Benefits of Blockchain: A Complete Guide
Ranjan Dailata is an Aezion Solution Architect and Aezion Labs Lead.
Benefits of Blockchain: A Complete Guide
Cryptocurrency is no longer the main point of conversation when the term “blockchain” comes up. Once separated from cryptocurrency, it’s easy to see that there are many other promising use cases for blockchain technology—especially in the world of business.
For businesses of all sizes, the use of blockchain can help support data security and access controls, all while creating a “trustless network” that enhances transparency and traceability of all information that’s shared among employees, partners, and vendors. Of course, if you’re new to the concept of blockchain in business, it can be tough to fully understand its benefits.
One thing is for sure: The adoption and management of blockchain technology is inherently complex. However, businesses that are able to see past this complexity find that there is a host of benefits associated with adopting blockchain technology, including improved speed, reduced cost, and new opportunities to support efficiency and automation.
So, what are the benefits of blockchain for business? Here’s a closer look.
Why Distributed and Decentralized Matters
If there is one thing that most people know about blockchain, it’s that this technology offers a distributed and decentralized environment—distributed means that blockchain distributes data across multiple nodes, which improves resiliency. By storing copies of a ledger in multiple locations, it helps protect against unapproved changes.
Meanwhile, the decentralized aspect of blockchain means that there is no single source of data. While most traditional databases are centralized, meaning there is one main entity (i.e., the administrator) that can dictate policy and exercise control, that is not the case with the blockchain ledger.
Decentralization means that multiple entities or users have control over the blockchain network and must work together when deciding to delete or change records. There can still be a hierarchy of users to help support data security and privacy within a business application, but no one entity has complete control over the blockchain or its records.
On paper, this might sound like an unnecessary complication; however, this aspect is central to all of the resulting blockchain features and benefits businesses enjoy, including its ability to support advanced security, data quality, and workflow efficiency.
Blockchain Supports Security Initiatives
Business security is a front-of-mind concern for all businesses today. With an increasing focus on data privacy regulations like GDPR along with major initiatives in the area of data governance, businesses know how difficult it is to gain visibility into their massive data stores and better control that information.
Data governance, in particular, requires three key components: Visibility, access, and control. Blockchain helps tick all these boxes by creating a transparent and highly traceable information-sharing system. Blockchain also helps control data by anonymizing personal information and creating a permissions system to control who can see and share what.
The traceability of blockchain also supports data quality. By controlling who has permission to do what and keeping a detailed ledger of every data move and change, blockchain empowers businesses to maintain accurate and reliable databases that allow information sharing without compromising security.
Many other security features of the blockchain are a by-product of its distributed architecture. The distributed nature of blockchain networks makes it virtually impossible for a single hacker to gain control of all of a business’s data. By decentralizing the data, it is much more secure than if it were stored in a single system.
For all of these reasons, blockchain is considered highly promising by security professionals. The tradeoff is this: By nature of the blockchain, more users equal better security because it means more participating nodes to verify the ledger and identify bad actors
. However, more users also equal reduced performance. For businesses interested in implementing blockchain technology, finding a balance between security and performance is a key concern.
Blockchain Increases Workflow Efficiency
Blockchain technology offers advanced capabilities for managing and transferring all kinds of data. For that reason, it is entirely capable of replacing certain paper-heavy processes altogether. As a result, blockchain technology can help speed up workflows while reducing the chance of human error.
The streamlining that takes place when blockchain technology is implemented can help businesses realize major increases in efficiency and productivity. Examples include workflow management system that eliminate paper processes, and coordination and collaboration systems that displace third-party mediation, and other slow exchanges.
With just one ledger, blockchain ensures that clearing and settling transactions is a fast process. Plus, the traceability across the blockchain allows for easier and more accurate auditing. Records on the blockchain are immutable, meaning that everything is time-stamped and can’t be erased, allowing for a simple and transparent way to see every move and change that has occurred with a given transaction or piece of data.
If you’re not yet familiar with the immutability and traceability aspects of blockchain, realize that these unique features are some of the biggest reasons for widespread blockchain adoption.
Blockchain Enables Automation and Smart Contracts
Automation is a major point of focus these days, but the way in which blockchain enables automation goes far beyond the capabilities of any other system. One unique aspect of automation that’s unique to the blockchain network is a “smart contract.”
