Unraveling the Potential: Blockchain Use Cases from Business
Exploring Blockchain Applications and Success Stories in Modern Enterprises
Blockchain technology has emerged as an innovative force, transforming traditional practices and opening up new realms of possibilities. Businesses have understood the benefit of the cryptographically secured, distributed and cooperative data storage system. But what is hype and where are the real business cases? To shed light on the practical applications of blockchain in real-world scenarios, I spoke with Roman Shtih, a seasoned blockchain expert. He shared his rich business expertise and practical advice for companies with us.
Blockchain is mostly associated with start ups and the crypto world. But Blockchain can likewise bring benefits to traditional businesses. Why should a company decide to use blockchain?
Shtih: It is important to understand that blockchain and cryptocurrency are not identical things. Blockchain as a technology is harmless, it is a way of organizing and storing data using a distributed ledger. In any business, we use data that is stored in one way or another, and blockchain is just one of the ways to store any data, which has significant advantages. Cryptocurrency exists due to blockchain and is included in the concept of blockchain. In simple terms, this is just transactions that occur in it. It is important to distinguish between the concepts of cryptocurrency and blockchain because cryptocurrency cannot exist without blockchain, while blockchain without cryptocurrency finds application in many other areas.
Both blockchain and cryptocurrencies can be useful for business, but let’s consider only blockchain in this case. Here we can start from the characteristics that blockchain possesses – decentralization, transparency, and immutability of the data entered into the blockchain. Where can it be useful?
Let’s consider two situations. First situation is, if there is a large number of participants who cannot trust each other by definition.
For example, a huge number of your potential clients are united by your project, but by definition cannot trust each other. Blockchain here can act as a way for participants to interact with each other. There is no centralized participant who validates the actions of others – everything is stored and recorded in the blockchain, to which everyone has access and everything is transparent and secure. Blockchain in this case is a kind of game rules that facilitate interaction between participants.
This story has worked very well, for example, in SCM and logistics sphere. A large number of people from different countries, under different jurisdictions, cooperate and this should be somehow controlled, most often control is distributed among several participants and they need to constantly synchronize data. Blockchain solves this problem, all data is stored in a single registry, which in turn is distributed and each participant can view this data, but cannot change it.
DHL is the world’s leading logistics company that tracks pharmaceuticals from origin to consumer using blockchain technology. According to WHO, more than 10% of medicines in the world are counterfeit, causing the death of over a million people annually. DHL uses a blockchain-based ledger with nodes in 6 regions to track pharmaceutical products throughout the supply chain, which is accessible to all interested parties including manufacturers, distributors, pharmacies, hospitals, and doctors.
Second situation is, if you need an Out-of-the-box solution for project economics.This is a situation where you need to create an economy from scratch. When you build a business or you are a participant in a business environment where there are different interest groups and they have a complex system of relationships with each other. For example, manufacturers and distributors. And you need to develop infrastructure and common rules of the game for them, under which they exchange some data and make some transactions, and all this is stored in one place and works according to the same rules. Blockchain can help here.
The openness and immutability of data stored on the blockchain will allow businesses to create information systems that guarantee, at the technology level, the authenticity of stored data. (Roman Shtih)
Blockchain has proven itself well in finance. The most well-known example we talked about is cryptocurrency. But blockchain is also well suited for exchanging other digital assets, not just related to payment. Here, the example of using loyalty programs on the blockchain is relevant, when it is necessary to distribute bonuses as digital assets among different participants, and it is possible to create a secondary market for these digital assets. There are already examples where major brands are starting to create digital assets and motivate owners of these assets to exchange them with each other. Blockchain can be used for tokenization of assets or business processes to make them easier and faster, for example banks can use blockchain for such purposes.
Blockchain is not a panacea, you can do without it if everything works well in a specific case. But in many cases blockchain can solve some problems in traditional business processes and can become a solution that makes life easier for all participants.
Blockchain can support different business models that involve transactions of tokens or assets, but it is also an excellent technology for validation or certification. For which sectors do you see the most potential?
Shtih: The use of blockchain holds the great potential for businesses in tasks related to digitizing classic paper-based processes, which usually require the creation and maintenance of archives of paper copies/originals of documents. The openness and immutability of data stored on the blockchain will allow businesses to create information systems that guarantee, at the technology level, the authenticity of stored data. Digitization of paper archives, confirmation of document originality, copyright and property rights. All of this looks very promising, although it requires updating the existing legal framework on a number of issues.
It is particularly interesting to consider the use of blockchain technologies to create digital twins of enterprises, where data within the model is updated based on uploaded NFTs containing information about the technical characteristics of various production parts. Up to confirming the originality and supply chain of individual spare parts. In this regard, standardization of data format at the industry level is necessary.
