It’s safe to say that cryptocurrency has exploded in popularity in the last few years.

With millions made speculating on these digital currencies, it’s no wonder that many people are drawn to the likes of Bitcoin, Ethereum and Tether. Yet the money-making potential of crypto isn’t where the excitement ends. The tech that’s used to record these transactions is also causing a stir in the business and technology world. And that technology is blockchain.

 

As someone with investments in both crypto and the tech industry, the potential applications of blockchain excite me. And I’m not the only one. According to CBInsights, global investment in blockchain surged 713% last year, reaching a whopping $25.2 billion. But what exactly is blockchain and how can it be utilised by businesses?

 

What Exactly Is Blockchain?

In its most basic sense, blockchain is a shared, digital ledger that records transactions and ownership of assets. The two most important things to know about blockchain are:

• It’s decentralised
• It’s immutable

Unlike other databases, which are often kept in one location by a centralised administrator, blockchain is duplicated and distributed across multiple computers and networks, known as nodes. Blockchain is also immutable (unalterable) which means that data cannot be changed or removed once it’s been added.

Both of these elements add transparency and integrity to transactions. Whilst blockchain is primarily used to record transactions and ownership of cryptocurrencies or NFTs, businesses are starting to explore ways to incorporate this technology into their operations.

 

How Does Blockchain Work?

Getting your head around blockchain can be difficult. I’m certainly no expert myself but having a basic knowledge of how blockchain works can shine a light on its potential applications in business.

In blockchain, transactions are recorded as ‘blocks’ of data. These blocks then form a ‘chain, with new blocks added each time new data is entered.

When a new transaction is made, a new block is created that records information like the time/data, parties involved etc. The nodes, or computer network, verify the data before the block can be added to the ledger.

Blockchain typically uses cryptography to secure transactions, meaning the nodes have to complete a complex mathematic process. Once the data is verified, the block can be added to the existing chain.

As each block is connected to the one before, you end up with an accurate ledger that confirms the exact time, data and sequence of transactions. Each new block also helps to verify the previous block and ensures complete trust in the chain as a whole.

 

What Are the Benefits of Blockchain?

Now we know what blockchain is and how it works, let’s take a closer look at the top 5 benefits of blockchain:

Secure

Data stored on blockchain is highly secure for a number of reasons. Blockchain uses cryptography and consensus protocol to verify data. Thanks to this technology, blockchain is also tamperproof, so data cannot be altered after the fact. Transactions or ownerships recorded in blockchain can be verified and trusted, making it a secure way to conduct business.

Transparent

Unlike regular databases, no one person or organisation has authority over the data; blockchain is decentralised. Instead, the ledger is distributed across multiple ‘nodes’. Users can view the same data, at the same time. When data is added, they’re all updated accordingly. As the blocks record transactions sequentially, users can have access to the whole history of verified and immutable transactions at their fingertips.

Traceable

Thanks to the way the technology works, blockchain provides a high degree of traceability. Each transaction is recorded as a block, which links to previous blocks to create a chain. The chain acts as an audit trail to trace transactions or ownership history. This ultimately allows users to trace each stage of a transaction, which could prove itself particularly useful in relation to supply chain management.

Automatable

With the help of smart contracts, blockchain can help to automate processes, automatically creating a contract when certain, predetermined conditions are met. For example, if a transaction is approved and added to the blockchain, contracts can be instantly created and sent to the parties involved, without involving an external intermediary.

 

Private V Public Blockchain

Whilst most crypto and NTF trading occurs on public blockchain, there is another type of blockchain available: private blockchain. While both use the same technology, there are some notable differences between private and public blockchains. The type of blockchain a business opts for will ultimately depend on its operating model.

Public: 

• Fully decentralised
• No restrictions on who can view the ledger and participate in the consensus process.
• Fully immutable: data cannot be altered once it’s added as no single authority controls the nodes.

Pros:

• highly secure, immutable, transparent

 

Private:

• Partially decentralised
• Controlled by people within an organisation or group.
• Partially immutable: Can alter the blockchain as the organisation or group has all authority.

Pros:

• Highly efficient, private, quick

 

How Can Blockchain Be Used by Businesses?

