Why Blockchain May Be An Opportunity For Your Business
In 2010 the software developer Laszlo Hanyecz used ten thousand bitcoins to buy two pizzas.
It is widely considered to be the first actual transaction of goods or products where the payment was in bitcoin. Many in the IT industry now celebrate May 22nd each year as the ‘bitcoin pizza day.’
At the time, this quantity of bitcoin was worth about $41 (USD). When I checked the current value online in April 2021 those two pizzas would cost $541 million. Quite a difference – hopefully Laszlo held on to some bitcoin rather than buying more pizzas.
Bitcoin still hasn’t really gone mainstream. It’s more like gold – an asset that people invest in rather than use to make purchases. What is really interesting about bitcoin though is that it is the first example of a global currency that uses a blockchain to keep track of who owns what. But what is blockchain technology and why should business leaders be more aware of the opportunities it may offer to their company?
In 2016 Don and Alex Tapscott published their book Blockchain Revolution, which explained and defined blockchain and the possibilities it offers. In the book they said:
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
So in short, blockchain is a ledger that cannot be adjusted. It always maintains a record of every change. Records cannot be edited or deleted, only new ones can be added. Clearly, the application of blockchain to bitcoin was logical, because of the need to trace financial transactions, but the same concept could equally be applied to other business problems – such as the need for a logistics company to track millions of parcels globally.
To understand the principle of how it works, let’s think about a typical step-by-step blockchain transaction:
1. A transaction is requested – perhaps a payment from one person to another.
2. The requested transaction is sent to a peer-to-peer (P2P) network of computers known as nodes. The nodes can all talk to each other and all are aware of all requests – every node will be updated.
3. The nodes validate the user status and the requested transaction is applied.
4. Once validated the transaction is added permanently to the blockchain in a way that can never be changed. Note that transactions can only ever be added to the chain – previous actions cannot be deleted.
5. The transaction is validated and completed.
As a distributed database of transactions, a blockchain is hard to beat. It is simple, very hard to corrupt or infiltrate, self-correcting, and transparent. Clearly, in systems or processes where trust and transparency are important, blockchain works well. The problem is that most business leaders have only ever heard of bitcoin as a system designed using a blockchain – and as the pizza example shows, that feels a bit wild.
Other use cases are out there if you look. The logistics company DHL has been building a system that tracks drugs from manufacturing to consumption – cutting costs and improving trust and security in the drug production process. DHL has been working with management consultants from Accenture to establish this blockchain-based track-and-trace serialization system in six global regions. The system is now populated with more than 7 billion unique pharmaceutical serial numbers and is handling more than 1,500 transactions per second.
The World Wildlife Fund has been exploring how to use blockchain to ensure that the seafood served in shops and restaurants really come from where the vendor claims. This is because consumers are increasingly calling for fully traceable seafood that does not come from illegal fisheries or those that engage in human rights abuses – especially in the case of fish such as tuna. Both wholesale and retail seafood buyers have been asking for improvements in transparency and traceability to reduce the risk of their brands being associated with illegal activities. The blockchain system can provide supply chain transparency and therefore the traceability that retailers and consumers want.
Additionally, food producers and retailers including Dole, Nestlé, and Walmart have been using blockchain to track food products from the farm to the fork. The United Nations has been exploring blockchain solutions to the problems of child trafficking and jewelers are using blockchain to ensure that the diamonds used in their jewelry are conflict-free.
Blockchain is moving away from the volatile reputation of bitcoin. With trusted organizations, such as the UN and WWF, rolling out major blockchain-supported initiatives and global logistics carriers finding value in the concept, it’s time for more companies to explore how blockchain might work for them.