What is the impact of blockchain technology on business models?
One of the most prominent technologies —Blockchain technology — has been growing and emerging as a leader across the world. It enables new ways of sorting economic activities and it helps in reducing the costs and time related to the intermediaries. Technology strengthens the faith in an ecosystem of actors. The impact of Blockchain technology is shown by an upcoming research stream and other firms that examine the uses of blockchain technology.
While there are several key use cases of blockchain technology, its research and practices are still in their inception about the creation of new business models.
Blockchain technology has the potential to build a foundation for creating an unprecedented business model. The current blockchain solutions in the financial industry eliminate the requirement for reconciliation and intermediation. It enables direct transactions among trading partners. Additionally, the blockchain technology allows its participants to trace their assets and settle their transactions autonomously while providing a secure model.
The upcoming blockchain solutions, including VeriPart from Moog in the manufacturing industry, provide enhanced security and resilience features in an order to raise trust. In the meanwhile, a lot of organizations are actively considering blockchain technology to be a foundational technology. Besides, blockchain technology helps in authenticating the traded goods, facilitating disintermediation, and improving operational efficiency. Thus, it influences the existing and new business models.
However, there is no empirical-based research related to how blockchain technology is having the potential to change the existing foundation for new business models.
Additionally, blockchain technology-based companies still fail to deliver the promised business value in addition to the lack of theoretical focus on the influence of blockchain on business models. Furthermore, it is still not clear what business model patterns are successful for the new foundation technology.
Since the development of blockchain technology is in the initial stages, there has been no consistent definition has been adopted yet. Several authors believe that decentralized ledger technology is a crucial concept of the blockchain.
In order to provide a brief of the functionality of the blockchain technology, there is a reliable first use case i.e. transacting bitcoins.
Bitcoin is a peer-to-peer electronic cash system where transactions are processed without the composition of an intermediary. Notably, blockchain technology is presented as a linear register of all the past transactions within the system of the prominent bitcoin. The earlier transactions get documented in the chained blocks while the new transactions are added in new blocks.
Blockchain technology works as a general ledger in the context of the accounting system. However, no information is stored centrally but it is kept decentralized across all the nodes within the blockchain. On blockchain technology, each and every member is allowed to review the locations where the bitcoins have been transferred. Notably, they remain anonymous as individual entities.
Blockchain technology can transform several industries and alter the fields of its application. In the meanwhile, the current research has been predominately probing four domains.
Firstly, blockchain technology has been potentially affecting financial services, especially in the field of accounting, auditing, and bank transfer. The organizations can also reduce transaction costs by cutting out a third party. Besides, blockchain technology also allows cross-border transactions in a short span of time.
Secondly, blockchain research focuses on the supply chain as one of the most promising non-finance applications of blockchain. It is believed that it will deliver a real return on investment at the initial stage of blockchain development. It also enables all the members to identify and track the possession of a distributing item across the supply chain.
Thirdly, blockchain technology can also be connected to the concept of two-sided markets. Besides, blockchain technology has the potential to eliminate the need for an intermediary using numerous nodes on the system. It can also replace the platform providers with a network of nodes. Besides, it can also transform the reviewing market or even help musicians in making their careers more sustainable.
Fourthly, there are several types of research that address the benefits of blockchain technology in the domain of social welfare. Blockchain solutions, with the help of their decentralized approach, have the potential to leverage smart contracts. Also, blockchain solutions propose several opportunities in the healthcare industry, that includes sharing of patient data among research institutes. It can also address the current issues related to security by leveraging cryptography, decentralization, and consensus mechanisms.
Blockchain technology and its implications for the business models
Blockchain technology comes with several opportunities to develop business models. At the same time, it foists some limitations on the design of new business models. Blockchain technology provides several incentives in an order to convert customers to blockchain-based business models.
On the basis of its implementation, the Blockchain technology may include significant cost reductions coming from the disintermediation, faster transaction, reduced data-keeping for the customers leading from the distributed ledger technology, and improved data traceability and verification.
Blockchain technology also proposes an alternative approach for verified assets, taking it apart from the centralized transaction systems dependent on an individual organization. Blockchain is commonly provided by central transaction systems. Moreover, blockchain technology allows small and distributed stakeholders to practice control over transactions and hide their identities. There is a layer of encryption that defends all the transactions. It is pertinent to mention that the blockchains also assure security promoting trust among the participants of the system.
Apart from cost reduction, traceability, and improvements in security, blockchain technology supports the business model and organizational concept of distributed autonomous organizations.
Distributed autonomous organizations exist without any central governance. These are taken care of by the shareholders. They are coordinated through smart contracts. With this, the organizations get to replace the intermediaries providing their services at a lower cost.
In the meanwhile, the suggestions on the business model and the business practices are associated with the underlying assets of blockchain technology. The assets across the blockchain can be physical, virtual, monetary, or sometimes user-specific. Blockchain technology also provides several opportunities to change and enhance the underlying business models and the practices of organizations with customers, competitors, and suppliers.
In the end, it is worth mentioning that the blockchain-based business model allows the use of cryptography and tokenization.
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