We hear a lot about blockchain these days, but does it provide benefits beyond the buzzword? This record-keeping technology makes it impossible to hack a system or to forge the data stored in the blockchain. It is a distributed ledger technology (DLT) capable of recording transactions and related data in multiple places at once.
Blockchain can be likened to a database, yet it stores and manages information differently. While traditional databases store data in rows, columns, tables, and files, blockchain stores data in blocks chained together digitally. It creates a decentralized database that can be managed by computers in a peer-to-peer network rather than a central computer.
Financial institutions are using blockchain to realize faster and more cost-effective clearing and settlement. Nonprofits and government agencies utilize smart contracts with blockchain to develop immutable records. Healthcare organizations use the technology to secure medical records while enabling the safe sharing of patient data.
These are just a few examples of how blockchain is being used by organizations. Let’s break down five benefits blockchain can provide to help businesses operate more securely and efficiently.
1. Enhanced security and privacy
Companies utilize this technology to leverage the security of blockchain-enabled systems. By creating an unalterable transaction record with end-to-end encryption, blockchain can eliminate fraud and other unauthorized activity. The data is impossible to hack because it is distributed across a network of computers rather than being stored in one location. Blockchain anonymizes data and often requires permission to access, which eases privacy concerns.
2. Increased Speed
Another leading blockchain benefit is that it can process transactions much faster than other methods by eliminating intermediaries and replacing many manual processes. This increased speed will depend upon the size of each data block and network traffic, among other factors. When manual steps are considered, moving through transaction steps will be quicker and more efficient.
3. Reduced costs
All organizations aim to reduce costs, and blockchain can help with that goal. By creating efficiencies in transaction processes, as mentioned above, manual tasks such as amending and aggregating data become more cost-effective. Blockchain also makes the reporting and auditing processes run more smoothly. By eliminating middlemen such as vendors and third-party providers, this technology further helps to reduce costs.
Once transactions are recorded on a blockchain, they cannot be changed or deleted. This feature creates immutability. With blockchain, there is a permanent record that can be tracked over time because all transactions are time- and date-stamped. While older filing systems are prone to error and can be corrupted or retired, blockchain enables secure and reliable information auditing.
5. Improved Trust
Finally, blockchain creates the valuable benefit of trust between different entities. Even when trust is nonexistent or unproven, utilizing blockchain fosters a willingness to engage in business that involves transactions or data sharing. Even if organizations do not have a direct relationship, they can still share data or payments with enhanced security. Cryptocurrencies, including Bitcoin, are examples of how this technology builds trust between parties who do not know one another.
As you can see, blockchain technology provides important benefits to businesses in the areas of security, cost effectiveness, and more. As data sharing increases among organizations, blockchain’s benefits will become even more critical to keeping information secure. Reach out to our knowledgeable team to learn more about how this and other technologies can enhance your business operations.