The question you might be asking yourself at this point is what unique benefits of blockchain bring to the table that makes it worth it to implement completely new technology into your company.
What kind is a bit tricky when you’re researching blockchains is picking the facts out from the hype. Blockchains have made the claim of being able to help redistribute wealth across the world by changing the way wealth is created, held, and utilized. While cryptocurrencies like Bitcoin have certainly made a strong start with this, it will take a more radical restructuring of the international commercial landscape than simply changing to a blockchain system to truly redistribute wealth in any meaningful way.
Other benefits of blockchain technology remain only theoretical until more companies and individuals decide to start using the technology. One such purported benefit is the ability to use blockchains to store and protect your personal information in such a way that you can directly control how it’s viewed by whom, as well as how those viewers are allowed to use it. Blockchain is basically a virtual ledger, there are many other possible applications of Blockchain technology.
In the current internet age, you leave a trail of personal information every time you have to fill out a form, trusting that the organizations you’re giving this information to will use it correctly. These so-called “digital bread crumbs” are often gathered by advertisers and companies and subsequently monetized, allowing them to target people using information they may not even realize they’d revealed.
One suggested benefit of blockchain is in setting up a kind of digital “black box” for your identity. You could then keep your information yourself and simply give companies permission to view it, not to use, copy, or distribute it. This would allow you to reveal only the information a company needs to know and safeguard the rest. Theoretically, you could then also choose to share your information with select advertisers for a given payment, therefore monetizing your own information rather than allowing them to profit from it without your knowledge or approval.
The issue with this, of course, is that most of us have already been sharing our information on the internet for a decade or more. Blockchains could help you protect your information in the future, but won’t do much to clean up the bread crumbs you’ve already left scattered around. Still, this offers an appealing vision of the future, where true and easy protection of your personal information is possible.
If you’re curious about the potential benefits of blockchain technology implementation, either for your business or in other areas of your life, some of the most touted characteristics of blockchain systems are described here that follow.
The example of the black box for your personal information that was given above certainties into this advantage of blockchains. Transactions that are conducted on a blockchain system aren’t tied to your name or any other aspect of your personal identity but are instead controlled with a system of keys. This allows individual users to remain secure while conducting their in-network business.
There are two types of keys associated with your network identity. The public key is a randomly generated series of numbers that denote your address on the blockchain. You can think of this as your public handle since it’s what you’ll send to other users when you initiate transactions.
There is also a private key, which you can think of like a password, which grants access to your wallet app and permits you to initiate transactions. Whoever holds the private key controls how much information is given out along with the public key. While this certainly doesn’t make your identity completely hacker-proof, it does limit the ways in which your data can be stolen or corrupted. Security is a great benefit amongst the benefits of blockchain.
Proponents of blockchains are always bringing up its decentralization as the main selling point, but the exact benefits of this decentralization aren’t always as widely vocalized. Even in a centralized system, you have access to your own accounts and information all the time— so just what changes when the system is stripped of ownership?
The main benefit of decentralization is that it reduces a lot of the security risks associated with large databases and sensitive information. Without a central server, there is no one point of vulnerability at which the network could be hacked and exploited. It also makes it less likely for someone to be able to disrupt the network, or for it to fail because of a server error. Removing a centralized authority also means that there is no “gatekeeper” to the network. Anyone can join, voluntarily, for free; no one is directly profiting from transactions that happen on the network except for those parties involved in sales.
This also removes friction, conflict, and lag time associated with central servers or overarching intermediaries. Aspects of commerce like stock market trades can happen almost simultaneously thanks to the one-on-one nature of the interactions.
Where this is especially helpful is in the realm of legal documents. In current systems, documents have to be passed back and forth between involved parties. This opens up the potential for there to be different versions of the document in different places, which could result in conflicts between parties or the loss of important information. When every user on the network has access to all the data at all times, there is no need to create multiple versions, and the probability of disagreements and errors diminishes greatly. Decentralization is a great benefit amongst the benefits of blockchain.
A side-benefit of the decentralization aspect of blockchains is that the technology is inherently robust. Blocks of information are stored across so many networks that there’s no single point of potential failure. So long as one node of the network remains operational, the blockchain itself is protected.
The robustness of blockchain networks has already been demonstrated in the real world. Bitcoin has been in continuous operation since 2008 without any significant disruptions. The few problems that have come up have been the result of mismanagement during the early years of the network— in other words, the result of human error. The basic concept is sound, especially as it evolves to allow even less human control than Bitcoin has.
