WHY SHOULD I CARE ABOUT BLOCKCHAIN
If technology is supposed to be how we leverage and improve our work, as long as technology moves forward, our business needs to move forward too. And if we aren’t moving, somebody else is.
Blockchain is yet another technology that promises to make us work differently, as other techs before it, but with a huge twist.
New technologies will often become essential business tools once we, as users, feel confident with them. Typically, we start by trusting in the creator of the technology, then the team producing the brand, and then finally the brand itself. The brand name then becomes what instills a sense of trust.
With blockchain, trust in a brand is not necessary. The technology itself is trustworthy by design.
Let’s look at an example. To send money from country A to B we could hypothetically:
- Find somebody on Facebook from country A that will be travelling to country B, contact them and ask if they are willing to take money to a friend (and declare the money appropriately, so that is legal). We would put this person in touch with our friend and hope that they bring them the money. There is nothing that will guarantee that the money will end up in our friend’s hands. We have to trust that this stranger won’t lose our money, keep it for himself, or give it to another person by mistake. Also, we will only know that the transaction has been completed once our friend receives the money.
- Make a bank transfer: We would only need our friend’s bank account number and then to send the money using our bank. This is a secure method, since we can trust our banking institution to correctly deliver the funds.
Obviously, the first scenario is not desirable. We are willing to pay banking fees in this situation since trust is essential.
Bitcoin, the first blockchain made, acts as a type of virtual currency that allows us to directly send money from one account to another, without using a bank. Why would we feel safe doing this? Because these transactions are made via the blockchain, giving them a permanent, public record. A blockchain doesn’t exist on a physical server, but is instead a kind of shared ledger in which transactions can be recorded. The Bitcoin blockchain is supported by a network of distributed and remote servers, known as “nodes”, where “miners” process data and are rewarded with fractions of Bitcoin for the use of their computing power. Once a transaction is sent to be recorded on the blockchain, it can never be undone. Blockchain therefore takes away our need for an intermediary that we trust, like a bank. By design, blockchain gives us the trust we need.
Now let’s think about smart contracts and how they empower the ledger. Essentially Smart Contracts (SCs), used on blockchains like Ethereum, are small programs or sets of rules that will execute under specific circumstances and without any human interaction. Furthermore, the programs themselves and their execution can’t be changed or altered even by their creator or administrator.
For example, we could create a unique signature for a PDF file by hashing it (a mathematical function that produces a kind of data ID). We can store the hash on the blockchain and send the file and the hash from person A to person B. Person B can validate that the received document is the original because the only way to generate the same signature by the hashing process is by using the exact same file.
Having this hash in the blockchain acts as irrefutable proof that the document exists and hasn’t been altered.
Work done by a notary isn’t so different from this process, as their role is to prove that the content of a document is real and hasn’t been altered. But while a notary is an intermediary that gives us a way to trust content, blockchain is giving us this same level of trust by design.
But it’s not just a notary’s work that blockchain could potentially replace. In most cases where we have public, shareable information that needs to be validated and protected we can consider the use of blockchain. Copyrights and patents are an example of this, and there are many blockchain startups already beginning to re-address how we approach these services.
Smart contracts might seem like an abstract concept, but you may have to consider their utility if they could make your business processes more efficient. For example, if you need to ensure multiple participants have done their work on time, or would like to trigger actions like automatic payments.
To illustrate this idea, imagine you have one party providing a service and another receiving it. Usually there’s a contract between them that says something like: If the app is published in the app store before the specified date, you will be paid X amount of dollars and, if not, there will be a fine of Y. Smart Contracts, on the other hand, can do this automatically. In this case, when the app is published the SC can check the established dates and release/discount funds accordingly. This way you don’t have to worry about your customer not paying on time or your provider being aware of delivery dates.
Blockchain isn’t something that will be used with all information systems and it won’t replace them, but it certainly will have an essential role.
Will your business be positively or negatively affected by blockchain? This is my checklist of points to consider:
- Do I manage information that needs to be validated & marked in order to be trusted? (Monetary transactions, documents, etc.)
- Do I have or manage assets that could be assigned an abstract value (like a token)?
- Do I manage any proprietary transfers between parties?
- Am I an intermediary that provides trust of any kind?
If your answer is yes to any of these questions, you should be learning more about blockchain and smart contracts. Being aware and prepared is the best way to take advantage of this incredible technology that will be creating many new business opportunities in the future.
If your answer is yes to any of these questions, don’t panic. We have built a step-by-step process that can help you make your transition into blockchain.