Blockchain is a decentralized distributed ledger technology that facilitates secure transactions across a network of computers. The transaction data is encrypted and stored at various nodes (points) on the network and can be used for authentication. While cryptocurrencies are the most famous blockchain use cases, the technology can be implemented for other purposes too.
Statistics show that the blockchain market was $19.36 billion in 2023 and is expected to touch $32.69 billion in 2024. Even though only 3.9% of the people worldwide use blockchain technology, the industry is already worth billions. With more businesses and users entering the industry, it is easy to guess that its future will be bright.
In this blog, we’ll find out the benefits of blockchain and how it can increase transparency in a business.
Benefits and Challenges of Blockchain
Blockchain technology has been developed to increase the transparency of a process while also ensuring data security and privacy. This is done by creating smart contracts that cannot be altered or tampered with but can be accessed to gather the required information. However, blockchains are not without a few challenges.
Let’s check out what benefits the blockchain offers and what challenges a business should overcome when investing in the technology.
Benefits:
Transparency and Traceability
The blockchain is the opposite of a centralized network. It distributes information across the network of nodes and brings greater transparency to the transaction or process. For example, it maintains immutable records of each step in the process. This allows users to trace the details at any point. Manufacturers can share this information with consumers as proof of their sustainable supply chain.
Accountability
Given the decentralized and transparent nature of blockchain, businesses can ensure greater accountability from employees and network users. For example, a transaction can be traced step-wise back to the employees/ individuals who performed the task. This reduces the risk of fraudulent transactions, misuse of authority, corruption, etc. Moreover, blockchain networks automate auditing and reporting to save time.
Security and Privacy
Data security and privacy are a concern for every business. How can a business or an establishment share sensitive data with other departments and branches without worrying about hacking or authorized access? The blockchain network can help as it allows only authorized users to gain access to the information stored on it. It also offers role-based restricted access which allows the top management to determine who gets to see which information and what they can do with it.
Efficiency
Efficiency is another benefit of blockchain. Its inherent automation abilities save time and cost for an organization by eliminating middlemen and third parties. It also speeds up the transaction, though this depends on the network traffic and other factors. By automating workflows, enterprises can reduce the pressure on employees and allow them to complete their tasks quickly. This invariably increases the overall productivity of the business.
Smart Contracts
A smart contract is a pre-defined code agreement that automatically executes when the conditions are met. The smart contracts form the basis of the blockchain network, thus reducing the need for human intervention and the risk of error. Businesses can automate certain processes like procurement, invoice generation, tax/ payment, credit distribution, etc., thanks to the smart contracts on the blockchain.
Challenges:
Interoperability
No technology is free of challenges, and blockchain is the same. Organizations have to overcome challenges like interoperability to enhance the benefits and efficiency of a blockchain network in their establishment. Setting up seamless communication between two types of blockchains or a blockchain and a traditional network can be complex. The protocols are yet to be standardized to achieve this. However, it is not impossible. Expert blockchain development providers can help businesses find a solution.
Energy Consumption
Though blockchain technology can save resources, it is not entirely energy efficient. The consensus mechanisms require energy to complete the transaction. The proof of work consensus mechanism consumes high energy and takes more time. Fortunately, the latest blockchain networks are being built on the proof of stake consensus mechanism, which is more energy-efficient and fast. However, it is not as decentralized as the proof of work consensus mechanism.
Maintenance
There’s no denying the long-term ROI generated by blockchain. However, the initial investment and maintenance can be expensive. This also includes the upgrades the organization has to make to its existing IT infrastructure to align with the new technology. Employee training is another aspect to consider.
User Adoption
As we mentioned in the introduction, less than 4% of the users around the globe use blockchain. Many people are not aware of how it works and are even wary of using a new technology. Businesses have to make active efforts to educate employees and stakeholders to embrace blockchain networks. This can be stressful and change the workplace culture.
Role of Blockchain in Improving Transparency and Accountability
A few blockchain use cases to show how the technology can improve transparency and accountability in an enterprise.
Data Reliability
Blockchain enhances data quality and reliability by ensuring its accuracy through validation and authentication. Moreover, the records stored on the network cannot be tampered with or deleted without the action being detected. This increases trust in the users that the data they gather from the blockchain is reliable. This makes blockchain a great solution to improve accountability in healthcare (sharing patient records).
Fraud Prevention
Supply chain fraud is a concern for many enterprises. It can take months or even years to identify a fraudulent transaction. An opaque supply chain makes it highly complicated to investigate and detect the origins of fraud. However, blockchain brings transparency through its record-keeping and automated auditing features. That way, businesses can not only detect fraud but also prevent it from happening and reduce the risk of losses.
Collaboration
The blockchain network encourages collaboration between different parties due to its transparent nature. There won’t be any confusion about where the process was initiated or which user performed an action. It also keeps the data secure and encrypted when sharing the files between different users. This creates space for the teams to be innovative and think out of the box to come up with solutions for various business challenges.
Conclusion
Blockchain technology is revolutionizing many industries by bringing greater accountability, transparency, and traceability to business processes.
Take advantage of the several benefits of blockchain by partnering with ProMindsAILabs and make the most of our tailored blockchain solutions to achieve your business objectives and become an industry leader.