Blockchain has been a popular buzzword since Bitcoin's meteoric price increase captured mainstream attention. However, while blockchain technologies have become more accessible and valuable over the years, that doesn't mean business owners should blindly jump on the bandwagon. Instead, a measured approach is best.
Let's look at whether your business could benefit from blockchain technology, whether you should build or buy a solution, some of the most common use cases, and how to implement a solution.
Do You Need a Blockchain?
Many businesses fall into the trap of building solutions in search of a problem. In other words, they seek to make something with blockchain technology, but their solution doesn't necessarily solve a real business problem. Not surprisingly, these efforts often result in a significant waste of time and resources without any tangible value in return.
Blockchain technologies are ideal solutions to specific problems:
- Trust Issues – You need to establish trust and transparency among multiple parties who may not fully trust each other.
- Integrity Issues – You need to maintain a secure and immutable record of transaction data.
Businesses should only consider blockchain technologies when they can help overcome these problems in ways conventional software falls short. For example, you could track retail transactions on the blockchain, but there needs to be a significant benefit over existing point-of-sale solutions. Otherwise, there's little reason to justify the investment.
Blockchain Use Cases
Blockchain technologies may not be appropriate for every business, but they can provide immense value in cases where trust and integrity issues are critical. While there are many examples of these use cases, a few popular areas have emerged where blockchain startups are launching solutions and businesses are finding real value.
#1. Know Your Customer
Many banks must comply with know your customer (KYC) regulations. While a customer could provide their passport or drivers' license during each transaction, a counterfeit document might deceive a teller, or a hacker could use stolen or counterfeit papers online. As a result, blockchains could provide a helpful solution.
Blockchain technology can eliminate these problems. When a customer creates an account, a trusted identity verification provider can verify their authenticity, create a digital representation of the documents, and store the information on an immutable blockchain. Then, a teller or app would only need to verify the customer's digital credentials.
#2. Electronic Health Records
Many hospitals and healthcare offices must create and manage electronic health records (EHRs). Unfortunately, these technologies tend to be very bifurcated because each hospital uses its own system. As a result, healthcare businesses may have trouble accessing need-to-know patient data, and patients may have difficulty accessing their data.
Blockchain technology could address these issues. By storing EHRs on a blockchain, patients have direct control over their health data and can share it with authorized healthcare providers or researchers. Moreover, the blockchain makes these records more secure and interoperable between healthcare software systems.
#3. Supply Chain Management
Food supply chains involve multiple parties (e.g., farmers, manufacturers, grocery stores, and logistics providers) who need to trust each other and keep a reliable record in case there's a recall. But unfortunately, a failure to document a step or fraudulently-changed information can lead to missing data and regulatory problems.
Unlike conventional software, blockchains eliminate the possibility of missing documentation or fraudulently-changed information. Every party within the supply chain can access the same database and understand where problems arose and who's responsible for them. In addition, customers can trace each product back to the original supplier.
Other Blockchain Use Cases
KYC, EHR, and supply chain management are just a few examples of instances where blockchain technologies could be helpful.
Some other potential use cases include:
- Cross-border transfers for financial services.
- Event ticketing and management.
- Insurance claim management.
- Retail supply chain tracking.
- Educational credentials.
Should You Build or Buy?
Businesses can build or buy blockchain solutions to overcome these problems. While building a solution provides the most flexibility, many companies opt to purchase an off-the-shelf solution or use flexible done-for-you enterprise blockchains to reduce cost and overhead and deliver a faster return on investment.
Most Ethereum blockchain applications are built with platforms like Alchemy and Infura. These platforms provide easy-to-use APIs to access the blockchain and create smart contracts. However, while the Ethereum blockchain is the most reliable option, deploying smart contracts and adding transactions involves paying development and gas fees.
Fortunately, many blockchain startups have built off-the-shelf solutions atop Ethereum and other blockchains. For instance, Ripple provides a purpose-built blockchain for cross-border payments. Businesses can use the blockchain for real-time settlements with far lower fees than conventional money transfer businesses and wire transactions.
Enterprise blockchains provide another option for larger businesses. Unlike Ethereum, these private blockchains target specific use cases and don't involve paying high gas fees. They're also easy to integrate with other vendor and partner systems and tend to scale better than custom-built solutions on Ethereum or other public blockchains.
Implementing a Solution
It's a good idea to define clear goals and key performance indicators (KPIs) before implementing a blockchain solution. That way, you can quantitatively measure the project's success and determine the return on investment. For example, you might measure quality assurance metrics or other business factors that blockchain technologies aim to optimize.
Since most blockchain solutions target mission-critical parts of a business, it's usually safest to start by implementing a small-scale pilot program before deploying the solution widely. That way, you can spot and address any problems early on and ensure that partners and customers understand how to use the data beforehand.
The Bottom Line
Blockchain technologies have been a buzzword for several years, but that doesn't mean it's right for every business. Before implementing a blockchain solution, businesses should assess whether the technology is addressing a real problem, carefully review the different options, and implement the solution in a measurable way.
If you trade crypto assets, ZenLedger can help aggregate transactions across wallets and exchanges to understand your tax situation. Our platform can help compute your capital gain or loss, generate the tax forms you need each year, and ensure that you're not overpaying or underpaying your taxes. Get started for free today!