Amidst the varying degree of attention given to bitcoin and other cryptocurrencies/altcoins, there is a growing interest in the applicability of the underlying blockchain technology in business. As an independent consultant, I receive various requests from clients and prospective clients with regards to how they can implement the latest and emergent technologies into their existing business models. In response to the increasing queries around blockchain and digital ledger technologies, I have written this article to help business leaders who are pondering the same question:
“Is my business ready for blockchain?”
First, let’s cover the basics in a bite-size format.
- Blockchain (technology), is a digital ledger, that enables records (blocks) of information/transactions to be shared amongst various users/participants;
- Each block of information creates a timestamped record that cannot be changed or erased (immutable);
- Participants can either be part of an open group of users (a public blockchain, such as Bitcoin) or a controlled group of users (private blockchain such as Hyperledger Fabric, or any other enterprise blockchain);
- Each block of information is linked to a specific user/participant. The participants are all administrators on the blockchain (decentralised);
- The blocks of transactional information can only be accepted and updated if all users/participants agree (give consensus);
- Over time, as new blocks are added to the ledger, a chain of blocks are created, hence the name “blockchain”;
- the blockchain contains all verified information for each and every transaction that has been shared on the system;
- blockchain can be used for “smart contracts”, scripts that automatically execute when certain conditions are met (which reduces/eliminates manual administrative burdens);
- Blockchain (technology) is referred to interchangeably as digital ledger technology (DLT).
Why is blockchain useful?
There are multiple applications for the technology, and there are successful use cases in agriculture, finance, healthcare, supply chain management, real estate to name but a few. For many businesses such as banking, insurance, legal, verifying customers (know-your-customer (KYC)), privacy and security, and anti-money laundering measures are paramount to their legal and regulatory obligations. Blockchain can enhance those compliance obligations for payments and settlements.
Case Study 1: Crossborder payments via RippleNet xVia
- Use xVia API = no software installation
- Full payment tracking, even for transactions with digital wallets
- Capital efficiency through real-time on-demand requirements (as opposed to positioning for T+2 settlement)
- Improved reconciliation due to embedded rich data such as exchange rates for each party’s payment
Ripple is like SWIFT but built on blockchain technology, and provides an alternative to cross-border payments, which the SWIFT organisation has dominated for over 50 years.
Case Study 2: Securities settlement vi R3
Smart contracts are more economical
There is potential to disrupt and change many industries and sectors, hence this article is focused on demonstrating some use cases that can help business leaders to consider the benefits of using blockchain technology.