How Blockchain Is Changing How We Do Business
In our last post, What is Blockchain?, we talked about the history and origination of this new technology. Today, we are delving further into this subject, and discussing how it is changing the way we do business. If you aren’t sure what blockchain is, check out our last article with a brief description and history of blockchain. If you already have a healthy idea (or you think you do), good luck! Let’s dive in.
Still relatively new, blockchain technology is limitless on what it can do for us now and in the future. With the implementations of blockchain in some business practices, it is obvious that blockchain is going to make a significant impact on the world. Despite its complexities, our understanding of it is vital to our success in the future. So, we are going to make this easy for all of us: Here are five ways blockchain is changing how we do business:
The first invention to use blockchain technology was Bitcoin, a cryptocurrency. Cryptocurrency continues to be a large part of what blockchain is used for now. With currently over 130 billion USD worth of Bitcoin in circulation and an average of 360,000 transactions per day, Bitcoin (and other cryptocurrencies) are beginning to make their departure out of the shadows of the World Wide Web to the acceptance of the public.
How is it changing business? If cryptocurrencies continue to gain popularity, business may turn to using crypto instead of traditional currencies. We may also see the emergence of more businesses created for the sole purpose of mining cryptocurrency.
- Removing the Middleman
Probably the most obvious of the five points, blockchain technology removes the middleman from the picture that used to be impossible without him.
Here was the process before blockchain: Company A needs a service performed and searches for another company which can meet their needs. Company B performs a service that will fulfill the needs of Company A and agrees to perform the service. A fee is agreed on and upon fulfillment of the service, Company A pays Company B. Unless company A is your 12 year-old sister who babysits for the families in her neighborhood and gets paid in cash, completion of the transaction happens through a third party, normally a bank, who takes a percentage of the transaction as compensation for completing it. The transaction can take days, and can be secure, as much as the third-party makes it.
The process after blockchain is much more simple: Company A and Company B agree on a service and payment–nothing changes there–but when the contract is fulfilled, Company A can pay Company B directly over the blockchain–no middleman required. This is possible because blockchain is a peer-to-peer network, and because it is public, it is secure. Another benefit? It’s fast, taking only as long as needed to add the new block to the chain and confirm it with the network.
How is it changing business? These benefits for businesses will tempt them to fulfill their transactions over the blockchain, instead of through third-parties, as long as the benefits outweigh the drawbacks to using blockchain applications, such as the requirement to use cryptocurrency to complete the transaction instead of traditional currencies.
- Smart Contracts
Banks are not the only middlemen in the business, or even in that scenario. A middleman could have also been used to find Company B, and another middleman to draw up the agreement of services. It is not just limited to corporations–you and I use the middleman, too! Applications like AirBnb (thanks for the great deal on my weekend vacation), Paypal, LinkedIn, Amazon, eBay, even Google, are the middlemen because they match parties together who fulfill each others’ needs.
How can blockchain replace AirBnb, you ask? As you may recall from the previous blog post, blockchain applications like Ethereum are built to support smart contracts, or protocols that enforce a set of rules determined by the buyer and seller which can self-execute. Because smart contracts can execute the agreement without any other third-party interaction (and did I mention with no disputes with the contract details?), that means no monthly memberships, no commissions or other transaction fees for the buyer and the seller.
How is it changing business? Again, it’s about the monetary benefits. Lower costs for fulfilling contracts will lead businesses to use smart contracts over the current method.
- Decentralized Autonomous Organizations (DAOs)
A Decentralized Autonomous Organization is exactly want it sounds like. DAOs are literally changing the way we do business because they are a new type of business. Held together by a smart contract, the organization is a true democracy, each token holder having the ability to vote on decisions in the organization. This business structure, different from the traditional hierarchy, reduces the ability for persons of the organization to make self-interested decisions which would go against the purpose or goals of the organization. But because the majority has to agree in order to pass a decision, it takes much longer to pass any one policy.
Some DAOs include The DAO, Dash, and Aragon.
How is it changing business? If those currently experimenting with DAOs are better able to define how a DAO should be run, then we may see the rise in popularity of DAOs, and a change in common business structures.
- Other applications in the Blockchain
Ethereum also supports other applications in the Blockchain. One example is Cryptokitties, a game launched in 2017 on Ethereum’s network. Support of applications in the Blockchain opens the door for other uses of the blockchain as well. Some ideas are secure voting, transaction mechanisms, internet browsers, and more.
How is it changing business? If these applications were able to become popular with consumers, more so than current systems, businesses would need to adjust how they use those applications to continue to reach their customers.
At the moment, none of these things are completely integrated into how we do business. I still have a bank account, I wrote this blog post using Google Docs, and I don’t own any Bitcoin. Most of these things are still in their baby stages, which means there are still problems. When Cryptokitties was first launched, it almost slowed the Ethereum Network to a halt. None of these things are going to happen overnight–they might not even happen in the next century. But they will happen, however slowly the world requires. The world is changing, and society and technology are adapting. It is our job not to be left behind when these changes do happen and adapt along with them.