One of the biggest concerns of any business owner is how to provide more value than their competitors. It could be the price, the design, the raw material, or even how trustworthy a product or service can be. That’s why many companies look for ways to use blockchain technology in their businesses.
Here you’ll understand what blockchain is and how it works, what kinds of the network exist, and where you could use it to innovate in your company!
What is blockchain technology?
Put it simply, blockchain technology is a way to process, store, and permanently certify information. It works as a stamp impossible to remove, which can be added to any digital document or file.
Whenever we talk about a blockchain, we refer to a network, as it’s a decentralized ledger. Meaning the information isn’t stored in just one place, but in the several nodes – the storage places – and in real-time.
What makes it so safe is that since information is digitally stored in several computers. Any involved record cannot be altered retroactively without the alteration of all subsequent blocks of information.
Under the right conditions, it can be very secure and private and the information is impossible to tamper with.
How does blockchain work?
The information handled with blockchain technology is divided into sections, known as blocks. These are copied and spread through a network. So, when a new block of information enters, it is immediately associated with the previous one and gets sealed once the next block enters, forming a chain.
Every node has its own copy of the chain, but usually part of the information is encrypted. Only participants that have access to the encryption key can actually see all of the information inside the block.
In other words, if two people make a transaction, everyone in the network will have a copy of its existence, but only the two people that participated in it will have access to the details, making it private.
The network might be able to see senders, recipients, amounts, or other components. This all depends on the blockchain’s nature but it only discloses what might need confirmation in the future, any sensitive information is protected.
Remember, blocks are immediately associated with those who came before and after them, and that order becomes coded into the block itself. So trying to pull off a scam by hacking/tampering with blockchain technology is virtually impossible.
What are the kinds of blockchain?
Before getting to use blockchain technology, we must understand the kinds of networks, private, public, and consortium.
If you are familiar with cryptocurrencies, it’s likely you’ve interacted with a public network since they are the majority of the distributed ledgers. These are constituted of millions of nodes, as no authorization is required. All you need is to download the software.
Public blockchains are very secure because you have millions of nodes, and all information is open for verification, but it might take hours to copy and process information.
Private networks are dedicated networks of computers that tend to be much smaller than public ones. With fewer nodes, transactions are much faster. For this same reason, the networks’ reliability depends on the appointed validators.
Validators are selected nodes assigned to validate transactions. If malicious activity is spotted in a private network, it’s easier to track and ban it.
Private blockchains keep rules and restrict permission of who can see and write to the chain. They are not decentralized, as there is a clear control of the system. Still, information is stored in distributed nodes.
In between, you’ll find the consortium network, combining characteristics from the previous two. The biggest difference lies in the block validation process. Instead of completely democratizing control, or centralizing it through validators a consortium establishes a group of entities equally responsible for block validation.
We could say it’s a semi-private network, with a hybrid access method. It may keep blocks open to all, or just authorized nodes, and so on. But in essence, the consortium helps companies collaborate and maintain the regulation of the network.
Now, how do you choose the best one for your business? A public blockchain, like Ethereum for example, might be worth it for low-investment startups. But its performance will let you down as soon as your company grows.
Startups with a higher volume of transactions should ideally invest in their own private network or join a consortium. The second option can be cheaper, maintaining high-quality servers and services, while having the numbers to keep things secure.
How to use blockchain technology to standout?
A lot of the startups looking into this option are following a marketplace model, where people can sign up to a website, get connected, and buy stuff from each other. But this isn’t the only scenario where startups could benefit from blockchain technology.
Blockchain lets you keep a decentralized record of information, and share it in real-time. Think of all the markets this technology is about to disrupt, by solving their needs in an instant.
Supply chain transparency
Take a look at global supply chains, and how hard it can be to track all stakeholders involved in production and distribution.
With blockchain technology, it’s easier to verify a company’s ethical background and raw material origins, for example when a product recall is required or facing a workers’ rights violation report.
No more delaying projects until all the parties have received their copies of a new contract. It can be done almost instantaneously with blockchain.
Think about the medical records a hospital must keep in their archives? Now, think that each patient could have their records protected by a keycode, sharing it whenever is necessary.
Faster payments and financial audits
Since it’s almost impossible to fraud the blocks, financial audits can be done much quicker. It will take less time for accountants to verify expenses, double payments, changes to bank accounts, vendors, and customers' master data, for example.
Invoices and billing documents will no longer require reconciliation, improving small business cash flow. Insurance companies will be able to verify a patient’s medical appointment and procedure, match it with the hospital or clinic information, and reimburse a payment even before the patient leaves.
Intellectual property protection
Anyone dealing with creative activities protected under the Intellectual Property law could use blockchain technology to ensure the copyright of their pieces. And it can be particularly helpful for smaller businesses, who don’t have access to law firms to help them with that.
You can read this great article, by 99 Design, on how blockchain companies can help creators protect their copyrights and get fair compensation for their incredible jobs!
Digital ID and credentials
Getting further into verification, companies like IBM are investing in decentralized ledgers to provide digital identity solutions. This should fast-track and secure sensitive data collection and storage, making it easier for people and companies to prove their credentials, get permission, and access data networks, for example.
A way for startup innovation
We all now understand how everything processed and stored in blockchain technology comes with its own certificate of authenticity. And this is potentially huge for startups. Keep in mind that most of the innovation in the startup field comes from new ways of using technologies.
As a young company, one of your difficulties will be to prove yourself trustworthy, especially when compared to bigger, more-traditional businesses. This technology can help startups build a customer base by proving that they’re not just hijacking funds for some evil master plan.
The truth of the matter is once you have more than four people as customers, you could benefit from blockchain somehow. The tricky thing might be finding a time and place for it, and our Prototyping and Specification module could be just perfect for that. Book an appointment now!
We hope this article was insightful on how you can boost your startup by providing real value to your customers, and learning more about how technology can help you with that.
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