By Joshua Choong, Elysium EPL Strategic Procurement and Commercial Management Practice Lead
The world of blockchain technology and cryptocurrency is gradually moving out from underneath its almost underworld-like cloak, becoming more and more mainstream as business understands the opportunity it presents to improve the security and efficiency of many traditional business transactions. Cloud-based computing will make way for “stateful computing”, which will offer the capability to track the real-time status of every exchange worldwide – the basis of what is projected to be an increasingly automated and intelligent future.
What is blockchain? Despite the stigma, at its core blockchain is an incredibly trustworthy technology. Essentially, it is a decentralised digital ledger, with identical copies of the database housed across multiple computers in a network. These computers work together to build up what is known as a “chain” of data, refreshing it with new “blocks” of data as the data is checked and validated. The technology forms the basis of cryptocurrency transactions given it’s considered highly secure – a key factor in the drive from businesses to utilise the technology for enhanced automation and regulation. Rather than trusting one party to keep the ‘ledger’, blockchain allows for thousands or even millions of independent validators.
Here are five ways blockchain is set to revolutionise the future of traditional contracting.
Autonomous execution of contracts
Blockchain enables 24/7 autonomous execution of so called 'smart contracts' – ownerless blockchain accounts that contain machine-readable instructions for transactions like fund transfers, or the storage and computation of data. Ultimately, it means the smart contracts will become the third parties in transactions, minimising or eliminating the need for human involvement. For businesses, it offers the potential for a massive drop in transaction and management costs, particularly in industries with high-volume, low-cost contracts. It also offers increased transparency certainty for suppliers, especially when it comes to payment terms.
2. Automation of escrow
Many contract types involve withholding funds until certain conditions are met, such as real estate contracts. It’s what is known as holding funds in escrow. Given blockchain’s basis in automation and validation, it could revolutionise these processes – ensuring funds are held in escrow until pre-programmed conditions are met, rather than relying on a trusted third party to hold or release the funds. 3. Information and identity verification
Traditional data entry and validation processes still used by many businesses carry with them significant risk, particularly around data security and human error. In addition, identity fraud remains a significant issue in the digital age. Blockchain technology has the potential to transform the way information is verified and validated and could be particularly valuable for auditing – think the way records are established, processed, recorded, and reported.
4. Decentralised finance Imagine a world where you could access finance without needing to speak with a bank or financial institution – the reality is, we are already there. Blockchain paves the way for decentralised financing models that don’t require the involvement of third parties for transactions on the open market. And we’re already seeing it take place, with assets (like houses) paid for in cryptocurrency, and cryptocurrency exchanged and transferred via the technology with loans collaterised by a decentralised pool of funds rather than a single institution.
5. Measuring performance Improved transparency of contract performance and governance is another benefit of blockchain technology, which allows objective, autonomous verification of contract performance metrics. Again, it eliminates the need for third party validation, ensures improved visibility across all parties and enables quick identification of issues that need immediate redress.
For businesses, it’s time to begin embracing blockchain and digital asset technology; technology is evolving at an exponential rate and the quicker businesses learn how to utilise and adapt, the sooner they can begin realising the benefits that technologies like blockchain can bring to their business.
Joshua Choong is a Strategic Procurement and Commercial Management Practice Lead with Elysium EPL, a professional services firm with a team of trusted advisors working with clients to help solve complex problems and deliver major transformation projects. Learn more about our service offerings on our website: elysiumepl.com.au.
Comments