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While blockchain has long been touted as a business tool, many companies are understandably hesitant to jump into a new kind of software with potential liabilities which they don't understand. Some may even be confused as to what the blockchain actually is and what it can do for their business. If that's you, then here's what you need to know about blockchains for business.
A blockchain, at its core, is an immutable ledger. This ledger is maintained by a network of users, either public or private, who secure the network through the use of cryptography.
Each block of data has a unique ID and is linked together with the previous block, forming a chain of timestamps that leaves a traceable record of transactions. While this seems simple on the surface, the power of the blockchain is really based on the fact that you can not alter the data of a block without altering every subsequent block as well. This underlying technology is part of what secures the Bitcoin network, and the public ledger builds trust with users.
However, while Bitcoin is the blockchain project which people are most familiar with, there are actually many uses for blockchain which go far beyond digital currency.
Logistics
One of the most promising applications for blockchain in the business world is in logistics. IBM's Pharma Portal is a key example of this use case in action. Using this software, companies can build better, more efficient supply chains with new levels of tracking and transparency that prevents the waste of precious resources, like temperature-sensitive vaccines, and confirms delivery at every step, reducing the risk of counterfeits entering the supply chain. [1]
Product authentication
Speaking of counterfeits, a blockchain can also be tied to a physical product using NFTs (Non-Fungible Tokens). These unique blockchain assets can then be used to authenticate products by anyone, cutting counterfeiters off at the knees when consumers can instantly confirm for themselves that a product is not legitimate.
Nike patented the technology for 'CryptoKicks' in 2019 for just this purpose in an effort to help curb the massive amount of counterfeit sneakers hitting the market. [2] Though product authentication is not just for fashion, nearly every product can quickly be counterfeited and offloaded onto unknowing consumers, sometimes with dangerous consequences that impact the reputation of brands when consumers think the products come from them.
Financial services
One of the biggest show-stoppers as of late in the world of blockchain is Defi, and while today's iterations are used as a way to escape the corporate finance world and participate in sometimes risky schemes to earn coins and tokens, that's not all its good for.
Blockchains have also been used to sell homes as NFTs, simplifying the process of buying and selling property and as a means to put both digital and physical assets up as collateral on the blockchain to gain funding for projects.
Likewise, businesses interested in offering these services to customers themselves can quickly see how using a blockchain could streamline lending procedures. Offering instant loans based on blockchain-based collateral or smart contract insurance policies, which automatically execute based on specified events, are both exciting possibilities.
Decentralized data storage
While everyone knows Amazon, not everyone knows that they secretly run the internet. Over a million companies, including Facebook, Apple, and Netflix, use AWS (Amazon Web Services), and they control 33% of the cloud services market in total. [3]
This may be good for Amazon, and its investors but it's not so good for everyone else. An attack on AWS could take down large portions of the internet, and that's obviously a big liability for businesses. It's estimated that an outage of just a few hours cost Facebook $60 million in ad revenue while they sorted it out. [4]
Blockchains operate on a distributed ledger. There is no central authority which can be attacked or shut down. Instead, blockchain projects avoid security risks by distributing copies of the blockchain's data across multiple nodes, this is not only great for securing in-network transactions, but it also makes network downtime a virtual impossibility.
Several different blockchain projects have suffered attacks on their networks in the past. The Ethereum blockchain was targeted in 2021, and while the assailant managed to trick a few nodes on the network, others quickly caught on and corrected course. This ability to adapt and overcome is the key component in the strength of blockchain projects. [5]
However, the network also faced a more serious attack less than a year after its launch, the infamous Ethereum DAO (Decentralized Autonomous Organization) hack. In this case, the hackers never touched the actual code of Ethereum but instead exploited a vulnerability in the smart contract to make off with $55 million in tokens. [6]
The developers proposed a hard-fork, a controversial move at the time that would split the network, rendering previous transactions invalid to thwart the attacker, which was implemented by the nodes on the network. While the process would be slightly different for a private blockchain, which is the most likely use case for a business, this event does help highlight the robust nature of blockchains.
Software of any kind is not perfect, and there will always be vulnerabilities in the code that hackers will try to take advantage of. What makes blockchain special is its ability to adapt, evolve, and survive these attacks, all while maintaining the network's integrity.
Choose your blockchain wisely
While most people are only familiar with public blockchain projects like Ethereum and Bitcoin, there also exist private blockchains. Private blockchains, unlike public ones, restrict who can participate in the network and how they may participate.
A blockchain network, like the one created for Bitcoin, was meant to be pseudo-anonymous. However, private blockchains typically require identity confirmation and permission levels, adding another layer of security that is absent from a public blockchain. For applications that need to store and process sensitive data, it makes sense to take the private route, but a public chain, which is audit-able by anyone, can add trust in specific applications, like with Bitcoin.
Get 3rd-party security audits
Companies sitting at the forefront of the blockchain space, such as IBM, not only have developed numerous technologies that help companies ease their way onto the blockchain, but they are also working hard to help them beef up their security. In fact, for a fee, IBM will even attempt to hack your blockchain network for you, revealing any dangerous vulnerabilities. [7]
Teach your employees good cyber security hygiene
Most security breaches are not caused by hacking but by phishing when an employee who doesn't know any better hands someone everything they need to wreck your business.
That's why it's important to teach all employees, no matter what their actual job is in your organization, how to recognize phishing emails, how to avoid social engineering hacks, how to use 2FA authentication on vital applications, and the purpose of using web filtering to block potentially hazardous sites that could infect your corporate computers with malware.
In short, the blockchain is a valuable tool for businesses, but no software is perfect. It's important to know not just how to use it but how to use it securely.
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