One retail company that grows gene-modified cotton and has implemented a track and trace system on the blockchain. The customer can trace the entire production process of the cotton, from the farms where it was grown and harvested, to all stages of production, up until the final product. The blockchain acts as a guarantee that no steps were violated and everything is transparent to the customer. Anyone can see where and how their t-shirt was produced.
Blockchain solutions have been successfully implemented for example in logistics and supply chain management. Which use cases have you realised in your work with companies?
Shtih: For example, we have implemented a project for one of our clients, an electronic archive containing digital copies of original documents accumulated over several decades. Data confirming the authenticity of digitized documents were stored on the blockchain. This allowed us to abandon the storage of paper copies of documents and dramatically accelerate interaction with them.
For businesses, everything is simplified by using internal blockchain, for example, enterprise blockchains based on Hyperledger. You don’t need to connect to the global blockchain, you can create your own distributed data registry within your company, all of which eliminates problems with the environment and regulation. (Roman Shtih)
Blockchain technology is trending, but many companies still have doubts for example about regulation or environmental issues. What are the challenges and risks of integrating Blockchain?
Shtih: In fact, the problem of emissions into the environment was solved several years ago when blockchains with other participant consensus mechanisms appeared, where there is no need to mine coins. Yes, at the beginning, when there was only Bitcoin, a huge number of machines were required for mining, and hence, a huge amount of electricity. All of this began to bring a negative carbon effect and the problem of emissions into the environment arose. The transition from the Proof-of-Work consensus mechanism to Proof-of-Stake solved this problem, now it is enough to have any device, not a huge mining farm, to support blockchain operations.
As far as regulation is concerned, it is important to mention that blockchain technology itself does not require any regulation, it works on its own and does not require control. We are talking about cryptocurrency, which cannot exist without blockchain. The difficulties of regulating cryptocurrency are precisely what is being discussed, it is an alternative to the traditional financial market and in its essence does not require intermediaries such as banks, etc. This in turn makes it easier for criminal organizations and scammers to conduct transactions in cryptocurrency, which of course is frightening. Also, the cryptocurrency market is associated with a sufficient number of speculative things, which also affects its reputation.
In the USA and other countries there are discussions in which business conflicts with regulators about cryptocurrency and blockchain. But in blockchain itself as a technology, there are not so many problems and it can be applied even without cryptocurrency.
For businesses, everything is simplified by using internal blockchain, for example, enterprise blockchains based on Hyperledger. You don’t need to connect to the global blockchain, you can create your own distributed data registry within your company, all of which eliminates problems with the environment and regulation.
By the way, talking about regulations, In general, we see that more and more countries become “crypto-friendly”, for example in June 2023 an important event for cryptocurrency sector took place in UK – The Financial Services and Markets Act 2023, or FSMA 2023 for short, was officially approved by King Charles. That meant a dramatic shift in the status of crypto trading, moving it to a regulated financial activity in UK.
The Blockchain technology has proven its credibility in the business world. Why is it still sometimes associated with scam or Ponzi schemes?
Shtih: Blockchain and cryptocurrency are often equated, but this is not entirely correct. Blockchain can exist without cryptocurrency and as a technology can be applied in many other areas, not just finance.
An interesting fact: in order not to be associated with scams and fraud, some providers that implement blockchain in business use the term “distributed ledger” or “design ledger” instead of “blockchain”.
To understand everything, we first need to understand what a Ponzi scheme is. A Ponzi scheme is a financial model in which each new participant contributes money, and previous participants receive returns from it. The problem with this scheme is that it does not create value in and of itself. It only creates value through the influx of new users. If the influx of new participants into this financial model slows down or stops, the scheme collapses because the profits and returns that the scheme guarantees cannot be paid out due to the lack of new users. Those who have already entered this model and are participants stop receiving payouts on their returns. That’s how a Ponzi scheme works, and some people think that cryptocurrencies work the same way.
However, the value of cryptocurrencies does not depend on new users. Cryptocurrencies exist as payment instruments, and people use them as investments. The price of investments is formed based on supply and demand, just like in traditional financial markets, and there are no models that give more bonuses to those who entered crypto earlier. This is just a regular financial market, not a Ponzi scheme. To understand this topic in more detail, it is necessary to delve into technical details, such as how cryptocurrencies are simulated.
What would you advise a traditional company, that wants to analize its potential for a Blockchain solution?
Shtih: To consider the potential use of blockchain technology from both an optimization of business processes and marketing standpoint, including customer interaction, brand recognition, and loyalty. It is also worth mentioning the possibility of attracting investment for new projects through tokenomics. Evaluate the potential impact of implementing blockchain on current business processes in both the short and long term.
Being present in Web3 is a significant marker of innovation for consumers. The question of whether to use blockchain or not is no longer relevant. The more pressing question is how soon businesses will need to implement blockchain into their existing operations and how effectively they can do so.
Roman Shtih is the CEO of MetaLamp, a company that focuses on blockchain development for startups and businesses. The MetaLamp team has expertise in EVM and Cardano development.