ownership. You will only share your data with the counterparties that you have agreed to share with. Blockchain grants businesses the assurance of always knowing with whom your data has been communicated.
Blockchain seamlessly achieves data sharing. It is also a much more affordable tool for all the same benefits. Managing centralized data is a very expensive task, and keying in the data, maintaining the database, managing access control of the database, are just some of the processes that contribute to high operational costs. This all counts towards the overall operations costs of running a business; now imagine running a consortium of tens or hundreds of subsidiary businesses. Using blockchain to ensure the data is distributed spreads the cost of running a centralized database to each of the participating businesses. Plus, each of these companies would prefer to have their database running on their own terms anyway. So in practice, consortiums technically save the cost of running a centralized database.
Lastly, since participating businesses maintain their database and control their data, building a chain of responsibility with accurate traceability is possible. When a fall-out happens during a business process, the clear traceability of the blockchain can quickly and easily identify the source of this issue, starting from which data point caused business execution to fall out of sync. The necessary corrections can be made immediately, which enhances the efficiency of the rest of the business pipeline and streamlines conflict resolution and arbitration as well. The blockchain gives businesses data integrity across the network.
- Smart Contracts: Auto execution of pre-agreed business logic and fast settlements
Besides the data integrity, another benefit of blockchain technology is automatically executing agreed-upon business logic. Currently, the execution of business goals depends on individuals. The performance and the efficiency of human execution varies, and there is always human error. Having the business logic executed by the computer code assures consistency and fewer human errors. This automatic execution eventually leads to the ultimate goal of faster settlements of business. Everything is settled between the buyer and seller anyway; having blockchain technology will give enterprises higher efficiency and easier deals with automated enforcement.
The above two features can be projected at almost any industry in the world. People are living in a world that generates billions or trillions of data points a day. Before one can catch an opportunity and start thinking about generating value using this abundant data source, one must think about managing these massive data sets and using that data to automate as much as possible. Once they find a solution around data management, naturally, the next step is to reduce operation costs by automating business execution.
And with that, hopefully, you’ll have some greater intuitions on how to think about the blockchain and can apply it to your own industry. What do you think? Let me know in the comments.