Blockchain has become immensely popular in recent years. Many of us know it as the underlying technology behind cryptocurrencies such as Bitcoin and Ethereum. But the potential of blockchain goes far beyond digital currencies.
Businesses constantly search for ways to increase efficiency and security and reduce costs. And blockchain has the potential to provide immense value in these areas. It's no wonder that many enterprises are exploring ways to incorporate blockchain into their operations.
This blog will explore some innovative ways enterprises can leverage blockchain technology beyond cryptocurrencies and how it can transform their business. But first, let's understand how blockchain technology works.
How Does Blockchain Technology Work?
For the uninitiated, blockchain uses distributed ledger technology to provide transparent and secure record-keeping. But what exactly is the meaning of distributed ledger?
The distributed ledger is a database spread across a network of computers or nodes. No central authority controls the data; all participants have a shared view.
Blockchain is also a type of distributed ledger. The nodes on the blockchain network verify each transaction before it is added to the ledger as a block. Once verified, the new block is linked to the previous one to create an unbroken data chain.
This means that once you record a transaction on the blockchain, it cannot be altered or deleted. Hence, blockchain transactions enjoy a high degree of immutability and transparency. It makes the technology ideal for applications where secure and transparent record-keeping is essential.
Distributed ledger technology contrasts traditional ledger systems, where a single centralized entity maintains and controls the database. The centralized control makes the latter prone to fraud or data manipulation.
So in distributed ledger vs. traditional ledger battle, the former emerges victorious when it comes to data transparency and security.
Distributed Ledger Technology Vs. Blockchain
Although blockchain and distributed ledger technology (DLT) are often used interchangeably, they differ. Blockchain is a specific type of DLT that uses cryptography to create an unbreakable data chain.
However, distributed ledger technology extends beyond blockchain and includes other distributed databases that enable secure and transparent record-keeping.
This means that you can use distributed ledger without blockchain as well. In fact, several applications of DLT do not use blockchain technology. One example is the Hedera Hashgrapg platform.
Unlike blockchain, Hashgraph distributed ledgers use a directed acyclic graph (DAG) to record transactions instead of a linear chain of blocks. This allows for faster transaction processing and higher throughput.
Nevertheless, both these technologies offer various applications to enterprises, as we will discuss below.
Blockchain And DLT Opportunities And Applications For Enterprises
Here are a few examples of where enterprises across industries can apply blockchain and distributed ledger systems beyond cryptocurrency:
Blockchain In Banking, Insurance, And Finance Services
Blockchain technology has a lot to offer in the banking, insurance, and finance industries. It is already used for banking applications such as improving the KYC process and enhancing fraud prevention.
The technology is also being tested to streamline cross-border payments and reduce costs by eliminating intermediaries. With the rapid evolution in blockchain and DLT, it won't be long before decentralized finance platforms facilitate public peer-to-peer lending on a large scale.
Insurance sectors can leverage blockchain to automate claim processing with smart contracts. The technology can also enhance risk assessment for insurance companies by improving data accuracy.
With the increasing adoption of blockchain and DLT, the financial sector can become more efficient, cost-effective, and transparent. In fact, it is estimated that blockchain technology can help financial institutions save up to $12 billion a year!
Blockchain In Supply Chain Management And Logistics
The supply chain management and logistics businesses thrive on transparency and efficiency. And blockchain can provide this by recording and tracking every transaction on the decentralized ledger.
With distributed ledger technology, companies can gain real-time visibility into their supply chain. It enables them to identify and solve issues quickly. The transparency and immutability provided by the technology also help reduce the risk of fraud and counterfeiting.
Further, blockchain can streamline this industry by automating several processes with smart contracts, such as shipping, delivery, tracking, and payments.
Blockchain And Digital Rights Management
Industries that create digital content, such as music, film, and publishing industries, rely on Digital Rights Management (DRM) to protect their content from being stolen and shared illegally. However, the existing DRM solutions have some limitations and loopholes that impact their effectiveness.
Blockchain technology can strengthen the system's effectiveness by offering a decentralized and transparent platform for digital rights management. All stakeholders, including the creators, publishers, and consumers, can track and verify the ownership and usage of digital content.
