You’d be forgiven if you mistakenly linked blockchain technology with bitcoin. While blockchain has many uses outside the domain of cryptocurrencies, the name first appeared in the media associated with bitcoin, and many people linked the technology to the emerging currency. If you have been keeping an eye on the latest news in technology and finance over the past few months, however, then you’ll know the potential that blockchain and cryptocurrencies will likely have on the rest of society.
What Is Blockchain?
A few months ago, I attended SAP SuccessFactors SuccessConnect in Las Vegas. I spoke with keynote speaker Penny Stoker, who said, “Blockchain is essentially a technology that validates transactions.” That stuck with me, as suddenly I saw all sorts of new and interesting applications of what blockchain could do for entrepreneurs.
At a high level, courtesy of IBM, blockchain is defined as “shared, immutable ledger for recording a history of transactions.” Even more abstracted, it is a secure, peer-to-peer platform for verifying digital events. Effectively, industries can leverage technology core to blockchain to store and manage information, access, and trust across a wide network. And rather than having a single player control the “keys,” blockchain is decentralized, meaning no one individual can manipulate or override the data. This is especially important to sectors like finance and government, which are prone to fraud and system abuse.
How Entrepreneurs Can Leverage Blockchain in 2018
Perhaps the most exciting piece of the blockchain puzzle is how the technology can enable a whole new wave of entrepreneurs (engineers, designers, etc.) to build more quickly, more efficiently, and much bigger than ever before. The massive opportunity in blockchain is unique to our time, and surely in the next five years we will see a number of critical innovations come from it. So here are some ideas to get you thinking about blockchain’s impact in 2018.
1. Eliminate the Background Check
In speaking with Penny Stoker, we began to extrapolate how blockchain might verify trust when it comes to the HR industry. In the same way that Twitter adds the blue check mark to verify accounts, a company like LinkedIn could leverage blockchain to verify employment. Instead of having the HR department from every company call previous employers to verify the candidate’s employment history, blockchain could be used to verify mundane (but important) things like employment start and end dates, title, and job responsibilities.
This simple technological change would save countless hours and a significant investment in resources just to prove that what a candidate claimed on their résumé (or LinkedIn profile) is, in fact, true.
As a side note, if you’re as upset as I am about the Equifax breach, this same thinking could easily be applied to banking and credit checks. Why pay a company like Equifax to handle easily hacked, highly sensitive, and personally identifiable data when you could use blockchain to privately and securely verify every step in your credit history?
2. Fully Automated Legal Agreements.
I had another great conversation with Tom Golway, chief technologist at Hewlett Packard Enterprise, who is working on several applications of blockchain for business. He explained that blockchain is the proverbial missing link that would empower legal agreements to operate at a fully automated level. That is, because blockchain is essentially a “smart contract,” businesses would be able to complete the entire process of orchestrating their legal agreements without today’s human intervention that slows the process down.
How many times do businesses agree on terms only to have contracts sitting in someone’s email inbox waiting for a signature–digital or “sign, scan, and email back?” Blockchain will likely remove this delay from businesses that have well defined their terms and clients who wish to engage without the traditional delays of waiting for additional approvals and signatures.
3. Supply Chain Verification
Another powerful pioneer in blockchain is Alicia Tillman, chief marketing officer at SAP. She sees all kinds of possibilities and applications of blockchain when it comes to a company’s supply chain. Businesses know who they are buying from directly, but often do not know who their vendor’s suppliers are. Blockchain could help businesses instantly understand recall implications. Or when a component fails, using blockchain you would immediately be able to see who the original supplier was and within minutes identify every suspect product or part that could be impacted.
Blockchain also helps in verifying things like ethical sourcing, avoiding counterfeit parts, and ensuring against child labor practices. Bringing verified transparency into the supply chain will expose many of the uncertainties that have haunted businesses since the inception of global sourcing. It will also empower businesses to verify that their sourcing requirements are being met by their suppliers.
4. Access to Capital
A massive barrier to entry for entrepreneurs with ideas is raising capital to finance their projects. And, in many places in the world outside the United States, entrepreneurs do not have access to the modern financing and fundraising instruments that could help them efficiently and affordably raise funding for their companies.
Many of the mechanisms for lending, found in most parts of the world, are suboptimal for small, growing businesses. The costs associated with traditional loans are hidden in incremental fees and minimum deposit restrictions. All this does is add to the challenge of starting a business, which is already very difficult.
Blockchain will make it so any entrepreneur from any location in the world can, at a minimum, gain access to capital. While not all ideas are created equal and deserving of funding, at least all makers will have the opportunity to fundraise for their idea, given that digital currencies, like bitcoin, operate independent of geographic location. In other words, everyone is able to accept and send cryptocurrencies without hidden international fees and exchanges.
5. More Efficient Fundraising
Startups are about moving quickly and solving problems as fast as possible. One of the biggest points of friction in building a company is having to allocate expensive time and resources in the fundraising process. While raising money at the right time and from the right people is extremely important and critical to your roadmap, it does take tons of time away from your core business. In fact, raising money from the traditional route of venture capitalists can take months of meetings, travel, and email back and forth before anything is finalized. Entrepreneurs are in the business of moving quickly, not spending time fundraising.
Using a blockchain, a self-verifying system, venture firms can transfer funding in as little as five minutes after making their investment decision. This will speed up the entire process of raising funding and reduce the amount of friction in the fundraising funnel.
6. Transparent and Accountable Shipping and Logistics
For years, entrepreneurs have been approaching problems the same way: banking on their toolkit of “centralized models” of management. Blockchain introduces a completely new way to control access and information, which can, in turn, open a whole array of new opportunity.
ShipChain, a blockchain-based platform, leverages this distributed mindset to optimize the freight, logistics, and shipping industry. They use Ethereum smart contracts to eradicate the need for expensive freight brokers. Instead, their technology automatically tracks and verifies each stage of the complex shipping and logistics process, essentially acting as a digital broker for carriers around the globe.
What is unique about their solution is that it would not have been possible without blockchain. Rather than having a centralized agent controlling the system, they are putting “trust management” in the power of the distributed ledger. This approach brings a level of transparency and accountability that this industry has never before seen.
7. Applications Beyond Transactions
By now, you get the idea, so let’s explore some “out there” ideas to get your creative juices flowing. For a moment, consider the implication of Tinder, the dating app, if it applied blockchain to a person’s dating history–essentially giving a transparent ledger of someone’s dating profile.
Consider the ramifications if every financial contribution made to a politician was blockchain verified. Knowing where the dollars were coming from to help a politician get elected would bring a new level of transparency to lobbying efforts.
With these things in mind, where else in your business could transparency and accountability be helpful? These are the areas for opportunity that are worthy of additional exploration. If it’s frustrating to you, chances are others would love a solution to the same problem, and this could be a competitive advantage for your company.
Transparent and Accountable
A core component of developing with blockchain is its transparent and accountable nature. All transactions that occur on the public ledger are secured and encrypted so no one player can manipulate the system. Entrepreneurs are often sitting in the dark when it comes to understanding and keeping up with industry transactions, but with blockchains in place, all of the information can be verified and trusted.