Like other DLT solutions, blockchain technology was originally used for cryptocurrency transactions. Now it can help businesses solve various problems. This is possible not only in banking and finance but also in many other industries. Secure databases with public or private access will help optimize business processes in retail, logistics, real estate, and many other areas.
In early 2009, the first transaction was carried out on the Bitcoin network, the world’s first cryptocurrency operating on the principle of a distributed ledger. Bitcoin became a practical application for the blockchain, which subsequently attracted the attention of business entrepreneurs. Cryptocurrencies have brought high value to the financial services industry by providing an alternative to centralized banking and the risks associated with it.
But both large corporations and small startups have seen the technology as promising much more than only decentralized storage of digital currency and transactions.
Why Decentralization is Needed
Decentralization of responsibility for data processing has shown its effectiveness in significantly eliminating the possibility of compromising data and the infrastructure networks on which they operate. Excessive duplicate processing and data storage in blockchain networks make it a trustable source for storing currency assets and information.
This is due to the fact that an attacker would need to compromise a significant number of nodes in order to substitute the transaction data. Compared to the task of compromising one processing node of a centralized network, the chances of that in a decentralized network significantly decrease as the number of nodes in it increases. This can be applied to business networks and workflows.
In many cases, compromising the flow of a process results in some loss of the intended benefit. Realizing the importance of leveraging business operations or making it harder to compromise them in many industries can have significant implications, probably even surpassing the impact that decentralized blockchain technology currently has on the world of financial applications.
Growing corporate interest in DLT
There is a trend towards an increase in interest from the corporate sector. The use of DLT technology, including blockchain technology, is becoming more conscious. Now we can see a gradual transformation of requests from businesses that previously could not figure out where they could apply a distributed ledger. Now they have a demand to solve specific problems using DLT technology. It became clear to many what it is, where it can help, and they began to use it.
Examples of DLT and Blockchain Application in Business
To illustrate the above, we have selected several cases in which the use of distributed ledger technology is really necessary.
Cryptocurrencies are some kind of decentralized banking. Crypto wallets are used as bank accounts for storage, receiving, and sending funds. But unlike bank accounts, crypto wallets are not the custodian. They do not store users’ private keys and cannot access their funds. This removes any restrictions on the use of cryptocurrencies, preventing blocking funds or other manipulations by third parties that financial organizations may commit.
On the other hand, the functionality of those wallets was limited compared to bank accounts. But then cryptocurrency projects have appeared that allow the crypto asset owner to receive interest on the balance, for example, Cardano, TRON, and others. The Bitcoin fork ATOM was able to exchange various cryptocurrencies at the blockchain level using the so-called atomic swap. This saves transaction participants from intermediaries such as exchanges and banks and also reduces exchange fees. Such platforms can work autonomously, and the blockchain is supported by independent participants, in most cases unrelated to each other.
It’s obvious that the technology will soon overtake banks in cost, productivity, and the number of services they can provide to customers. There are already decentralized exchanges like Binance DEX.
Tokenization of payments
For example, when a company uses bills of exchange for a settlement, it costs the company a lot of money to administer the process. It is impossible to simply issue an electronic bill of exchange, as the recipients of the bills will fear deleting the bill of exchange entry from the centralized database.
It is possible to solve the problem of trust when issuing an electronic bill of exchange through the involvement of a third trusted party, for instance, a depository or a bank, but this will further complicate the process. With the help of the DLT, the company issues promissory notes in the form of tokens in favor of counterparties. Once issued, tokens can be traded to any third party.
In this case, the blockchain guarantees the absence of control by the issuer over the register. Thus the issuer will not be able to delete records of bills issued, which creates confidence in electronic bills comparable to trust in paper bills.
Optimization of supply chains in logistics
If the DLT can monitor all transactions from start to finish, then the same will apply to deliveries. It is difficult for companies to build traceable, controlled, and reliable supply chains. And with the help of blockchain, consumers will be able to monitor the entire path of products of interest from the moment of production to points of sale.
The greatest benefit of DLT will be companies with many suppliers, buyers, and franchisees who need to be constantly monitored. Together with the cargo, the supplier sends forwarding papers, which at each stage of delivery are checked by warehouse and customs officials. In sea transportation, there are often cases when documents take longer than the cargo itself.
Logistics companies will also be able to reduce the costs associated with paperwork. All records in the blockchain will be reliable, as they cannot be tampered with or deleted since such a system will not have a single point of failure like centralized databases.
DLT based systems are trusted by all participants in the chain, solve the problem of authenticity verification and counterfeiting, provide an exchange of information about the location and quality of goods. Blockchain is suitable for solving these problems due to immutability, time order of blocks, and decentralization when all participants can enter their information and trust someone else’s.
Decentralized registries can be both public and private, where data is partially or completely hidden from prying eyes, who have not been given access to information. At the same time, this information remains reliable and genuine. It’s just that their owners can determine for whom they will open access to confidential information.
This approach will be useful in the medical field. For example, MedicalChain uses blockchain to simplify the storage and use of electronic medical records. Another medical company, NanoVision, has combined DLT technology with artificial intelligence to collect, store and process patient data.
IoT sensors and DLT as an accounting system
The creators of one of the startups have modeled a system using sensors and smart contracts, where one can, for example, rent out a gadget and keep records through the blockchain without the participation of any intermediary. This could be renting a car or a house or selling electricity to neighbors. You can register and sell your assets equipped with sensors.
Other developers have made an impartial fire safety inspection system. The person in charge must at a certain moment come to the sensor and sign the operability with his NFC tag while the data is publicly visible. As an option for the development of the system, each such check can extend the lifetime of the internal token of the system, and if the responsible person did not check in time, then he must buy the token for his own money, that is, in fact, pay a fine.
The fundamental improvement compared to existing business models here is that, for example, if a company has commercial real estate that it leases out, then it can put a traffic sensor there and make a contract not on a fixed monthly fee, but on terms of the number of traffic per month.
This is one of the most common areas in which scammers work. Fraudsters, for example, often try to forge documents on insured property in order to reduce the cost of the policy. The blockchain will keep all records, which will prevent cheating on the part of customers and reflect full information about the use of a vehicle or real estate.
In addition, this approach will simplify the data validation process, which will increase the efficiency and productivity of insurance companies. RiskBlock has developed a blockchain-based proof of insurance solution that helps law enforcement, insurers, and their clients track up-to-date insurance information in real-time.
Real estate and asset tokenization
Another area of application of distributed ledger technology is the accounting of real estate transactions. The same as in other areas where documents are uploaded to the blockchain, transactions are represented there and accepted by all interested parties.
For real estate companies, asset tokenization will also be relevant. Such use of DLT and, in particular, the blockchain can help, for instance, to split some large and illiquid asset, say, a business center, into small parts and then sell these tokens or lease them.
Safe Transactions Without Intermediaries
DLT in business can be used for secure transactions where they are not yet available. It is possible to carry out secure transactions for renting a house without intermediaries or reducing the rent commission when dealing with marketplaces. A simple multi-signature smart contract is used for this.
Now for certification of documents, it is necessary to use the services of notaries. This is time-consuming and not always fast. An electronic assurance system would solve the problem of document validation by removing the need for an intermediary. Here, the distributed ledger acts as a guarantee of the accuracy of the information.
Both large network corporations and small startups from different business areas will benefit from public and private distributed ledger technologies for solving various business problems, ensuring security, and optimizing processes.