Category: Best Practices
It seems like every week you can read about the shiny new technology trend, so it can be hard to know which to take seriously. Bitcoin became an overnight sensation and before you knew it, everyone was talking about and investing in cryptocurrencies.
Contrary to what some believed would fizzle out as quickly as it became popular, cryptocurrency is here to stay. Just this year, JP Morgan created the first bank-backed cryptocurrency which will be used to instantly settle payments between its wholesale clients.
Shortly after cryptocurrencies gained popularity, tools started to pop up to help manage the technology which is how and why blockchain was created.
While it’s a relatively new technology, B2B businesses aren’t far off from being able to take advantage of blockchain.
In order to prepare for the widespread adoption of the technology, it’s important to understand what it is, how it works, and how B2B businesses will be able to use it.
That’s why we created your B2B blockchain cheatsheet.
What is blockchain?
Blockchain: blockchain is a distributed, decentralized, public ledger. (source)
To put it plainly, blockchain is a technology used to maintain records and carry out transactions. Essentially, blockchain is a public database of digital information.
From a technical standpoint, blockchain is comprised of two parts:
Blocks – digital information such as money, goods, work, transactions, etc.
A block is created every time an event occurs such as a purchase, trade or shipment. The block contains all of the information about that particular event including time, date, cost, and the parties involved. Because blockchain is open source and accessible by anyone, individual information like names and credit card information are given codes – just like tokenization in payment processing.
Chain – a public database of digital information or blocks.
The chain part of blockchain is a chronological record of every block. As a new event occurs and a block is created, it is added to the end of the chain, similar to adding a new row in a spreadsheet. Each person that has access to the blockchain has a copy of the record which are updated in real-time – everyone’s copy is identical.
The goal of blockchain is to record and validate transactions without a middleman or intermediary such as a bank. With blockchain, the public ledger means that the collective group verifies the recorded transactions and removes the need for a middleman. Since there isn’t a single instance of the blockchain, it becomes very hard to manipulate or hack because a change to one instance results in a change to all. Similarly, due to its chronological nature, you cannot make a change to one block without affecting the entire chain.
Blockchain is a hard concept to understand but there are many analogies that can be used to make it a little easier such as:
- How to run blockchain on a deserted island with pen and paper
- How blockchain is like a history book
- Blockchain explained: why blockchain is like Google Docs
Even though blockchain is hard to explain, that hasn’t stopped many companies from adopting the technology into their business models.
In sub-Sahara Africa, BitPesa is using blockchain technology to reduce cost and increase the speed of payments to, from, and within countries across the continent. It’s allowing frontier markets to use modern technology to expand and grow at an accelerated pace in regions that faced barriers lacked access to traditional funding.
Everledger, a technology company, is using blockchain to help verify the authenticity, provenance, and custody of diamonds across the supply chain. The solution is designed to help prevent fraud and illicit global diamond trading. Because of the industry’s focus on the authenticity of each stone, this use case of blockchain gives the stone unique “fingerprints” that can be traced from mining to the final sale.
Blockchain is on the cutting edge of technological advancements for payment processing and transactions. So, why should B2B businesses pay attention and make investments in this technology? We’ve outlined three of B2B blockchain.
How can B2B businesses take advantage of blockchain?
Possibly the most impactful use case of blockchain for B2B is the supply chain. Because blockchain is a shared version of events and transactions that are being updated in real time, it has the potential to created supply chain efficiencies. The technology allows for simple tracking of goods because all parties involved can see the current state of an order, product, or transaction. Think of blockchain as supply chain management delivered via the IoT.
Fast, Easy, Safe Transactions
At its core, blockchain is a digital ledger that takes out the middleman. For B2B businesses, this means faster, easier and safer transactions. By removing banks and intermediaries, blockchain allows for almost instant transactions allowing B2B businesses to get paid faster. When blockchain is used to process transactions, amounts and locations aren’t barriers so cross-border business is easier. Since any part of the blockchain cannot be manipulated without the entire chain being altered, blockchain is a secure way for B2B businesses to process transactions.
Improved Sales Processes
The B2B sales cycle is inherently longer and more involved than B2C because of the heavily research-based and expensive purchases. A common barrier for many B2B sales teams is establishing trust between the company and their prospects and customers. Blockchain speeds up this process because the system simultaneously ensures secure payments and doesn’t require extensive credit checks.
It’s clear to see that blockchain has many uses beyond cryptocurrencies, and businesses across the globe are already seeing the value of blockchain technology. In fact, 82% of Fortune 100 companies are researching how they can implement blockchain technology into their current business model. Future looking CIOs are looking to modern technologies like blockchain to digitally transform their businesses.