HOW DOES BLOCKCHAIN Work Business IBM BLOCKCHAIN

Blockchain work for business

Introduction

The technology behind cryptocurrencies like Bitcoin could revolutionize

the way business is conducted.

This technology is called blockchain—and it’s the backbone technology

of Bitcoin and other cryptocurrencies.

Blockchains have mostly been used to underpin cryptocurrencies, but

there are many other possible uses emerging.

In fact, this powerful technology can add new layers of speed, security

and can even lower costs associated with payment processing, but

that’s only scratching the surface.

In this special report, we’ll take a closer look at some of the ways

blockchain could be integrated into your current business, or help you

launch a new one.

Let’s begin!

Blockchain work idea

Before we consider the different ways blockchain can help your

business, it’s important you understand exactly what blockchain really is.

“Simply put,” says BDC senior economist Gillian Ellas, “blockchain is a

continuously updated digital record of who holds what.”

Records of each transaction—the date and time, dollar value of the

transaction, and the participants involved—are all encrypted into a

“block” that is linked to other blocks, forming that blockchain.

So, you first have information, like a deal between people, which is

then added to other records to make a block. The final product is all the

blocks linked together in one long “chain.”

Let’s look at it more simply, with examples. 

Suppose Mr. A is selling three coins to Mrs. B for $75. The computer

record will list all these details, including digital signatures from both

Mr. A and Mrs. B. The record is then checked by the computer network.

The computers in that network (called “nodes”) check the details of the

transaction record to ensure that it’s valid.

Records that are accepted by the nodes are added to a block. Each

block also contains a unique code called a hash, as well as the hash of

the previous block in the chain.

These hash codes allow the blocks to be linked together in order on the

chain.

This hash code is created by a mathematical function that takes digital

information and creates a string of letters and numbers from it.

No matter what size the original file may be, a hash function will always

generate a code that is the same length as all the other codes.

For example, a tweet message is far shorter than a novel like The Lord

of the Rings, yet they both would have a hash code of the same length A blockchain database is shared across a network of computers, so no one computer contains the information. 

That network is constantly

checking the information to ensure that all the copies of the database

are correct.

Once a record has been added to the blockchain, it’s very hard to

change it. Any changes to the record will generate a new hash code.

So, if someone decided to edit The Lord of the Rings and removed a

single comma, the resulting edit would have a whole new hash code.

This is why it’s so hard to hack a blockchain. The blockchain will still

have the original hash code embedded in it, so for a hacker to restore

the chain, he or she would have to recalculate that—and the next hash

code, and the next, and so on.

Recalculating all those hash codes would take a hacker an enormous

amount of computing power (not to mention the time).One of the reasons cryptocurrencies are so fascinating is that there’s no central authority controlling the blockchain. 

Each person in a blockchain has the capability to access the same information. This provides transparency and continual reconciliation.

And, since the blockchain exists on many different computers without a

centralized version of the information, there’s no central database a

hacker can attack.

This means you no longer need a trusted third party to verify your

information and process your transactions. You do, however, need

some way to trust the other parties.

Members of a blockchain are anonymous and there’s no real way to tell

if they’re trustworthy or not. To resolve this issue, blockchains set tests

for the computers who try to join the network. These tests are called

consensus models.

The consensus model tests require a computer to “prove” themselves

in one of two ways. Proof of work requires a computer to “work” an increasingly difficult computational puzzle in order to add a block to the chain.

This process, which is called mining, takes a lot of computer power. In

return for this work, members may receive rewards like tokens or bitcoins.

With proof of stake, on the other hand, participants buy tokens that

allow them to join the network. The more tokens they have, the more

they can mine.

HOW DOES BLOCKCHAIN Work Business  IBM BLOCKCHAIN

The financial services industry is one of the areas beginning to utilize

blockchain technology to save on cost and develop new services.

Financial institutions have been investing in blockchains to simplify

their record-keeping for payments and other transactions.

One recent example is the Australian stock market, which announced

they’d be using blockchain to settle transactions. “This technology,”

says Gillian Ellas, “will be used to record shareholdings and manage the

clearing and settlement of equity transactions.”

Another financial example is a company called Abra, a money transfer

platform that lets people working abroad send money home in 54

different currencies.

The money transfers are fast and cheaper than a traditional service like

Western Union, which charges an average of 7% of the amount of

money sent, according to the World Bank

A third blockchain project involves the World Wildlife Fund and three

other companies that are working together to sustainably source tuna in the Pacific Ocean.

These companies are ConsenSys, a blockchain company, TraSeable, an

information technology firm, and SeaQuest Fiji, a tuna fishing and processing company. The four together are utilizing blockchain to track where, when, and how the tuna are caught and sold.

Blockchains are also the basis for cryptocurrencies like Bitcoin and

Ethereum, which can be bought and traded like traditional assets. And

recording trades on a blockchain offers a way to check the history of a

product.

An additional example would be jewelry companies, which hope to

assure customers that their diamonds are not from a place where their

purchase might finance war.

IBM BLOCKCHAIN

“Several major companies are investing in blockchain,” says Ellas,

“including Microsoft, IBM (with more than 400 blockchain projects

around the world), Unilever, and Toyota.” Blockchain could also be useful in property records. Storing land

records on a blockchain might cut way down on costly title research

and insurance, and in politically unstable areas, it could prove

ownership.

