Blockchain is sufficiently complex that many find it a technically challenging idea to grasp. Here, we’d like to offer a less technically dense explanation of its benefits for P2P providers and their customers.
Much more than a ledger or database, Blockchain is more like a “digital trust”. It can act as a backbone to one of the most crucial components of doing business – trust. That trust, with Blockchain, is shared between machines and between humans.
While Blockchain continues in its development as a business tool, business and thought leaders are taking notice and exploring its applications. One of its most promising applications is in the realm of procurement.
Cutting out the middle man
One of the fundamental features of Blockchain is that it creates the element of trust required to satisfy a transaction. That means there’s no middle man. Here’s a simple example of a transaction to illustrate the point:
Your friend is travelling overseas and has run out of money. You get an email asking for a loan. To realize that loan, you transfer money from your own account to your friend’s.
You have trusted a third party to affect the transfer. Whether you’ve used a bank or a PayPal account, a third party is involved.
You have put your trust in a third party and while we’re all used to doing that as part of a transactional economy, when we do this, we’re exposing ourselves to all manner of things going sideways.
For example, what if the institution you’re dealing with turns out to be corrupt? What if the transaction record states that you transferred more money than you asked for? What if that money ends up in the pocket of the third party?
Blockchain creates the means to cut out the middle man, placing the element of trust in the hands of those who have a personal and direct interest in the transaction.
Security between peers
Without intermediaries in the mix, the element of trust is established between peers in a secure environment. This streamlines the transactional process, exchanging value directly.
Consider that over 50% of businesses still pay by check, according to a recent study by JP Morgan. Blockchain’s true potential is in eliminating the need for traditional payment methods, which (while reliable in a sense) slow down the process.
Paper-based transactions are no longer needed, as trust has been established via the security of the system itself, which precludes the possibility of fraud, forgeries and other risks associated with financial transactions.
Increased supply chain transparency
Transparency in the supply chain is a common challenge in procurement. A lack of it can lead to unpleasant discoveries, hidden behind intermediary entities, including child and slave labor in the production of goods.
Trustworthy traceability ensures due diligence at every link of the supply chain, precluding the need for intensive investigations concerning compliance. That’s an advantage all procurement professionals will welcome.
CenterPoint Group is a trust procurement advisor. Contact us to exploit the power of numbers.