In recent years, blockchain technology has been emerging as one of the most disruptive technologies that add value to business. In simple terms, Don and Alex Tapscott, authors of Blockchain Revolution (2016) describe blockchain technology as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value”.
Blockchain technology is mostly associated with cryptocurrency. The fact is, it also serves many uses ranging from executing contracts, processing payments, sharing highly sensitive data, protecting copyrights, monitoring supply chains to using it for record keeping. The global blockchain market is facing massive growth, although it is still in its infancy. The global market in 2017 was $708 million, and it’s anticipated to reach an impressive $60.7 billion in 2024. In the next few months, more companies will be taking on the distributed ledger technology to conduct digital transactions, drive efficient processes and stimulate innovation in business.
Here’s how it works (click to enlarge):
Seeing as blockchain technology is making a huge mark in business, it stands to reason that it must offer innovative value-driven benefits – here’s how:
Eliminates fraudulent transactions
Blockchain technology allows for secure and decentralized transactions, as opposed to using central servers as banks do. This technology can validate ownership of a digital asset and verify transactions. The transactions recorded in the blockchain cannot be deleted or changed in any way. By using blockchain technology, businesses can see where the digital assets came from and who owned them. This means of transacting is ground-breaking in this country, so much so that the South African Reserve Bank (SARB), through Project Khokha, is trialling the ledger technology. SARB’s feedback on the trial is optimistic – “the results show that the typical daily volume of the South African payments system could be processed in less than two hours with full confidentiality of transactions and settlement finality”.
Reduces transaction costs
Blockchain technology removes the need to pay third parties, such as banks, mediators, payment networks and money transfer services to manage and record transactions. Furthermore, it can cut operational and IT costs by not having to replace legacy systems and administration infrastructure in organizations. There is some investment required to implement blockchain technology. The cost, however, is far below the cost of maintaining IT infrastructure.
Provides Smart Contracts
Blockchain Smart Contracts enable companies to exchange digital assets securely and transparently, without the need for an intermediary. Here’s how Smart Contracts work:
- A contract between two parties is coded into the blockchain – the contract receives and distributes assets.
- The contract executes based on the established coded terms.
- The digital asset is transferred automatically, and the transaction will be undisputed.
- Regulators can access the blockchain to understand the transactional activity.
All the Smart Contract transactions are securely recorded in the blockchain and cannot be altered afterwards. That transparency goes a long way in establishing trust and certainty – which are essential in business.
Decentralizes data for better security
The most distinguishing feature of blockchain technology is that data is not stored in a centralized location or server. The decentralized nature of blockchain technology means that there is no central authority, making the users totally responsible for the system – making it more secure. Once a transaction is made and recorded, it’s impossible for the data to be manipulated as the technology can validate transactions in an incorruptible manner.
As we live in an era undergoing an incredible digital transformation, we find that businesses that don’t adapt may well find themselves losing their competitive edge. As it stands, the adoption of blockchain technology rouses some uncertainty, at the same time it’s gaining steam daily, and it is fostering innovation, eliminating fraud and improving processes for many a business.
Do you need help discovering how you can drive digital transformation and process improvements in your organisation? Get in touch. We make business better.