The Advantages of Blockchain Technology in Business

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In a digital era, the advantages of blockchain technology for business are significant 

While you have likely heard of Blockchain in the context of cryptocurrency or Blockchain tech companies, its role as a technology for Business may be less clear. With benefits for all industry sectors, it is a technology whose strength is transparency and security. While a safe technology, there are trade-offs: like all tools, you need to consider the benefits against the costs before using. 

About Blockchain

What is Blockchain?

Blockchain is way to record and track information. As it is a type of technology and not a specific network, it can be adapted easily to suit your business’ information needs – public or private. 

Put simply, think of it as a chain of Blocks. Each Block contains the latest information you want to share, a unique fingerprint (known as a hash), and the fingerprint of the preceding Block. In this way, it operates as an unbreakable chain, with each piece of information adding to the next. 

As each Block is connected to only one other Block, they form a long chain of immutable information – Blockchain!  

Where is information stored?

An exact copy of this chain of information is shared among many users (decentralised). Just as your Business would save critical business information in more than one place, so too Blockchain information is stored in multiple locations. This is known as Distributed Ledger Technology.  

“It can help to think of Blockchain as the information itself. How that information is validated & copied around the network or globe is Distributed Ledger Technology,” says Jude Rajkumar, a Project Lead in the Sydney Office. 

• Blockchain: a chain of information. Each block is connected to an earlier Block. Each Block contains a set of data, a unique fingerprint (known as a hash), and the fingerprint of the preceding Block. 

• Distributed Ledger Technology:  how Blockchain is copied and stored around the network. A network of computers creating a database system, or ledger, to store and share copies of identical records across the network. Blocks are validated on the network before being added to the distributed ledger. 

Once information is added to the Blockchain, it cannot be altered. The accessibility of the information is up to your Business. 

Networks can be either public or private: 

• Public: The network is accessible to the public and anyone can participate in blockchain activities. A key advantage is a more robust network due to public participation and the benefits of a decentralised and autonomous operation  
• Private: The network is only available to some individuals (those with the right authentications and permission). A key advantage is that it can be tailored to meet the specifications of an organization and can provide higher levels of control over data access.  

Access can be restricted to unrestricted: 

• Permissionless: A public blockchain that is completely decentralised and allows everyone to contribute towards the network and make changes. 
• Permissioned: Blockchain with customisable options that can only be accessed through an authentication process. Permissions can further be restricted to certain tasks within the blockchain network to ensure data integrity. Private blockchains are usually permissioned and are also known as consortium blockchains. 

For further information about Distributed Ledger Technology, refer to this article.

Why does blockchain work?

1. For every piece of new information, a new Block is created. For instance, sending money to someone would be a new transaction and would result in a new Block of information. 
2. To make sure new Blocks are actually connected to a previous Block, they need to be validated. Validation is performed by many computers or servers in the network (Known as Proof of Work). 
3. Once validated, the Block is rapidly copied to all the other Ledgers. The validation and then rapid dissemination of the Block ensures the integrity of the information. 

Is blockchain safe?

Yes – this is the strength of Blockchain.  The combination of the unique hash against each Block, the validation process required for new Blocks, and the distribution or copies of information across Ledgers means Blockchain is very safe for the recording of information in a decentralised way.  

“Imagine you were a bookkeeper with a book of your day’s totals. You store exact copies of this book in each of your offices around the globe. After you update your book with the day’s tallies, you then send a copy of the updates to all your other offices. They check to make sure that you are allowed to update the totals and that it is indeed the latest information, before penning the information into the book. The offices constantly check with each other to make sure everything matches,” says Jeffrey von Drehnen, Project Lead in the Sydney office. 

“If anyone were to try and edit totals from a week ago, you could see how that would be difficult. Even if you got away with editing one book, editing every book in every office at the same time would be a big ask.” 

Is this the same as Bitcoin? 

Not exactly. Bitcoin and other cryptocurrencies use Blockchain technology. The kind of information shared with Bitcoin is about financial transactions; however, Blockchain can be used to share information about any number of topics. 

“There are very likely to be benefits of using Blockchain for your business. However, crypto currencies are a little different. They are more like an unofficial sort of currency. And like all forms of currency, it has its own risks and benefits that need to be considered carefully before using. The recent collapse of crypto exchange FTX highlights the risk of entering this space, so you should seek financial advice,” says Ryan Almeida, Consultant in the Melbourne Office.  

Advantages of blockchain technology for business 

There are potential advantages to becoming a Blockchain business for many industries: 

• Transparency: As Blockchain uses Distributed Ledger Technology, Blockchains can be seen by anyone who has access & permission  
• Traceability: Every transaction is recorded in the chain, meaning you can see exactly where pieces of information were added – the ultimate version control! 
• Security: The uniqueness of each hash, the validation process & distribution of information means Blockchain is very safe 
• Removes the intermediary: Distributed Ledgers connect end users without any intermediaries. Depending on how you currently operate, this may save time and money as intermediaries (such as banks) are no longer required to oversee and validate operations 
• Immediacy: All authorised participants can access the same real-time information, which makes it makes it easy to track and audit transactions. 

Disadvantages of Blockchain technology 

“Blockchain is a useful tool. But like any tool, it has its disadvantages,” notes Jude. 

“It may not be the most efficient way to communicate and store information, so you really need the transparency & accessibility benefits to you and your customers to outweigh the costs of using this technology. In circumstances where you need greater & transparent access to information is where it may be of value to your business.” 