Given the immense benefits of blockchain, it’s no wonder that businesses are looking to utilise this technology. From the looks of things, there are two main ways that blockchain can be used in the business world:

Carry Out Transactions

Blockchain is already used to record transactions of cryptocurrencies and NFTs. Businesses could therefore harness the technology to carry out transactions with clients or other businesses. The digital ledger could allow businesses to perform, validate and record transactions without much human intervention, all whilst maintaining integrity, transparency, and traceability.

Add to that smart contracts, and blockchain could help businesses reach new heights of efficiency and security, without increasing operational costs. Businesses can carry out transactions with a fraction of the administrative effort.

Improving Supply Chains

Given both the transparent and traceable nature of blockchain, the technology could find very practical usage in monitoring and managing the supply chain of businesses across various industries, especially food production and logistics.

Using blockchain to record each transaction within a supply chain creates greater transparency for companies and consumers. It also provides traceability in the event that something goes wrong. Smart contracts can also help to automate a supply chain for greater accuracy e.g., automatically update inventory after a delivery.

 

Six Companies That Are Already Embracing Blockchain

In 2021, 81 of the world’s top 100 companies were using some form of blockchain technology. Let’s take a closer look at 6 companies that are already embracing blockchain:

Microsoft

As a tech giant, Microsoft Azure is working with companies in various sectors to deploy blockchain technology. This includes helping to create the first blockchain-based marine insurance platform and even using blockchain to pay royalties to game developers in its Xbox gaming system.

Kodak

Whilst most of us will remember Kodak for their camera, the company is keeping up with modern times by embracing blockchain technology. They are using blockchain to prevent copyright infringement and piracy of images and videos. You can even purchase licenses and images with their very own KODAKCoins.

Walmart

Walmart, in partnership with IBM, is testing the use of blockchain in their food supply chain. IBM have already successfully tracked the origin and freshness of produce and the retail giant is looking to blockchain to improve data management and traceability.

Disney

Like Kodak, Disney is also looking to combat piracy and movie leaks with blockchain technology. Last year, they successfully patented a blockchain-based content distribution system. The proposed system would use blockchain technology to protect their audio-visual material in an attempt to stop the illegal distribution of their content.

Coca Cola

After accusations that a large amount of the company’s sugarcane came from forced labour, Coca Cola, partnered with the United States Department of State, is using blockchain to solve this ethical issue in its supply chain. With the transparency of blockchain and smart contracts, Coca Cola is creating a registry where workers can report cases of forced labour.

E-Sign

E-Sign has evolved its use of blockchain, utilising hyper-ledger fabric technology to enable a collaborative network of networks. Rather than an open, permissionless system, Fabric offers a scalable and secure platform that supports private transactions and confidential contracts. This architecture allows for solutions developed with Fabric to be adapted for any industry, thus ushering in a new era of trust, transparency, and accountability for businesses. E-Sign uses this technology to create ‘Smart contracts’, high-level documents that businesses transmit securely across their network.

 

The Darkside of Blockchain

I can’t write a piece about blockchain without mentioning a major flaw: sadly, blockchain is not the most environmentally friendly technology out there. Carrying out the mathematical processes that verify transactions can be energy-intensive, as the computers that do this eat up a lot of electricity. If power comes from burning fossil fuels, we have to question the environmental impact of blockchain.

This is especially true for cryptocurrencies, which use blockchain to record transactions. There’s much concern around the environmental impact of Bitcoin, which is a particularly energy-hungry cryptocurrency. Indeed, it’s estimated that each Bitcoin transaction consumes 1,173 kilowatt-hours of electricity- the same energy it would take to power a home for six weeks. Whilst the industry is taking steps to minimise the environmental impact, mainly by using renewable energy, it’s important to recognise the downside of such technology in the discussion on crypto and blockchain.

 

The legal bit: This blog is meant for entertainment purposes only and should not be taken as financial advice.

Matt Newing is a self-made entrepreneur, investor, and philanthropist who’s always on the lookout for the latest and greatest business opportunities. If you have a business and need help taking it to the next level, try pitching it to Matt today.