A blockchain is basically a distributed database that is shared among a computer network’s nodes. It is essentially a digital ledger of transactions that is duplicated and then distributed across the whole network of computer systems in the chain.
The launch of Bitcoin in 2009 moved blockchain from conceptual to actual real world use, proving that this digital ledger technology really works. Since then, organizations and businesses across the globe have been figuring out how blockchain can work wonders for them too.
Big name brands, government agencies, and nonprofit institutions are using blockchain to improve existing processes and boost new business models. In this post, we will identify the top five blockchain benefits.
Blockchain allows the sharing of data in an ecosystem of businesses where there is no single entity that is exclusively in charge. It serves as a means for collaboration among parties without mutual trust. The decentralized structure improves transaction processing efficiency and gets rid of the operational cost burden of the central organization. In addition, all nodes on the computer network have an active role in the verification and recording of transactions.
An excellent example is the supply chain where multiple businesses – from producers and suppliers to logistics companies, distributors and retailers – require information from others in the chain, yet there is no single entity that is responsible for facilitating information sharing.
Blockchain Fosters Trust
Blockchain develops trust among the different entities where it’s unproven or completely nonexistent. As a result, those involved are more inclined to engage in business deals that involve transactions that they may otherwise be reluctant to undertake or would have entailed the need for an intermediary.
The establishment of trust is one most cited benefits of blockchain. Its value is apparent in early use cases of the technology that enabled transactions among various institutions that did not have direct association or correspondence yet still need to share data. Cryptocurrencies, in general, are classic examples of how blockchain fosters trust among entities who don’t even know each other.
Enhanced Security and Privacy
The security of blockchain-powered systems is another major benefit of this new technology. Here is how security is improved: blockchain creates a permanent record of transactions that are protected by end-to-end encryption. This effectively eliminates fraud and any unauthorized activity.
In addition, data on the blockchain is safely stored across a network of computers, making it virtually impossible to hack. This is in sharp contrast to traditional computer systems that store data in servers. Blockchain is also capable of addressing privacy issues better than conventional computer systems by making the sources of data anonymous and requiring permissions to restrict access.
As previously mentioned, blockchain gets rid of intermediaries and it replaces manual processes in executing transactions. Both of these allow blockchain to handle transactions a lot faster than traditional methods. In fact, blockchain can process them in a matter of seconds in certain instances.
Document-heavy processes are tedious, time-consuming, and susceptible to human error. By streamlining and automating them through blockchain, transactions can be executed faster and more efficiently.
However, it is important to note that the speed can vary; how fast a bockchain-enabled system can handle transactions depends on several factors like the size of each block of data as well as network traffic.
Nonetheless, experts have agreed that blockchain trumps other technologies in terms of speed. A perfect proof of this is the use of this technology by Walmart in 2016 to track the source of packed mangoes in 2.2 seconds, a process that previously took a week to accomplish.
Reduced Overhead Costs
For most businesses, a huge chunk of their budgets are allocated for improving existing systems. Blockchain technology is the answer for those looking to reduce their operational cost and overhead.
It can help lower the expenses associated with hiring third-party vendors and outsourcing technical support. And since blockchain has no centralized player, there’s no need to pay for vendor costs. Everything is virtual and you have control of the system.
Blockchain also minimizes manual tasks like amending and aggregating data, as well as easing the auditing and reporting processes. Lastly, less interaction is required when validating transactions, further eliminating the need to spend money and effort to do basic tasks.
Blockchain technology is a game changer with a huge impact on virtually every industry. It fosters trust, security, privacy, and transparency of data shared in a business network. It also provides significant cost savings due to automation as well as increased speed and efficiency. Now that you understand its significance and benefits, you can decide whether you want to use this technology or not.