Blockchain technology is officially a worldwide used enterprise technology. According to some survey results in 2020 more than 35% of enterprises were ready to invest $5+ million in this technology, and blockchain has reached $6.6 billion numbers in 2021. In 2022 these numbers will be even bigger as we will see at the end of the year. Enterprise blockchain technology has already conquered the business world and changed the way companies interact with each other and conduct their transactions.
No wonder the interest in this approach remains high, as organizations are interested in implementing and improving this approach to security. However, along with the interest, the high remains a knowledge gap about the peculiarities of blockchain solutions. In this article we will dive into the most important aspects you should know about the blockchain and its implementation.
Enterprise blockchain is a type of permissioned network that can be implemented and used for enterprise needs. Such software is called to strengthen business and enterprise performance by increasing their security, scalability, accountability, and simplifying the use and control processes.
In general, we can divide enterprise blockchain technology into private and consortium types. The first one is a restricted permissioned network, that is available by the closed circle of users. It is used in companies that want it for internal purposes with a limited number of participants. The consortium type is more fitting for collaborating purposes between two or more parties, which set the network operation rules and contributions. It has a scalability feature and a higher security level.
Enterprises keep increasing their investments in both types of blockchain but it is important to investigate all sides of this approach and define whether the correlation between pros and cons is worth for the particular case. Let’s start by outlining the advantages and disadvantages of enterprise blockchain solutions.
Businesses can really benefit from implementing blockchain technology thanks to its decentralization and immutability. Many other aspects can encourage you to use it in your enterprise processes. Let’s take a closer look at the most significant ones.
Implementing blockchain eliminated the need of using several mediators in numerous business processes. This can not only save costs on the production and distribution but also provides you with more control. There is no need to worry about the decency of the third parties who can not meet your service quality standards.
With the blockchain network, all the participants have access to the same data so there is no need to waste time on verification processes. Every operation is recorded and time-stamped, so the real and actual transaction history can be checked by every permitted user.
Another perk of decentralization is the speed of transactions. Regular banks can process the operations for up to 6 days, so when you need a fast solution, they rarely can be handy. But with blockchain, the transaction can be done in seconds. That leads to lower costs as you save on fees and exchange services.
The protection from cyberattacks is crucial for enterprises. Experts claim that with blockchain companies receive a higher level of security for recording systems. The encrypted transaction records cannot be changed as they are connected with the previous records so it is impossible to compromise the data. Moreover, the decentralized records stored on multiple commuters can be changed only with the approval of all participants which is pretty hard to do. This feature also ensured the durability of the entire chain.
Reducing the human interaction is possible with the implementation of the smart contracts, they are the blockchain programs that allow action only when all previously stated conditions are met. The processes are speeded up and the next action can be triggered by the confirmation of the previous one.
This feature can be among both pros and cons depending on the type of business. This feature can be useful for enterprises with complex supply chains where tracing and managing the production process is very important. However, you need to ensure the quality of every stage of production, and with blockchain, it can be done easier.
It is important to take into account the cons you may face using blockchain technology in your enterprise processes.
It is resulted by the repetitions of some processes in the chain. When the ledger is updated it cases the updates in every node so they could store the current ledger version. That is why these processes are running over and over, causing lower performance. The same problem is with the signature verification when every node should confirm the authenticity of the user, and it may take some time. Moreover, it is hard now to find capable developers to handle the blockchain processes within the enterprise.
To get access to the transaction processes you need a private key. It causes security issues, as you need to store it safely ensuring no one has access to it. And in case of losing that key, you will lose access to the network as well without an option for restoring the access. This drawback as well as general unfamiliarity with the technology leads to acceptance issues, as not every company can understand, without mentioning implementing, it into its processes.
To implement the blockchain software, the companies have to get rid of the legacy network they may use now. The big drawback is that the blockchain is still incompatible with legacy networks. This causes many issues and doubts among enterprises, even acknowledging all the benefits.
Unfortunately, not all blockchain systems have a decent set of regulations for their network. That is why many businesses have trust issues with this technology, as it opens the risks of ICO scams. While the governmental regulation cannot completely handle the blockchain issues by now.
Due to the node's nature and its need to communicate and update all the time, the blockchain requires a large power consumption. So the overall power consumption grows as well. The industry works on this issue already, and many eco-initiatives ensure lower energy consumption through blockchain processes.
Enterprises possess sensitive and secret information they need to protect. They cannot afford to distribute it among numerous participants as there’s a risk that scammers or competitors might get access to it. Also, the automated processes cannot be completely controlled by the company. And we know how important for enterprises to be sure every stage of production is under their control. However, the private and consortium blockchains can be a solution to both privacy and control issues.
Apart from the overall pros and cons, there are specific concerns considering specifications and problems connected to the enterprise blockchain development and its implementation into the business operation. We have disclosed some aspects above, like security and privacy issues, scalability problems, and risk of criminal activity. Even though most of the drawbacks can be handled, you still should keep in mind what difficulties the enterprise may face.
