Every few years it seems, a new technological innovation emerges which promises to revolutionize the way businesses operate. What is now familiar and fundamental — email, cloud computing and storage, collaborative project management platforms – were once alien and often intimidating before they were universally adopted.
Today, the revolution turns to “blockchain.” You may have heard the term, you may have read something about it, but if someone at a cocktail party asked you to explain what it is and why it matters, you may find yourself tongue tied. Let’s untie things a bit.
What is Blockchain Technology?
Every business uses ledgers to record and keep track of its transactions with suppliers, vendors, customers, business partners, and others. When your business enters into a deal to supply a customer with a product on a regular basis, for example, you keep a ledger of each shipment and payment. Your customer keeps its own ledger as well. In more complex transactions involving multiple parties, there could be many ledgers all of which are supposed to be accurately recording the same flow of goods and currency. In larger businesses, there may even be multiple internal ledgers recording the same transactions.
Blockchain technology is designed to eliminate the use of multiple ledgers and replace them with one secure, tamper-evident ledger shared by all the participants in a transaction, cutting out the middleman. This shared-ledger technology records transactions in a public or private peer-to-peer network protected by cryptographic technology and accessible only by authorized parties.
Using blockchain, all the authorized users reach a consensus as to the protocols to be used in maintaining and updating the ledger, ensuring uniformity and clarity between the parties. This consensus and the transparency inherent in the shared ledger ensure that no unauthorized entries go unnoticed and that any attempts at tampering or alteration are quickly identified. Once a given transaction is agreed to and recorded by consensus, it is irreversible.
Why Blockchain Matters to Your Business
With multiple parties maintaining multiple ledgers for the same series of transactions, inconsistencies and disagreements can create conflicting narratives of those transactions which in turn can lead to costly disputes and litigation. Dueling accountants try to reconcile these completing ledgers and expose any manipulation while attorneys try to use them to assert the validity of their clients’ positions.
The shared and secure nature of blockchain, in which all parties have real-time access to one, agreed-upon ledger, reduces the likelihood of such disputes as well as the costs of such disputes if they should arise. There is only one set of books, no transaction gets recorded without consensus, and no party can claim that they were unaware of where things stood weeks or months ago.
All transactions between businesses involve trust in the other party’s honesty and fair-dealing. Many businesses are jumping aboard to provide blockchain services to interested business. With blockchain, parties instead put their trust in a technology that ensures transparency, efficiency, and accountability. While still a young technology, blockchain’s potential for businesses of all sizes is clear.
If you have any questions regarding blockchain and how it could help your business, please contact us. We welcome the opportunity to assist you.