Further, since the blockchain is tamper-proof, registering their work in blocks lessens the risk of misattribution for artists.
Blockchain And The Energy Sector
In the energy sector, blockchain could be the best path toward sustainability. It can allow real-time energy production and usage tracking, making energy management more efficient.
It can also facilitate instant peer-to-peer trading of excess energy without any intermediary. Regulators can also use blockchain to create and trade carbon credits and emission certificates to incentivize companies to reduce carbon emissions.
Blockchain And Healthcare
The way our healthcare system stores and shares patient data is highly inefficient. Currently, there are many entities involved, such as health record vendors, research organizations, insurance companies, doctors, and patients.
This often leads to communication silos, piecemeal data sharing, confusion, and delays in decision-making. In addition, data is not stored securely enough to avoid different kinds of data breaches.
Blockchain has the potential to revolutionize the way the system functions currently. For instance, health data can be stored and preserved more securely in the blockchain network than individual organizations' servers.
Patients can have all their data stored in one place and quickly share them with different parties, reducing the concern of slow data exchange.
Owing to these valuable benefits, global blockchain technology in healthcare is estimated to grow 68.40% from 2023 to 2030.
The Internet Of Things And Blockchain Technology
The primary goal of the Internet of Things (IoT) is to connect people, places, and products and offer new opportunities for value creation. However, security and scalability are significant concerns associated with IoT.
Blockchain can alleviate these concerns by offering a tamper-proof distributed ledger, enabling trust between various parties involved. The robust level of encryption available in blockchain also makes it a safe haven to store IoT data.
Billions of connected devices can coordinate and process transactions through the blockchain network, reducing processing overheads related to IoT gateways.
Blockchain And SMEs
There is a big misconception that blockchain is only intended for big enterprises. However, SMEs and startups can benefit from the technology as much as large corporations.
Blockchain has the potential to help new businesses overcome the challenges related to scale, transparency, and lack of business history by reducing information asymmetries and transaction costs. This can help their access to finance and trading opportunities.
SMEs and startups can also benefit from the increased efficiency of their services and better supply chain management facilitated by blockchain. Besides, innovations such as peer-to-peer marketplace, smart contracts, and decentralized finance can provide them with new growth opportunities.
Other Blockchain Enterprise Applications
Blockchains can be used in many areas where transaction security and transparency are paramount, such as cybersecurity, the public sector, government, and the voting process.
Other industries that can benefit from blockchain include the media industry, digital health, the legal sector, etc.
Challenges Faced By Enterprises In Adopting Blockchain
While blockchain has many use cases across industries, enterprises face several challenges when adopting the technology. Here are a few significant ones:
Since blockchain is still new and evolving, the regulations governing this technology are not very detailed and clear. It can be difficult for businesses to meet compliance requirements and legalities related to blockchain adoption.
With the rising popularity of blockchain, many organizations are developing their blockchain system with varying characteristics.
These separate systems do not always communicate well with each other. And currently, no universal communication standard enables seamless communication between them.
Many existing blockchain applications are struggling to handle mass integration. For example, transaction processing in Bitcoin networks sometimes takes days.
This can limit the potential use cases for blockchain technology and make it less practical for certain industries and applications.
While blockchain transactions are encrypted and immutable, the system is still vulnerable to certain attacks and threats, such as the 51% attack. Security also depends on how careful users are while handling private and public keys.
Despite the many challenges, Spydra's solutions can help enterprises adopt blockchain smoothly and efficiently. Spydra's API-driven plug-and-play solutions enable businesses to leverage the full potential of blockchain and decentralized web structure.
With features such as dynamic smart contracts, immutable databases, GraphQL API, listeners, high security, and one-click deployment, Spydra supports extensive use cases across industries., from supply chain and financial services to easy web3 transition and NFT launch.
What Is The Future Of Blockchain Beyond Cryptocurrency?
Blockchain technologies hold much potential for business applications beyond cryptocurrency, as seen in the distributed ledger technology examples above.
Adopting blockchain in finance, supply chain management, healthcare, real estate, and other industries can lead to significant innovations and improvements from traditional business practices.
However, the technology is still in its nascent phase, and its adoption has certain challenges. As the technology evolves, many more innovations and use cases will likely emerge to improve business productivity and profitability.