The healthcare field is another area where blockchain records would

prove useful. Your medical history could be securely stored and

controlled by you rather than by your doctor.

Finally, blockchain technology could create tamper-proof election

returns. The advantages of this should be fairly obvious, especially in

the United States.

How Blockchain Can Benefit

Your Business  

As small businesses seek better and more efficient ways to serve their

clients, blockchain can be especially useful as a way to conduct

transactions and even to raise capital.

The cost to incorporate this technology is far less than you might

assume.

Many small business owners think that only large companies have the

money to afford expensive designers to develop such advanced

technology.

The truth is, Entrepreneur writer Drew Giventer says, vendors have

emerged who “provide blockchain-based technology, not only for Wall

Street, but for Main Street as well.”

And blockchain technology isn’t just for digital-first or online-only

businesses. Bakeries, gyms, nail salons, restaurants, and other small businesses that rely on a physical space in the real world can get

started using blockchain today.

Let’s take a look at some of the ways blockchain technology can benefit

entrepreneurs who want to take their business to the next level.

The first thing your business can do to adopt blockchain is simply to

begin accepting cryptocurrency as a method of payment.

“What signals more of a commitment to blockchain,” asks Giventer,

“than allowing customers to pay with bitcoin or other cryptocurrencies?”

Some larger e-commerce companies like Expedia and Overstock accept

bitcoin. And this option is also open to online stores through platforms

like Shopify, too.

This platform offers several advantages to small businesses, as the

transaction fees are low and fast, and there are no chargebacks.Of course, traditional merchants just aren’t set up to accept

cryptocurrencies, so rolling out this plan will require a lot of planning

and testing.

You’ll need to evaluate and spend money on a digital wallet, a

merchant gateway, or a combination of services needed to accept

cryptocurrency from your customers.

However, the benefits of accepting cryptocurrencies will outweigh

these costs in the long run.

First, your customers can see that you’re willing to expand your

services, and that’s something that will bring in new business.

Cryptocurrencies also allow you to directly deal with your customers.

That will reduce transaction costs as you won’t be paying a third party

for those any longer.

Another big advantage is that payments will be permanent and

irreversible. This will leave your customers with no choice but to contact your

business directly if they want a refund—and that will end the problem

of chargebacks, where customers purchase services or goods, then

cancel the payment on their credit card, leaving the business in the

hole.

Blockchain technology is particularly recognized for its applications and

platforms which aid money transfers and payment transactions. Your

business can utilize this to transfer funds securely without heavy costs.

For example, you could transfer money to employees anywhere in the

world without worrying about using an expensive intermediary.

What about a situation where you want to properly document

transactions with several parties involved?

You might be able to use some of the new business applications for

Distributed Ledger Technology (DLT) that are being investigated

currently You could have an accounts audit trail, ties in a supply chain, or steps to

the execution of a deal. Ethereum, created in 2015, is an easy way to

make special “distributed applications” or Dapps.

Another variation, called permission ledgers, blends the advantages of

a blockchain with business security. You might not realize when an

underlying device begins using DLT, but you can see certain changes:

Reduced instability in supply chains:

With many small businesses, shipping and logistics activities can be a

resource-eating, admin-heavy mechanism.

And with each supply chain partner, the work is multiplied. DLTs can

make some of these activities easier and far more secure.

Unbreakable agreements:

Businesses deal with contracts of all sorts on a daily basis, and signing

those contracts means placing your confidence in a piece of paper.

The difference with a blockchain is that it’s digital and cannot be

changed or tampered with. Smart contracts also don’t require a lawyer to negotiate the agreement,

saving you time and money. So long as the conditions of the contract

are met, the value transfer will happen without fail.

Safer data storage at a reasonable price:

Blockchain allows users to store data in a safer digital form for a fair

price. The stored data can be encrypted so that only those with a crypto

key can access it.

And how about data storage? “Blockchain storage applications,” says

Giventer, “allow users, including small businesses, to store data in a

safe way, and at a reasonable price, without compromising data

security or overspending.”

Businesses and personal users spend more than $20 billion every year

on cloud storage. Imagine saving that money instead of throwing it into

the cloud.

Businesses can also use blockchain for smart contracts, which are self￾verifying and self-enforcing contracts between the business and the

client. The contract is stored within a blockchain ledger and is recorded in a

way that cannot be changed or manipulated.

Some examples of smart contracts include commercial leases,

agreements with suppliers or vendors, and employee contracts.

A smart contract offers your small business a level of protection it

would otherwise not be able to afford. You’ll be eliminating the

middleman (usually an attorney) with a smart contract, and that will

save you a ton of money.

“Global blockchain platform Ethereum,” Giventer notes, “was the first

to introduce smart contracts to the cryptocommunity, and is

considered one of the more advanced platforms for coding and

processing of smart contracts.”

Blockchain technology can give your small business an alternative

method of raising capital through Initial Token Offerings (ITOs) or Initial

Coin Offerings (ICOs). These are a virtual form of investment created

with blockchain technology.