Blockchain’s Effect on Business
Blockchain could have serious implications for the future of business. From accounting to operations, the growing consensus among industry leaders is that it’s likely to impact every major area of work – and the shift is already starting.1
Blockchain is a technology that allows consumers and businesses to track transactions from start to finish without having to consult a central authority tasked with preserving the transaction or encrypting the data. By compartmentalising these transactions, it provides transparency of what’s going on in the history of transactions and also makes these transactions more secure.2
This technology is allowing innovators and disruptors to flip the script on typical business processes in a number of exciting ways. Some of the organisational effects of blockchain include:
Supply chain tracking
Blockchain and business go hand-in-hand when it comes to transparency. Business owners often don’t have oversight of who their vendor’s suppliers are, but technology could help put this to an end by bringing more openness to the supply chain. For example, in the food industry, it’s extremely important to have solid records that trace each product to its source in case something goes wrong. Because of this, Walmart uses blockchain to keep track of their produce, where it came from, where it was processed and stored, and what its expiry date is. Unilever and Nestle also use blockchain for similar logistical tracking.3
Bringing transparency into the supply chain also helps in verifying things like the authenticity of parts and ethical sourcing. By harnessing this technology, a company can also provide digitally permanent, auditable records for stakeholders and investors.4
Lowering operating expenses
Blockchain allows businesses to send and receive payments through a programmatic set of rules called “smart contracts’’.5 These take expensive brokers, escrow agents, and other financial intermediaries out of the equation.
Smart contracts are self-executing computer programs that can carry out the terms of a contract as laid out by their creator. They enforce this contract with cryptographic code, making it unbreakable as the terms of the contract are automatically actioned.6
As all actions related to a particular smart contract are transparent and recorded, this could also reduce the cost of tracking and reconciliation. This is promising for global corporations as basic administrative functions like payroll management could be executed seamlessly across different countries.7
According to Cyber Security Ventures, cybercrime damage costs are predicted to hit $6 trillion annually by 2021.8 But blockchain could bring some relief to this. Since blockchain transactions aren’t bound by a centralised storage system and can’t be tampered with or changed retrospectively, they’re arguably safer than the current systems in place.9 Blockchains store data using sophisticated math and software rules that are almost impossible for attackers to manipulate.10
Each block added onto the chain carries a hard, cryptographic reference to the previous block. That reference is part of a mathematical problem that needs to be solved in order to bring the following block into the network and the chain. This creates a uniquely encrypted digital fingerprint called a hash, making it secure and virtually tamper-proof.11
Cutting out the middleman
If you’re a professional involved in banking, contracts, settlements, or any part of business that involves servicing as a third-party to a transaction, your role may be affected by the increasing adoption of blockchain. With this kind of technology, cryptology replaces third-party intermediaries as the keeper of trust. By using mathematics instead of middlemen, it can help reduce overhead costs for companies or individuals when trading assets or can quickly prove ownership or authorship of information.12
Providing new possibilities
Blockchain may be the backbone that allows cryptocurrency transactions to occur, but Bitcoin and Ethereum are just the start of what could be possible in the future. According to Dr Michael Yuan, Chief Scientist of CyberMiles, a foundational blockchain designed for commercial apps, “Future applications of this technology [could include] e-commerce marketplaces and applications, peer-to-peer finance and insurance transactions, content distribution, healthcare data exchanges, B2B accounting applications, supply chain, and customer service applications.”13 It’s a brave new world for businesses who are willing to embrace it.
For early adopters and evangelists, the impact of blockchain is limited only by the imagination and effort of the visionaries who will use it to transform their organisations.
Learn more about the business applications of blockchain technology with MIT Sloan.
- 1 Misra, P. (Mar, 2018). ‘5 ways blockchain technology will change the way we do business’. Retrieved from Entrepreneur.
- 2 (Mar, 2016). ‘Blockchain: A new mechanism for trust—no intermediary required’. Retrieved from Quartz.
- 3 Marr, B. (Mar, 2018). ‘How blockchain will transform the supply chain and logistics industry’. Retrieved from Forbes.
- 4 Rampton, J. (Nd). ‘5 applications for blockchain in your business’. Retrieved from The Economist.
- 5 Edwards, M. (May, 2018). ‘Why executives should care about blockchain’. Retrieved from Concannon Business Consulting.
- 6 (Nd). ‘Definition of smart contracts’. Retrieved from Investopedia.
- 7 Edwards, M. (May, 2018). ‘Why executives should care about blockchain’. Retrieved from Concannon Business Consulting.
- 8 Morgan, S. (Oct, 2017). ‘2017 Official Annual Cybercrime Report’. Retrieved from Cybersecurity Ventures.
- 9 Kharpal, A. (Jun, 2018). ‘Everything you need to know about the blockchain’. Retrieved from CNBC.
- 10 Orcutt, M. (Apr, 2018). ‘How secure is blockchain really?’. Retrieved from MIT Technology Review.
- 11 Kharpal, A. (Jun, 2018). ‘Everything you need to know about the blockchain’. Retrieved from CNBC.
- 12 (Mar, 2016). ‘Blockchain: A new mechanism for trust—no intermediary required’. Retrieved from Quartz.
- 13 (Oct, 2017). ‘What’s All the Talk About Blockchain and Why Should I Even Care?’. Retrieved from Inc.