Blockchain terminology came into limelight when Satoshi Nakamoto introduced the first-ever digital currency, Bitcoin to the world. In its true sense, blockchain is an increasing list of records, categorically called blocks that are linked to each other using cryptography. Each block comprises of a cryptographic hash of the preceding block, a timestamp, and transaction data.
It works as an open distributed ledger that allows recording of transactions in a verifiable and permanent manner. Despite having gained popularity in recent years, blockchain still has not gained the confidence of many financial spearheads and investors primarily because of some prominent misconceptions which still hover over this new-age technology.
Here are some of the common traps which the business heads are required to get away with while considering blockchain technology implementation:
1) Blockchain can be used only for cryptocurrencies
Blockchain, just like any other technology, has varied versions designed for the public as well as private requirements. Cryptocurrencies like Bitcoin and Ether rely on the “public permissionless” version as they allow each and every person to enjoy equal rights for creation, validation, data access, and production of new blocks.
In the “public permissioned” version, any person who satisfies the predefined eligibility criteria will be able to download the protocol and validate the transactions. The parties joining the blockchain frame will require permission beforehand itself.
In terms of privacy, which is most important for enterprises, the “private permissioned” version of the blockchain is the best option. Each and every participant involved in the network is selected beforehand and validated too. This version works well in a consortium model and is employed in conditions where business collaborations take place. As there are no cryptocurrencies involved, mining stands irrelevant in this version.
For instance, if an enterprise will set up its native blockchain network for maintaining collaboration between the suppliers, partners, and customers, the suppliers, and customers of another entity will not be able to join this private blockchain.
2) Blockchain is a fad! It is actually a collection of technologies
Companies that head towards blockchain technology only because of their fascination with technology often end up making big mistakes. Blockchain should be employed depending upon the outcomes derived in the business. Both private and public blockchain versions are bound to becoming successful only when they are used for:
- Giving an all-new advanced experience to the end-users
- Catering to the requirements which go under-served or unnoticed
- Reducing the interference of intermediaries
- Building trust through digitization of processes and securing the real material or activity
When the focus is paid on these four features, varied problems get rendered to in any form of collaboration including B2B, B2C, P2P, machine-to-peer, or machine-to-machine. Public blockchain takes into account notable elements like C++ (for Bitcoin, invented in 1985), asymmetric encryption (invented in 1976), Proof of Work (invented in 1993) and SHA 256 (invented in 2001). With the culmination of these efficient technologies, issues like double-counting came to an end when Bitcoin was invented in 2008.
3) An industry-wide consortium is required to use blockchain
There is a general misconception amongst enterprises that the usefulness of a blockchain is only when all the arms of an industry become a part of it. In contrast to this thinking, the implementation of private blockchain through their native chain can give terrific positive results to the enterprise. It becomes important for the enterprise to opt for a DIY approach rather than DIFM or “Do it for me”. These micro-chains or private chains play an intriguing role in filling in the trust gaps which can widen when there is cooperation between firms, partners, consumers, suppliers to achieve a common goal. Blockchain implementation saves the time which firms spend in information reconciliation. These private chains promise to enhance collaborative benefits and thereby achieve positive network results.
Some prominent issues which private chains can solve include:
- Lead to a reduction of purchase order failures even when operated on Electronic Data Interchange
- Channelizing forward and reverse logistics of non-serialized inventory involving many stakeholders
- Improving the arrival time for customer orders which have to pass through various enterprise teams
- Keeping a check on the movement of high-precision tools and sharing of these tools between the primary equipment manufacturer and the suppliers
- Protecting personally identifiable information from getting sabotaged during its exchange in a network that involves many people
It is crucial for the entities to create and employ their own chains to bring a transformation in the processes or digital operations.