Blockchain, the innovative technology made famous by Bitcoin and other cryptocurrencies, has become a buzzword in the technology and business sectors. Many industry giants, from Microsoft to IBM, have made significant investments in blockchain, suggesting it may become an integral part to the way business is done in the future. As a small business owner, you might wonder how you too can make use of blockchain technology. In this article, I’ll cover five potential uses for blockchain in your business. But first, let’s quickly cover what a blockchain is and why you would consider using one.
What is a Blockchain?
A blockchain is a digital list of records that is secured with advanced cryptography. Data on a blockchain is divided into chunks called blocks. Each block on the chain includes a cryptographic hash to the previous block—which essentially means that each block is very securely linked to the block before it.
Because each block refers to the block preceding it, making changes to a single block also requires changing every block after the target block to ensure that the blocks still reference each other correctly. This structure makes blockchains extremely difficult, if not impossible, to modify once blocks have been added.
Their resistance to modification is the core of why blockchains are so useful. Where blockchains really excel is in use cases that require temporal accuracy. Each block of data includes a timestamp, meaning that blockchains are inherently linear in the way that they store data. Blockchains, therefore, provide businesses with an immutable record of data over time.
Now that we know what a blockchain is and what its strengths are, we can talk about potential real-world applications in your business.
1. Paperwork and Recordkeeping
The most obvious application for blockchains in business is for paperwork and recordkeeping. Contracts, correspondences, proposals, memos, receipts and any other document can be stored digitally on a blockchain, giving businesses a clear and accurate image of what happened and when. The advantage a blockchain has over traditional servers in this instance is to ensure that data has not been modified by any malicious actors.
Several major companies are using blockchains for this exact purpose. One such company is IBM, which has partnered with leaders in the shipping industry including UPS, FedEx and Maersk, who are all members of the Blockchain in Transport Alliance. Shipping companies have been quick to realize that blockchain technologies are a natural solution to maintaining transparent, up-to-date records on the status of cargo. In particular, blockchain is predicted to be an efficient means of managing paperwork, which currently suffers from clerical errors and fraud.
2. Transaction Histories
Given that the blockchain was first introduced as the foundation for Bitcoin and other cryptocurrencies, it should come as no surprise that blockchains are also useful for maintaining transaction histories. In the case of Bitcoin, the blockchain acts as a public ledger of all transactions on the network. The ledger can be accessed by anyone and clearly displays each transaction as it happens.
Bitcoin’s blockchain is distributed, meaning that it is maintained by no single trusted entity. Instead, it is maintained by a network of nodes that each validates the blockchain independently. As soon as a block is added, each node updates their personal copy of the blockchain. The nodes communicate with one another to ensure there is a consensus on the blockchain’s accuracy. Competing transactions or sequences of events are overruled if they conflict with the majority record. This structure allows Bitcoin to realize one of its founder’s core goals: ensuring an accurate transaction history without relying on a single trusted third party (like a bank) to act as the validator.
Implementing a blockchain in your small business for the purpose of tracking transaction histories may not require this decentralized structure. Instead, a blockchain could serve as a detailed record of debts and credits, which would once again benefit from the guarantee that the data cannot be tampered with once it has been entered.
3. Supply Chain Management and Quality Control
Another innovative use of blockchain technology is for supply chain management and quality control. Walmart, for example, has partnered with IBM to use blockchain as a method for managing supply chains to and from its stores. Walmart products make numerous stops on their way from producer to store shelves, and these stops provide many potential points of failure. This is a particular concern when it comes to food products, which can become tainted with bacteria and other blights. Together with IBM, Walmart is in the process of developing a blockchain that would record every step between producer and stores, thereby making it possible to trace any product back to its origin in a matter of seconds.
Potential applications of this include minimizing the risk of an E. Coli outbreak by tracing a product to the farm it came from. A preliminary test of this application showed that the system could track every step in the production of a bag of mango slices in around 2 seconds—a process that would have taken the company 6 days with earlier technology.
Small businesses could use blockchains in much the same way as a powerful tool for quality control. If a product being sold by your business fails to meet quality standards, finding the point of failure could be as simple as entering the product’s serial number and investigating the intermediate steps in its production.
4. Coordinating with Other Businesses
Blockchains’ speed, accuracy and security make them very useful for businesses in industries that require efficient coordination with other businesses. One such industry is air travel.
Airports and airlines rely heavily on streamlined data exchange in order to keep flights on schedule and traffic flowing smoothly. Sometimes, however, there are lapses in coordination. According to Kevin O’Sullivan, a lead engineer at an airline technology agency called SITA, individual companies each maintain their own flight databases and often fail to share relevant information with all parties involved. “Separate copies tend to drift out of sync,” and the results can be costly.
Last year, British Airways, in partnership with London Heathrow, Geneva International Airport and Miami International Airport participated in an experiment called FlightChain, in which the different parties merged their flight data onto a shared blockchain. The result was a single database guaranteed to have complete, undisputedly true information. A shared record like this has the potential to greatly reduce confusion and ensure frictionless coordination in the airline industry.
Businesses in industries that require similar coordination might also benefit from investing in a shared blockchain. Keeping all parties on the same page can go a long way toward preventing issues that negatively affect your customers. And if there are ever any lapses in coordination, the blockchain can serve as an immutable record to hold the appropriate parties accountable.
5. Decentralized Data Storage
Finally, blockchains’ ability to be secured by a network of nodes rather than on a single server makes them useful as a method for decentralized data storage. Decentralization comes with several advantages over traditional, server-based data storage.
For one, an effectively decentralized network will never experience downtime as a result of server outages. Each node maintains a complete copy of all data, so if a single node loses power or experiences other technical malfunctions, data will still be accessible from other nodes in the network. In other words, there is no single point of failure that could lead to an interruption in service.
Decentralized data storage is also useful to further ensure the security of data. Data stored on a single server can be manipulated because there are no alternative data records with which to compare it. By contrast, each node in a decentralized network maintains an independent copy of the network’s data. If there were any conflicts in data records between nodes—for example, if a malicious actor managed to edit the blockchain on a single node—other nodes in the network would be able to overrule the corrupted record. Decentralization, therefore, makes blockchains—which are already incredibly secure—even more difficult to compromise.
These are just five potential uses for blockchain in business. Given that the blockchain is still a very young technology (Bitcoin and blockchain were first introduced in 2009), the uses for blockchain will continue to grow as more and more companies and developers begin working with it. Whether any of these uses are right for your business depends on a variety of factors that only you know. Those of you looking to keep your business on the cutting edge, however, would do well to keep blockchain in mind.