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Blockchain/DLT — making its way through Enterprises

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The blockchain/DLT solutions are creating a major hype cycle at the moment, that’s making it difficult for people to accept its potential. But if you analyse the core of digital ledger technology, it has enough potential to change the way people think about the concept of trust in the business enterprise. Yet, there are so many missing pieces that need to be in place before implementing the enterprise blockchain.

Enterprise blockchain solutions are paving the way to trusted, stable and distributed business ecosystems. It’s helping the companies to fill the technical gaps and expand their business capabilities. To achieve this, businesses can simply integrate trust into data and modify their transaction processes with a cryptographically verifiable digital ledger. This overall trust increase in data will raise its value to the business. 

Blockchain/DLT are used to deliver transparency, trust and security thanks to a decentralized network of solutions. For the dynamic set of data, chain code and smart contracts are used to formulate data and clarify roles about people who can modify the data under certain circumstances. This inherent foundation of trust empowers companies to disrupt, reimagine and transform the transaction procedure both internally and externally with customers using data from countless sources.

Blockchain technology: an encoded and decentralized database

The blockchain is based on an encoded, decentralized or DLT/distributed database, that serves as a ledger where all the transaction records are stored and cryptography will be used to update transactions in real time.

Blockchain technology is being used in the world of cryptocurrencies, specifically Bitcoin. But with the passage of time this concept is changing, and other industries are also adopting the Blockchain technology and getting benefit from blockchain and DLT’s. Now-a-days, companies are urged to emphasize private blockchain networks for achieving commercial deployments.

Presently, Blockchain technology is being implemented in so many industries and applications that include lots of IoT’s (Internet of Things) and financial services i-e Capital markets, banking and insurance. And industries where Blockchain technologies are being implemented include information management, fraud management, digital identities and industries that involve smart contracts, trust, transactions, proof, payments  and in the decentralised nature of digital transformation.

However, it doesn’t mean that blockchain technology can be implemented only in decentralized applications. Infect it can be used by organizations for specific services that require trust from other parties or where it’s required to build a blockchain network with a larger group without the interference of traditional intermediaries. 

Process of implementing Blockchain/DLT in Business:

Typically, the Business model of an enterprise is made up of various support processes and core processes that are actually required to execute the company’s daily operations. The Company’s business model defines how an organization actually makes money; it specifies its competitors, target market and target customers. It also explains its value proposition which the company is offering to its customers and the revenue streams from where it will generate its profit.

Core processes are the activities for which customers are willing to pay, as these services add direct value to the product that’s being offered. The core processes might include sales, marketing, research, development, and other procedures involved in making up a company’s value chain.

Support processes are meant to surround the core processes to make sure all the work is done as efficiently as possible. These processes will add value to a company’s bottom line, but they won’t directly affect the company’s performance. When companies want to cut costs, they prefer to eliminate the support processes first. 

Stage One: Support Process update

The initial stage of implementing the Blockchain/DLT in a company’s operations starts with changing the procedures of support processes instead of completely redesigning the core process of the company that includes revamping document management, reference data management, etc. These type of changes will refurbish the process in which data and information is being exchanged between systems. The change in processes will make the existing processes of the company more efficient, and help the firm to realize the importance of investing in technology.

The best example of a support process can be the bank’s reconciliation process, used to reconcile the data running across different geographies and businesses, within their own internal entities. But Blockchain Network will help in the transformation of the same data to all the parties involved. That will automatically eliminate the need for reconciliation by reducing overall costs and efforts, which can’t be achieved by banks by using older technologies.

Stage Two: Core Processes Revamp

After optimizing the support processes with Blockchain/DLT, enterprises will move towards unlocking more advantages of this technology by updating their core processes. That will include the complete overhaul and redesign of processes, just like achieving the same tasks with succeeding processes similar to the original one but in a significantly diverse manner that wasn’t possible earlier.

For example, an enterprise can use smart contracts to encode consensual contracts i-e OTC products on a Blockchain network that will lead the company to achieve real-time execution of contracts with greater transparency among the parties involved.

Stage Three: Business Model Innovation

Once Blockchain/DLT networks will be pervasive across diverse organizations, they will automatically change the business models by aiding new ways, channels and uses that wasn’t possible earlier with the older technologies.

Just like retail investors contributing complex financial products like Repo Contracts. Presently, the Repo market is only limited to prime dealers i-e institutional investors and large corporations as it requires huge capital investment. However, when securities will be completely digitized based on Blockchain technology, then it can bring together a large number of retail investors to join the Repo market by lending cash or securities to corporate investors as they need it in return of better interest rates as compared to what retail instruments offer.

At this stage, most of the companies will cease to exist as they cannot make this type of transition. The companies that will survive will be able to reconcile these changes and provide a value proposition for their customers.

Conclusion

The transformative technology doesn’t just update existing processes but abolishes everything. Its main motive is to introduce new products and business models based on advanced technology like the Internet. It didn’t just improve Branch banking, but it replaced the need of traditional banks that have been in business for decades or hundreds of years. 

Just like other disruptive innovations, the above-mentioned three stages won’t necessarily occur at the same time in all markets and on all types of products.   There won’t be any specific time period of industry transition to the next stage.

To prevent this situation, the incumbent banks will try to change their current processes by implementing Blockchain technology, meant to save cost and effort.  So yes, we can conclude that it has become easy for smaller start-ups to replace the existing state of affairs of older institutions by using the latest technologies. 


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