Smart contracts allow a business to pre-define certain conditions, much like you would do in a paper agreement. However, the blockchain is able to track activities and events as they happen, automatically triggering pre-determined actions in a contract when the right conditions are met.
The insurance industry provides an instructive use case for the benefits of smart contracts. As an example an insurance company can create smart contracts to help automate the claims process, requiring the customer to submit a given set of documents before a claim is sent to an agent for review.
Once a customer uploads all the necessary documents, the smart contract triggers the next phase, which assigns the case to an agent so they can review the claim and send a settlement offer to the client. If the client accepts the settlement offer, the blockchain can automatically trigger a funds transfer or check request to streamline payments.
The blockchain also has applications in countless other industries, including real estate — where smart contracts are being applied in a much more complicated way to create the “eMortgage” or digital mortgage, which allows for offers, title transfers, and the closing process to take place entirely online with the help of the blockchain for verification.
Regardless of which industry you are in, there is likely a promising application for blockchain automation and smart contracts. The key to success in this area is finding the right partner to help you unlock these advanced capabilities of blockchain technology.
Blockchain Helps Reduce Costs
Because the initial adoption of blockchain is considered to be a complex and expensive endeavor, many business leaders are surprised to learn that blockchain adoption can help save money.
Without a doubt, choosing to incorporate blockchain technology into your business can be resource-intensive decision. Depending on how you go about it, you could spend months researching open-source frameworks, understanding the possibilities, and trying to tie it all together into a functional solution for your business.
However, with the right partner, blockchain adoption does not have to be overly complex or expensive. The right partner can help you define a winning business case and implementation plan to leverage blockchain workflows, smart contracts, security features and deployment options (self-hosted vs BaaS – Blockchain as a Service), to derive cost savings. In fact, once you have a business case and implementation plan in place, you’ll find that adopting blockchain truly can present opportunity for significant cost savings.
So, how do you start?
Making The Most of Blockchain Technology
Once you are more familiar with where you stand to benefit through the implementation of a blockchain solution, you’ll be better equipped to move forward and learn about the specific ways in which blockchain can be applied to your business. This may include digitization of processes, the addition of smart contracts to automate workflows, or using the distributed ledger to support your data governance program.
In any case, there are inherent challenges associated with blockchain adoption, and it’s important to be aware of them so that you can do your best to minimize and eliminate them. These common challenges include:
- Complexity: Overcome the resource-intensive research and implementation process that’s typically associated with blockchain adoption by partnering with an expert who can introduce you to the best solutions for your use case, without you needing to invest in preliminary research. A partner that’s highly familiar with blockchain can help you jump ahead to the first milestone, which is identifying the best solution.
- Cost: Whether you choose to self-host your blockchain solution or utilize a third party, such as a BaaS provider, you can minimize the costs associated with the initial adoption of blockchain by getting your infrastructure plan right from the start and involving stakeholders early. These stakeholders can help recruit more advocates, who can then become mentors to support a cost-effective adoption.
- Adoption: Because blockchain technology has a reputation for being complex, it can be that much harder to get your teams open to the idea of using it on a day-to-day basis. The key is planning a rollout that turns early users into mentors and advocates, thus getting others excited to adopt the new solution and making learning how to use it that much easier.
- Performance: As mentioned, the relationship between security and performance requires careful management. Due to the distributed nature of the blockchain, more users mean better security, but it can also mean a slower system. You can get around performance issues with proper resource allocation and planning, but this in itself can prove difficult. Partnering with the right partner and solutions providers can help you avoid costly performance problems now and down the road.
None of these potential challenges should be ignored, but is important to understand that all of them can be managed with the right experts on your side. So, if you don’t already have blockchain experts in-house, it might be time to look for a partner who can help guide the implementation of blockchain for your business.
Let Aezion Help You Implement Blockchain
Are you looking to tap into the many advantages that blockchain technology can offer? The process starts with having the right experts on your side to guide you through the common challenges and help you avoid expensive pitfalls during the planning, implementation, and adoption process.
Ranjan Dailata is an Aezion Solution Architect and Aezion Labs Lead.