• Operational energy costs: it costs a significant amount of energy to maintain distributed ledgers and to validate new Blocks. Depending on the source of energy, there are also environmental implications 
• Limited adoption: although there is a strong case for Blockchain technology in a variety of industries, there has been a low adoption and limited application so far 
• Speed: Blockchain technology can be inefficient, especially during heavy traffic flow when transaction speed can slow significantly which results in high transaction fees 
• Complexity: The systems are complex to set up and maintain which can be a challenge for those not proficient in the use of the technology.  
• Lack of regulation: As Blockchain is an emerging technology, regulations and standardisations governing its use are still fluid so may impact its use in the future. Non-reversible transactions can also put the sender at a disadvantage, especially in rare cases of fraud as there is no recourse 
• Criminal activity: As Blockchain is so secure & can also be anonymous, this makes it an ideal technology for criminals to move money and information 

Blockchain ideas for business 

Information your business needs to record can be stored with Blockchain. For instance: 

• Financial transactions: this includes foreign currency markets, debt insurance and cryptocurrencies. Digital currencies use encrypted blockchain technology for peer-to-peer transactions without the need for a centralised authority. There have already been almost 22,000 cryptocurrencies created on the blockchain network. 
• Supply chain management: the movement of goods can be traced in a secure and transparent way using Blockchain. 
• Digital identity verification: fraud and identity theft can be reduced by using secure Blockchain across different platforms and services as they do not require a centralised authority and the encrypted data limits the possibility of data manipulation. 
• Smart contracts: enable users to apply specific conditions to define a relationship between two parties and automates the execution of the agreement when certain pre-conditions in the contract are met without the need for third-party intervention. 

“Smart contracts are an exciting idea we will see more of in the near future. For instance, you could have contracts that execute a charge or refund based on certain criteria being true. For example, if your flight was late you could have the contract automatically organize a partial refund to the passenger,” says Ryan.

• Digital voting: provide a secure and auditable way to record and count votes while protecting the identity of the voter. 
• Digital notary services: a unique digital fingerprint of the contents of a document is used to verify the authenticity of the document and ensure it has not been tampered with. 
• Land title registration: provides an easily accessible decentralised digital database of land ownership to reduce the risk of fraud and errors. 

“Particularly in nations still building their governmental institutions, the ability to de-centrally register land titles means transparency in who owns what, limiting corruption and theft opportunities. Combining this transparency with the security of Blockchain makes land titles a strong candidate for Blockchain technology,” says Jeffrey.  

Due to Blockchain’s limitations, you would not use it for the storage of larger information, such as images or videos. Instead, you would use Blockchain to store information that proves the authenticity or location of files. You may have heard of NFTs, which use Blockchain to demonstrate ownership over art. 

Which industries are likely to benefit the most from blockchain technology? 

As we’ve mentioned above, Blockchain can play a pivotal role in improving data security by enabling secure and tamper-proof records of transactions and allowing data more broadly to be maintained and shared. In addition to this, blockchain technology can be used to create a secure and decentralized system for identity and access management, which can be used to authenticate users and control access to systems and data. Industries which are likely to see the largest benefits are: 

• Real Estate: Blockchain is likely to improve the process of purchasing property, such as title transfers and property registration, with the reduction of intermediaries and the use of smart contracts, which will automate the execution and make transactions faster and cheaper (Propy, SMARTRealty, SafeWire). For buyers, tamper-proof and transparent data management means they will be able to track ownership and history of the property easily and confidently. From a new product perspective, opportunities exist in productising Blockchain-based digital assets such as tokenized real estate, and enabling fractional property ownership (Vairt, Realblocks, RealtyBits). 

• Healthcare: People’s medical records are the most sensitive and important forms of data stored digitally. Utilising blockchain technology in this space can not only make these records more secure but will also facilitate more seamless sharing and maintaining between hospitals, diagnostic laboratories, pharmacy firms and physicians, allowing patients to obtain quicker and more accurate clinical outcomes, and prevent discrepancies and loss of information that traditionally have occurred from these multitude of handovers. Supply-chain implementations of blockchain technology can be used to track the origin, authenticity and movement of pharmaceuticals, medical devices and other healthcare related products, helping to improve drug traceability and stopping counterfeit and substandard products from entering the supply chain. 

• Finance: As we continue to move towards an increasingly cashless society, incidences of fraud and financial crime have become more frequent and sophisticated. Employing blockchain technology uses cryptography to secure transactions and ensure that the ledger is tamper-proof, resulting in a reduction of costs in security apparatus and victim compensation.   

• eCommerce: In addition to the obvious benefits in secure payments, the biggest benefits for the eCommerce industry are likely to be seen in Supply Chain Management – tracking products as they move through the supply chain, making it easier to trace their origin, monitor their quality, and manage inventory. With an increase in buyer’s sustainability obligations and concerns, blockchain technology can be used to track the end to end lifecycle of a product, from the manufacturer to the consumer, allowing customers to easily verify the authenticity of products and the conditions under which they were made.  

• Government: The need to maintain trust in Government systems has never been higher and blockchain applications enable a tamper-proof record of all government transactions, such as property ownership, tax payments, and voting records. This in turn enables an expanded suite of secure and improved Government services including eVoting, public welfare distribution, and the day-to-day administration of government services, such as document verification, licenses, permits, and more. 

• IT: In the tech space, traction has also been building in the distributed computing space, where the Blockchain network is being utilised to develop decentralised applications (DApps) for various purposes like gaming, prediction markets, and more. The advantage of these dApps have over traditional ones is that there is no single server, so users won’t lose access to the app if the server goes down, and since there’s no centralised storage, user data won’t be compromised if there’s a data breach or hacking attempt.