27 Aug Entrepreneur’s Guide to Blockchain: What You Need to Know
What is Blockchain?
As an entrepreneur, you spend your time building your business, serving your clients, and trying to keep a finger on the pulse of your industry. With new technologies developing all the time, it can be hard to keep up, especially when those technologies are complex and more than a little unclear. You have likely heard of cryptocurrencies like bitcoin in the news and conversations with other entrepreneurs. Within these conversations, you may have heard another term thrown around: “blockchain.” Blockchain is the underlying technology upon which cryptocurrencies like bitcoin are built. However, there is a lot more than blockchain can do beyond cryptocurrencies. In fact, blockchain just may end up revolutionizing the way we do business in the near future.
Blockchain, in its simplest definition, is a secure, distributed database used to record transactions. Let’s break that down:
Blockchain is tamper-proof. The reason why is because every transaction on blockchain adds another piece of data to the puzzle (or block to the chain, if you prefer). No single individual has access to a complete chain in order to tamper with or alter a recorded transaction.
This is the main element of blockchain that has techies around the world excited. There is no centralized database or server that controls blockchain. Instead, it is built on a public network of computers without the need for third parties, intermediaries, or a centralized storage facility.
By keeping a secure, decentralized record, transactions of every size, type, and description can be memorialized using blockchain. At its base, blockchain is a ledger, recording everything that is done using its technology in an immutable, efficient, transparent format. Its protocol allows anything of value (money, stock, music, intellectual property) to be managed and transacted between peers. While cryptocurrency gets the most media attention, blockchain can also be used to record anything of value — from insurance claims, to patent applications, to land titles.
In industries and transactions across the board, blockchain will be able to make middlemen obsolete. It has the capacity to replace mediators in banking, the financial industry, distribution of goods, and the use and recordation of intellectual property.
Why Should I Care about Blockchain?
You may have heard that blockchain is on track to be a $7.6 billion industry by 2022. In recent years, we have seen skyrocketing investment in this technology, but it isn’t quite clear yet how the technology will be used or regulated.
However, as this new industry develops, big companies are vying for the chance to be at the cutting edge of applying and monetizing this technology. Small businesses, without the resources or the time to devote to new tech, are starting to lag behind.
On its face, blockchain may not seem like it has a lot to offer small businesses. But think of it this way: small businesses are at the center of our economy and are necessary to our communities. However, they face seemingly insurmountable barriers to entry when it comes to building a successful businesses and scaling to meet demand. When a small business first becomes successful, it often faces challenges when scaling outpaces infrastructure, such as invoicing, inventory, payroll etc. In order to scale sustainably, businesses need to adapt their infrastructure or they will run into the risk of bottlenecking. Often small businesses will need to purchase expensive platforms, hire new employees, or contract with outside service providers to keep pace with a growing business. Blockchain may provide an alternative that is both more efficient and less expensive, allowing smaller businesses to compete.
Traditionally, a contract is just a piece of paper, but it works because there are consequences to breach. For example, there may be punitive action, fines, or a lawsuit. In each of these cases, the aggrieved party would look to a mediator to assist in enforcing the contract. A smart contract, built using blockchain technology, uses a decentralized system that does away with the need for a guarantor and a third party enforcement mechanism.
A smart contract is affected at the moment that each party agrees to the transfer. For example, if a licensing transaction for use of intellectual property is being created, the contract is created and completed in the moment that each autonomous party agrees to a) pay for licensed use of the property and b) share the property in exchange for the fee. This contract is simultaneously recorded so that proof of the transaction is immutable. Using smart contracts may help small businesses streamline, cut down on costs like legal fees, and avoid delayed payments indefinitely.
Intellectual property is one area that is particularly exciting in light of blockchain technology. By establishing a decentralized, tamper-proof ledger, intellectual property will be much more easily registered, recorded, and traceable. Licensing of intellectual property also stands to benefit. As in our example above, licensing would be transacted remotely, efficiently, and inexpensively. The ability of blockchain to resist hacking and alteration will help avoid costly litigation or arbitration.
As we have discussed, data stored on blockchain is immutable and tamper-proof because the information is spread across several nodes, and there is no single entry point for a hacker or cybercriminal to steal or alter data. Every transaction conducted on blockchain is timestamped and contains unique, identifiable keys. To preserve privacy, blockchain operates using a system of public and private keys, which are coded with cryptography to ensure the participants can be verified without exposing their information to public view.
These cybersecurity benefits are useful for small business not just because they protect the business from hacking threats and theft, but they also ease the pressure on businesses that store their customers’ sensitive data. By removing the need to store sensitive personal information within a business, companies will lessen their vulnerability to the lawsuits and damaged credibility that often follow data breaches.
Keep Up to Date on New Developments
Keeping up with blockchain and other complex tech developments can be difficult for anyone, especially those who are busy running their businesses. Let us help you! To make sure you are up to date and in the loop in new technologies and how they impact entrepreneurs, connect with us at The Brand Protected. You can reach us on our website or by calling (786) 363-0097.