Where to start?
Blockchain offers transactional verification instantly across a network without relying on a central authority. When implemented correctly, this means blockchain possesses the potential to reduce operating costs, more secure store and manage data, and improve the speed of transaction processing.
According to Deloitte, supply chain is probably the best place to start in assessing blockchain's practical value. Companies could forge new agreements with producers, suppliers, financial experts, record-keeping departments, and third party vendors, potentially leading to reduced costs, streamlined management, and a clearer understanding of the assignments and expectations of each player on the field.
Deloitte explores how oil and gas companies can use blockchain to monetize new ideas. As we have seen, oil and gas companies have struggled through price volatility and record production levels in recent years. This then leads to vast cost-cutting efforts, reduced exploration, and layoffs. As a result, oil and gas companies must consider how they operate and identify innovative ways to improve transaction processing.
Blockchain harnesses the power to improve and refine the back-office function bringing much new digital technology to the supply chain, procurement, or finance parts of the business. When exploring blockchain and its potential, four areas need to be considered. These are transparency and compliance, cyber threats and security, third-party impacts and efficiency increases, and the smart contract.
Case study: OpenBazaar
OpenBazaar launched in April 2016 and serves as an open source project with the goal to create a decentralized network for peer-to-peer online commerce using cryptocurrencies (most notably bitcoin). The platform allows buyers and sellers of goods to directly create shops and sell goods without fees, restrictions or accounts. You do not need to visit any website, you just simply download and install a program on your computer that directly connects you to other people looking to buy and sell goods and services with you. The great thing about OpenBazaar is that nobody has control over it. Each user contributes to the network equally and is in control of their own store and private data.
Unlike Silk Road and eBay, OpenBazaar doesn't maintain servers, host product listings, or store transaction data. Due to this structure, this means the company has no control over what is bought and sold. Whereas other online markets, stores, and platforms may ban the sale of certain merchandise and goods, OpenBazaar puts no limits on what can be listed. Also, because the source code is publicly available, it would be virtually impossible for a government entity to shut the platform down. The goal is to allow small businesses all over the planet spring up to sell their wares and goods using the OpenBazaar platform.
This significantly helps populations within the global south who suffer from lack of strong financial institutions, social capital, and financial literacy. Discussed in a previous article, climate change has lead to incredible natural disasters such as hurricanes and floods, which seriously devastate the communities within Latin America, Africa, and Southeast Asia leading to millions of people losing their life savings in one foul swoop. Also, countries suffering from heavy regulation and heavy corruption see populations that fail to trust banking institutions. For example, during the financial crisis within Cyrpus in 2013, the government simply confiscated consumer deposits making Cypriots devoid of their money and savings.
This is where OpenBazaar comes in. OpenBazaar uses blockchain and a peer-to-peer platform that will attempt to expand opportunities for unbanked and underbanked populations to have a secure and easy place to open a small business and sell goods in exchange for cryptocurrencies. Using cryptocurrencies, such as bitcoin, is the significantly lower costs associated with cross-border payments, in addition to the instant transfer, cutting out the need for intermediaries and the time requires for them to validate and clear the funds.
Utilizing blockchain technology to record and manage the movement of goods and related invoices will significantly decrease the risk of errors and the opportunity to alter invoice values or recipients. Goods will be tracked from source to customer, reducing time and costs, and providing insight into the supply chain process that could be used to create efficiencies. Invoices will be recorded in the blockchain, creating an immutable record of its contents. The movement of invoices also can be addressed in the blockchain using public and private keys, preventing unapproved parties from accessing the invoices. This again could help to reduce the administrative burden on companies to report transactions to authorities and reduce the time taken by tax authority audits because of the reliability and transparency of data in the blockchain.
Overall, it is the potential of this new technology and projects like OpenBazaar that will enable populations in emerging markets to live in a world where they are financially included and able to access capital.
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