Building on Blockchain Part 1: Benefits and Challenges
Unless you’ve been living under a rock, you’ve probably heard of blockchain technology. It’s surrounded by so much hype, that makes it challenging for companies to understand its potential applications and benefits.
Still, blockchain is expected to become mainstream soon. IDC predicts that in 2019, businesses will spend $2.9 billion on blockchain implementations. In 2022, that figure will rise to a smashing $12.4 billion, with the US and China at the forefront of spending on blockchain.
This article is for you if:
- You want a quick recap of blockchain
- You want to understand its benefits and challenges
- You’re wondering how blockchain could help your company grow
- I work as an Account Executive specializing in blockchain solutions from 10Clouds,
- I’ve been helping companies across many different industries take advantage of blockchain
- I’ve spoken with 500+ different startups + companies about their main needs and roadblocks related to blockchain technology
- The company I work for, 10Clouds, has completed 25+ blockchain projects during the last 5 years, creating a big database of insights and experience
- I’ve been presenting these insights at more than 5 different events across Europe, optimizing the content and sparring with different stakeholders
Blockchain – quick summary
Blockchain is a decentralized, distributed, and public ledger able to record transactions between two parties in a permanent and verifiable way.
Here’s how it works in practice:
Imagine that you’re managing a bank and want to streamline interbank transactions. Such transactions are complicated because they involve fees charged by wire services and require banks to review digital clearing systems for accounting.
A real-time interbank fund verification built on a blockchain would allow banks to share information securely. As a result, they could accelerate wire transfers and reduce their cost.
This is only one of the many potential use cases for sectors ranging from financial services and supply chains to healthcare and government.
Benefits of blockchain
Even if it’s a relatively new addition to our tech landscape, blockchain has been around long enough to produce case studies that prove its potential. Companies that entered the blockchain game early on have already achieved substantial business benefits. Here are 5 of them.
1. Cost reduction
A report from Santander revealed that by 2022, blockchain could reduce the financial services infrastructure cost by $15-20 billion per annum.
Cost reduction is a priority for most businesses. Blockchain removes the need for intermediaries or third parties that traditionally guaranteed transaction safety. Moreover, using blockchain also eliminates the need to review a massive amount of documentation for completing a trade. Every stakeholder has access to an immutable version stored on a blockchain, reducing the costs of preparing, revising, and circulating documentation.
2. Increased speed and efficiency
In a Deloitte survey, as much as 17% of respondents said that blockchain offers greater speed in comparison to the systems that are currently in use.
Organizations are already moving away from traditional, paper-heavy processes that increase the risk of human error. But automating them with the help of digital solutions is only the first part.
With blockchain, companies can streamline and accelerate these processes by removing the need for third-party mediation. As record-keeping is carried out using one digital ledger shared among all stakeholders, companies don’t need to deal with the chaos of reconciling multiple ledgers.
All the while, they can be sure that all parties involved have access to the same information, speeding up the clearing and settlement process. No wonder that 81% of executives are planning to replace their systems of record with the blockchain technology.
3. Top security
In 2019, 71% of executives surveyed by Deloitte said that the blockchain technology is more secure than traditional business solutions.
Blockchain is more secure than other record-keeping systems because it encrypts transactions and links them to the previous ones. That information is stored across a network of computers, not a single server. That’s why compromising transaction data would be very difficult for hackers. Industries that handle sensitive data such as finance and healthcare can use blockchain to reinvent how they store and share crucial information in a way that prevents fraud.
4. Increased transparency
Blockchain is a distributed ledger, allowing all parties to store the same documentation – for example, transaction histories. The shared version can only be updated upon total consensus. Changing a single transaction record requires altering all the subsequent records, so businesses can be sure that data stored on a blockchain is accurate, transparent, and consistent.
That’s why blockchain offers so much potential to the healthcare sector. For instance, MetLife’s innovation center is testing the first automated insurance solution that uses blockchain to provide pregnant women with financial protection in case of gestational diabetes. The product called Vitana connects to customers’ digital medical records through their mobile devices and issues a policy within minutes, without the need to make a claim.
5. Excellent traceability
Companies that deal with products traded through complex supply chains know that tracing them back to their origin can be challenging. By recording goods exchanges on a blockchain, you get an audit trail that identified the origin of the asset and every stop it made on its journey to your store. Such historical transaction data offers an excellent measure for verifying asset authenticity and preventing fraud.
For example, the biggest supermarket chain in the Netherlands, Albert Heijn, has developed a solution that traces the production chain of its own-brand orange juice. By scanning a QR code on the packaging, customers can follow the entire route of their orange juice bottle, from the grove to the store.
Building on blockchain – key challenges
Blockchain allows organizations to focus on identifying areas of friction and outmoded processes that could benefit from the secure authenticity verification of both B2B and B2C digital transactions.
More than half of respondents to Deloitte’s 2019 Global Blockchain Survey said that blockchain is a critical priority for their organizations this year.
But companies looking to implement this technology often struggle when asking themselves questions like:
- What is the right blockchain technology for my product?
- What skills do I need within my product development team?
- STO vs. ICO – how do they influence product development?
- How to digitize an already existing solution?
The challenges these companies deal with are as follows:
- Lack of understanding of the blockchain technology,
- Lack of proven solutions and compelling implementations,
- Lack of understanding of the in-house skills,
- Lack of knowledge about methods for raising money for blockchain projects. Many people believe that Security Token Offering (STO) is on its way to replacing the Initial Coin Offering (ICO) – and what does it mean in terms of product development?
- Lack of ideas about how to digitize an already existing solution using blockchain.
In next week’s blog post: the real life application of Blockchain technology and what you need to create a successful blockchain team.
Looking for further articles on Blockchain? You might find the below useful:
9 Unexpected Ways to Use the Blockchain Beyond Bitcoin
New Gutenberg Revolution. How Blockchain Is Changing the World
Blockchain: The Universal Remedy For Modern Healthcare
Are you looking for a team of Blockchain experts to help you take advantage of this technology?
Get in touch with me on firstname.lastname@example.org or call me at +48 793 200 141. We have the expertise you need for successful Blockchain implementation.