Blockchain technology is predicted to disrupt business and SMEs will reap benefits and encounter threats and opportunities as a result. For some small businesses, especially those who work with data or manage complex transactions, adopting a blockchain approach could transform the way they work.
For many small businesses, blockchain is just a word that pops up on Twitter. Some may already know blockchain is the technology that underpins Bitcoin, the first cryptocurrency, but for most people this is equally obscure.
For an unfortunate few, it’s a painful reminder of the time their cybersecurity precautions failed and a grim ransom message appeared on their computer screen with the jaunty caption “Bitcoin accepted here”.
The role of Bitcoin
Bitcoin exists completely online and is not controlled by a central bank. To avoid “double-spending”, every time a Bitcoin is spent, a block is created to record the transaction.
Network users known as “miners” run computers night and day to automatically confirm transactions that take place. Every time a miner confirms a transaction, they earn some Bitcoin for the effort.
This system has been running for eight years now and is sufficiently well-established that businesses in the real world already accept Bitcoin as payment for goods and services. Hundreds of other smaller cryptocurrencies have also emerged using the same methods.
However, it’s not all about the money. A blockchain is a series of linked transactions, all confirmed by third parties (distributed ledgers) in unchangeable blocks (immutable records).
The chain is formed because every transaction – every block – contains a mathematical reference to the blocks that came before. The transactions can’t be changed and although you can see the contents of a block, you can’t automatically view all the information in the chain, which makes it very secure.
A blockchain can also be referred to as a distributed ledger and thinking of it in this way throws up some interesting ideas.
How can blockchain play a role with business?
In business, there are plenty of situations where a series of transactions must be properly recorded and where multiple parties have an interest.
What about an accounts audit trail, steps to completion of a contract, or links in a supply chain? New business applications for Distributed Ledger Technology (DLT) are being explored.
Ethereum was developed in 2015 and is a simple way to build special systems called “distributed apps” or “Dapps”. Another variation – permissioned ledgers – combines all the benefits of a blockchain with essential commercial confidentiality.
You may not be aware when an underlying system starts using DLT but you will see some changes.
Blockchain technology could benefit your business in numerous ways.
Improved cash flow
Smart contracts created by a DLT system can make immediate automatic payment of invoices as soon as a transaction is completed. Rather than waiting for several layers of authorisation when the invoice is issued, everyone from the supplier to the project manager to the quality controller can see what is required and sign off as the work happens. Once everything is complete, the transaction block closes and a payment can be triggered automatically.
Streamlined supply chain operation
How can you be sure of the provenance of all the individual elements of goods you make or buy? DLT provides a chain of transparent and immutable records which can provide evidence that an ingredient is truly organic, or that health and safety procedures are being followed in a factory, for example.
If you are providing a service with repeat appointments, issuing a follow up could be an automatic process as soon as the first appointment is complete. The client may also be required to confirm the follow up in the system. This could apply to anything from healthcare to consultancy, reducing the burden of administration and the risk of no-shows.
Fewer intermediaries to deal with
If an agreement can be reached without a middleman, if it can be “disintermediated”. It represents both an opportunity – reduced costs – and a threat. If you run any kind of agency, then simply processing a transaction will no longer be enough. You will have to add value to your clients.
The travel industry has already tackled a similar problem, with direct online bookings displacing traditional agents. The best providers have pushed back to deliver a valuable service over and above booking management. This is going to be replicated in other industries, so be prepared.
How many times do you have to produce your passport, driving licence or utility bills to prove who you are? If all your information was held in an immutable chain, this could be used to verify your identity whenever required. Work is already under way at the United Nations to develop DLT-based identities for refugees and other people who have no life records.
Blockchain is going to disrupt and change our world in ways we cannot yet imagine. Twenty years ago, we had no idea that things such as Facebook or Netflix could exist. It’s time for some original thinking. How will your small business harness this opportunity?