Since data sent on a blockchain network is embedded into the network as a whole, it is by definition public, which gives it complete transparency. Once the transaction is added to the blockchain, there is no way to alter it or corrupt it without tearing down the entire network. This is theoretically possible but is very unlikely in practice. Not only would it require an exceptional amount of computing power, but by corrupting the network it would be rendered useless, making it a pointless venture.
While this is appealing for western countries, it makes blockchains especially valuable for other areas of the world where there is a less inherent trust for governments or large corporations, like banks. In places where corruption is a frequent issue, a blockchain can open up the digital economy for people who don’t want to put their faith into companies that historically don’t have people’s best interests in mind.
Telecom companies like M-Pesa in Kenya have started making phone banking a possibility, but since these are still centralized organizations, there is still a risk of people losing their money if the company should fail. By instead conducting transactions over a peer-to-peer network using only a mobile phone, this risk is removed.
Even in regions of the world where trust in corporations is fairly high, peer-to-peer networks can make an impact on the economy. They make it easier for people to establish trust directly with each other. This creates the potential for a true sharing economy.
Companies like Airbnb and Uber that are currently pointed to as representative of a sharing economy are in fact more service aggregates, still under the control of a centralized authority that collects a service fee. Blockchains would instead allow for the elimination of this service provider. A ride-sharing company could be owned collectively by the drivers, for example, allowing for a truly cooperative economic scenario. Trust is a great benefit amongst the benefits of blockchain.
Once a block has been added to the chain through the consensus of the network of users, it cannot be altered. You can add new records that update this existing block, but the block itself will always be there to be checked and confirmed, and the record of changes made will be impossible to erase.
Legal documents like property deeds, birth or marriage certificates, passports, licenses, school transcripts, and other important materials can be sent to a blockchain and entered into the public record of anyone in the network. This prevents such documents from being disputed.
It’s thought that as many as 70% of people who think they own property today actually have an extremely tenuous title to it. The title transfer record systems of many governments are easily corrupted. If a new leader comes to power, he can all too often simply decide he now owns a citizen’s land, and that citizen has very little defense against this.
If that deed is instead saved to a blockchain, however, this citizen’s rightful claim to the land can be verified by hundreds of thousands of computers, all over the world. This is just one example of how the immutability of a blockchain can be of great benefit.
In a similar vein, the fact that anything in the blockchain is unchangeable, permanent, and public means that anyone on the network, from the smallest individual user to the largest corporation and even government officials, can be held accountable.
From a business standpoint, this means that anyone who says they will deliver a payment, product, or service has no way to back out of this agreement. There would be no missed transactions, no human error, and no blaming failures on a machine error.
On a larger scale, consumers could verify whether companies who claim to use sustainable materials or fair employment practices actually do so by following the chain the entire way back to its source. This can also help companies to identify weak points along their own supply chain since the businesses both upstream and downstream will have their information as readily available.
Theoretically, this kind of technology could even be used to hold elected officials accountable for their promises. When elected, politicians could be made to sign a smart contract that holds their salary in escrow until they’ve delivered upon certain campaign promises. It can also help to make sure that money is being allocated to the places it’s supposed to be, rather than being used for corrupt or underhanded purposes. Accountability is a great benefit amongst the benefits of blockchain.
The easily verified information, lack of a central authority, and inherent transparency of blockchain networks combine to give you a secondary benefit of lowered transaction costs across the board. The fees paid to contract handlers and financial institutions could become a thing of the past, and the lack of errors or lost information can also save significant waste.
The costs of doing business in an open market can be a significant detriment to smaller operations, preventing them from competing with large corporations. These include the cost of establishing trust, the cost of logistics and coordination, and the cost of searching for customers and suppliers. All of these costs could be radically reduced in a blockchain system. This makes it much easier for independent entrepreneurs to make a living.
As an example, consider a musician who wants to sell their tracks to their fans. In the current system, there is a record production company with a team of lawyers, marketers, and other people who all receive a cut of the profits.
Using a blockchain would instead allow the musician to sell their songs directly to customers using a smart contract that establishes the terms for use without the need for all these peripheral figures. By reducing the number of slices in the pie, it means the fan can pay less and the artist can still retain more of the profit than they did before. This same principle can apply to a variety of industries. Lowered cost is a great benefit amongst the benefits of blockchain.