Blockchain is a powerful advancement in technology with the potential to create efficiencies in business operations and add tremendous value to enterprises that adopt it. With major hedge funds investing in digital assets, technology companies implementing blockchain-based solutions to streamline workflows, the White House issuing an executive order encouraging responsible innovation and regulatory bodies devoting increased attention, the potential for adoption is significant.
There are countless ways companies can stimulate growth and contribute to long-term sustainability by adopting blockchain technology to make money, save money and stay competitive.
Successful companies continuously analyze their business, customer behaviors and market conditions while optimizing processes to capture greater market share and revenues. For example, Amazon was initially an online retailer focused on books; the company now generates sustained and substantial revenue through a diversified business model, including physical grocery stores, Amazon Prime and third-party sellers. Today, it is one of the top five technology companies in the United States.
The incorporation of blockchain-based solutions can help boost a company’s revenue by improving existing products and unlocking innovative offerings that allow for additional reach into wider audiences. Amazon Managed Blockchain is one of the company’s recent product launches that enable its customers to access and develop public and private networks within Amazon Web Services.
Additionally, Goldman Sachs recently embraced blockchain-based asset management products and began offering Bitcoin and Ethereum exposure to private wealth management clients seeking portfolio diversification. These initiatives help retain customers and boost their brands as tech-forward companies, which positively impacts future product adoption and growth.
Further, tokenization — the process of converting something of value (real estate, a portfolio of equities or art) into a digital token that can be transferred on the blockchain — may provide additional revenue opportunities for businesses.
For instance, real estate tokenization allows investors to own fractional units of a given property and demonstrate ownership of, transfer and record property rights via the blockchain. Supplementing this with a private placement could provide more avenues for raising capital, attracting more investors, enhancing the liquidity of products through token trading and potentially offering additional liquidity options.
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Businesses aim for long-term sustainability by streamlining internal operations, managing expenses and eliminating costly and inefficient processes; those that fail to do so typically have shorter lifespans. For example, Blockbuster simultaneously amassed significant debt and missed the opportunity to pivot to emerging online video service models.
Eventually, in 2010, the company filed for bankruptcy. At the same time, Netflix managed its costs by capitalizing on emerging technology and forgoing physical stores while providing customers with versatile entertainment selections. As a result, Netflix now supports more than 200 million subscribers.
Blockchain’s decentralized and distributed properties help businesses save money by eliminating third-party friction and reducing the time necessary to perform specific functions. In contrast, traditional and established companies may have limited means to trim costs without completely transforming or uprooting underlying business practices and established procedures.
In addition, blockchain can streamline workflows from the onset, and its limited manual interaction helps decrease human error. For example, JPMorgan Chase is experimenting with using blockchain for collateral settlements, replacing fiat or U.S. dollar-based processes that are manually intensive and dependent on wires and banking transfers. These more efficient internal flows are expected to result in cost savings.
Generally, businesses with first-mover advantages acquire significant percentages of developing markets while establishing reputations as leaders and innovators. For instance, eBay gained a competitive advantage as the first to introduce an accessible auction platform that addressed an emerging online audience. These advantages cemented eBay as one of the world’s largest online auction sites for over two decades.
Similarly, the nascence of blockchain provides numerous opportunities for early adoption and competitive advantage. For example, Binance began as an unregulated cryptocurrency exchange in Chinaand has since expanded to provide offerings in other countries. Such innovation can demonstrate a company’s willingness to take advantage of new opportunities within a global landscape and soon inspire competitors to take similar steps.
Businesses interested in exploring blockchain technology may benefit from identifying outdated or inefficient processes that blockchain could ameliorate and determining a reasonable time frame and budget for gradual integration. One of the primary challenges for businesses' adoption of blockchain is a limited understanding of how the technology works.
Further, blockchain's specialized nature may create obstacles to finding skilled and experienced developers. Similar to any significant shift in a business' operational procedures, the adoption of blockchain will require education on emerging technologies, keeping up-to-date with industry advancements, consistently training employees and addressing the needs of customers.
Decades ago, the emergence of the internet created a need for businesses to develop online presences and provided efficient alternatives to time-consuming processes. Companies that embraced and integrated the internet into their strategies enjoyed its many benefits, including increasing revenues, reducing costs, engaging users and staying relevant. Today, using the internet and other digital technologies is a necessity for the success of most enterprises.
Blockchain has similar potential, introducing numerous solutions to help businesses improve existing product lines and expand service offerings. If blockchain remotely resembles its internet counterpart, businesses ultimately may have no choice but to embed blockchain technologies into their operations, becoming a necessary element as industries transition into a fully digital world.
Jerald David is president of Arca Labs, Arca's innovation division that creates and registers digital securities and tokenized funds.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.