The Pros Outweigh the Cons of Implementing Blockchain in Your Business

The launch of Bitcoin in 2009 introduced blockchain technology to the real world, highlighting the use and functionality of a digital distributed ledger technology. Today, the disruptive implications of its features are far-reaching. Blockchain technology can displace intermediaries, such as brokers, notaries, and banks, whose business models rest largely on providing independent third-party verification. Several renowned companies, government agencies, and nonprofit entities are relying on blockchain technology to improve existing operations and enable new business models.

What is blockchain technology?

Blockchain technology is a decentralised ledger system where there are blocks with unique characteristics. Every block is connected to another block to form a chain-like structure. These blocks contain information, and the connections in a chain-like structure indicate the linking process. Participants authorised to access the network can view and add information but not make alterations to existing records. All information within a block is cryptographically secured.

What makes the technology special?

The value of blockchain lies in its ability to share data quickly and securely without a single entity having the burden of safeguarding the data or facilitating the transactions. Blockchain eliminates the role of a central authority controlling all data stored in a given database and creates a single source of truth wherein parties can read and write to a common database.

Currently, many enterprises are willing to adopt blockchain technology. However, every technology carries a host of pros and cons, and blockchain is no different. While most enterprises try to unlock the technology’s value, they neglect the challenges and issues. Consequently, they make errors and lose out on resources and time.

When managers and executives evaluate a business case for blockchain adoption, they should focus on the following questions:

What are the sources of value that blockchain can deliver?

There are four primary sources of value that blockchain use cases can deliver. Businesses can mix and match these sources in different ways.

New Business Models

With the help of blockchain-supported innovation, businesses can generate new revenue streams. For instance, in the energy sector, blockchain platforms empower entities to trade excess energy stores autonomously over the grid.

Operational Efficiency

Blockchain automates processes, eliminating unnecessary intermediaries to enable organisations to enhance productivity and performance. For instance, the technology enables smart contracts that require no human interaction for enforcing contractual obligations and instead utilise predefined software.

Risk Mitigation

Blockchain-related applications help companies improve tracing and authentication across the supply chain. The effects of better transparency throughout the supply and distribution chain reduce the chances of health and safety issues due to counterfeiting and fraudulent parts. As a result, financial and reputational damage is mitigated.

Social Impact

Companies can use blockchain applications to support a wide range of initiatives, such as election management, voting, and ethical sourcing.

How will using blockchain align with the organisation’s goals and strategies?

Blockchain has the potential to become a game-changing force in all industries. Towards the fulfilment of the organisation’s goals and strategies, the adoption of blockchain helps in cost reduction. Blockchain eliminates the need for third-party assistance, and when businesses transact data without an intermediary, they save huge costs.

Additionally, delivering a satisfactory customer experience is an organisational goal businesses can fulfil with the help of blockchain. The technology can track goods throughout the supply chain, offering clear and instant visibility to industrial companies. Leveraging this feature of the technology, companies can create greater transparency with their customers, who are increasingly demanding it.

Will blockchain enable the organisation to compete more effectively?

With blockchain gaining more acceptance worldwide, it can help businesses get ahead of the competition in different ways. Blockchain is kickstarting the next automation revolution. Task automation will cut down on costs and boost productivity, thereby increasing revenue. That in itself is the core ingredient to compete more effectively.

Moreover, blockchain adoption allows businesses to include various cryptocurrencies in the payment gateway. The more payment options an organisation offers to the customers, the higher the chances of success. Speed is also of crucial importance in e-commerce. Sales through decentralised blockchain are comparatively faster than traditional systems. As a result, businesses can speed up high-volume transactions.

Pros of implementing blockchain in your business model

Blockchain and its characteristics can provide a multitude of benefits to businesses, regardless of whether they are adopting a public blockchain network or a private blockchain-based application. Blockchain’s capabilities support end-to-end automation and easy data sharing across organisations. It establishes trust between different entities willing to engage in business dealings. It significantly reduces manual reconciliation efforts. Moreover, it provides anywhere, anytime accesses to previous transaction records, which can tremendously improve regulatory and audit compliance. As a result, associated costs reduce, and response times improve.

Another leading benefit of this emerging technology is security and privacy. Due to end-to-end encryption, the record of transactions is unalterable, shutting out fraud and unauthorised activity.

Cons of implementing blockchain in your business model

For the successful implementation of blockchain technologies, everyone within the process ecosystem needs to adopt the system. Many companies are sceptical about investing in the technology and don’t believe it is ready to deliver high enough returns to cover the costs of replacing existing systems.

Another major con pertains to uncertain regulations. Due to the lack of central control, there is no clarity on who will address breaches in trust and protocols. Moreover, the lack of regulation results in the concept of ICO scams.

The Bottom Line

Blockchain can create benefits in all sectors of the economy, not just the financial services sector. The impact of blockchain technology extends to any business that serves as an intermediary between two parties, for instance, a buyer and a seller, and earns economic rents from a brokerage position in the value chain. Therefore, managers are advised to track blockchain technologies to assess their effectiveness and leverage their benefits for new value creation. If they fail to do so, they will lose their competitive edge to managers of firms who understand blockchain and are willing to marshal its capabilities into tangible and sustainable sources of value.

Author: Milan Ganatra, Founder & CEO, 1Silverbullet