We already know that blockchain technology has a very high level of energy consumption. However, it also requires expensive software and professionals to handle it. No need to say that the last aspect is crucial while we have a serious shortage of the right specialists to meet the enterprise demands. Apart from that, there are membership fees that are required for ensuring the required level of security.
Another shortage enterprise blockchain sphere experiences are in technology partners. Companies cannot define a clear implementation roadmap, as the technology remains new and not many organizations are involved in it. That is another huge problem to solve for companys' CTO. Enterprises are often lost in the tons of information to study and define the right technology for implementation.
Since this technology is still “young”, we experience a serious shortage in knowledge and expertise. We still cannot understand all the blockchain solutions and their technical specifications. This is added to the lack of qualified staff problem. Also, we do not know the full potential of the technology. Experts claim it can be used in almost all management aspects, but enterprises should clearly understand where and how they can implement blockchain and how it affects processes in the future.
We have mentioned above that the blockchain cannot work with the legacy networks, so the enterprises have to choose between these 2 options. The problem is that most companies have a well-established network, that is familiar and completely controllable. Even though the benefits of blockchain implementation can be huge, many companies cannot decide to switch to the new organizational structure without keeping the part of the previous one.
As we said, different industries need different technology solutions. However, these solutions have a serious problem with cross-platform communication. However, this can be also an opportunity for developers to enhance the technology and solve one of the biggest difficulties that may stop enterprises from switching to the blockchain approach.
Despite all complications, companies now investigating the potential of enterprise blockchain solutions and the ways of implementing them in corporate processes. Here are some examples of blockchain applications that can be used for handling enterprises' needs:
With smart contracts, companies can save a lot of time and costs by optimizing their transactions. Many operations like money exchange, identity verification, and access provision can be easily automated. This leads to the next point - international transactions. With blockchain, they can be done fast, and securely. Both parties should be using this technology though. But in this case, the payments will be done without any mediators like banks, which also saves costs on the operations.
As soon as companies start building their internet-of-things ecosystems, they should care about their security. And this is where blockchain solutions can be used. Security risks become lower as all the data is decentralized and stored on different nodes. Also, fewer reasons to worry about IoT downtime. While closed storages or servers failure can affect the entire system, with the blockchain you will not have such a problem.
Document management is one of the biggest issues for big companies. With the traditional approach, there are high risks of duplication, errors, and confusion resulted by the human factor. Blockchain technology allows controlling the document turnover and verifying the data about files around the entire system. Moreover, when there is one document available for the authenticated participant, there is no risk to duplicate or distribute the original file.
Implementation of blockchain enterprise solutions may have some complications, but it is definitely the ones that can increase the effectiveness of your business and encourage profit growth.
The absence of third parties in the processes gives the road to full automation that allows businesses to save costs on staff maintenance and increase the speed of e-commerce operations. Along with this, the enterprises can get the resources for expanding their client bases and improving reachability, as well as expanding the circle of partners and suppliers.
The trust and transparency potential of the blockchain opens the way for conducting business with unknown parties, so it is a huge opportunity for expanding the business, production, and services resulting in increased profit for sure. A high level of security eliminates the fraud activity and data leak cases, so the customers and partners will have more trust in your business.
Another useful potential lies in the visibility and traceability of the blockchain operations that can benefit supply chain management. This can help you extend your chain of suppliers while maintaining a high level of trust between parties as well as customers, as they will have access to the whole information about the product and will be able to trace its quality.
The application of blockchain in capital markets can ensure improved supply chain transparency while reducing costs and risks. Here’re the main benefits the enterprises can get for their operations with the blockchain usage:
ensuring the corporate standard quality of materials by easily tracking the chain supply;
eliminating the risks and losses from trading on the gray markets;
increased trust in the operations with the outsource manufacturers and suppliers;
Saving more by reducing the administrative service needs and paperwork.
Moreover, enterprises will strengthen their reputation by providing their customers with complete information about the product and its production stages. Public credibility and trust are directly connected to the sales results and overall brand awareness. Moreover, the better reputation among customers your company has, the higher chances you will attract more stakeholders.
While some companies still weigh out the pros and cons while delaying the modernization of their operations, top players like Microsoft, Amazon, or Walmart are already experiencing the perks of implementing enterprise blockchain in their business. It is not an encouragement to follow their example blindly because they are well-known and successful. However, if you are interested in blockchain technology for enterprises, you can trace their performance in this field and learn the specifications of such modernization.
We have disclosed the potential benefits as well as drawbacks that the blockchain may bring. The undoubtful fact remains the same: blockchain is the future of enterprises. Even though it is far from perfect, it keeps evolving and providing more solutions for business. Stay tuned to be aware of the latest blockchain trends in this industry and increase your awareness to be able to make the right decision for your company.