New technologies are crafted every day. In just the past few years we have seen the amazing possibilities of data science, artificial intelligence, and augmented and virtual reality become mainstream. Add to this the amazing technology of IoT, with wearables, smart cars, smart homes, and even now, smart cities. It’s easy to become overwhelmed by all of the innovations.
One technology that has become of particular interest to many sectors of the economy is blockchain. While it has been around for several years, it is just now showing its potential to resolve another of issues that industries have faced for decades – security, fraud prevention, immutable data storage, and more.
Where Blockchain Comes From
Blockchain was born with Bitcoin, the first cryptocurrency to disrupt the financial services industry. It was developed so that financial transactions, using digital currencies, could be permanently and immutably recorded and stored through a public distributed ledger that would be almost impossible to hack.
The beauty of this technology is that many other industries have come to see the benefits of using blockchain for a vast array of purposes and proving its value. Here are a few current uses.
- Health records can be stored securely, and a patient’s entire medical history can be made available to only those who are given permission to access it.
- Contracts can be recorded and stored, and the details permanently imbedded in a block. There will not be questions about those details or the ability to change them.
- Governments can use blockchain (and they are already beginning to do so) to secure identification documents of citizens.
- Insurance and travel industries can reduce fraud, something that currently costs them billions a year.
- Transportation and logistics industries can track shipments and devise the most economical methods of moving goods.
- Educational records can be recorded to provide a full history of student coursework and grades, an access can be granted to educational institutions as well as potential employers. The records are permanent and immutable.
- And of course, financial transactions and agreements can be immutably recorded so that there is never a question of the transaction details or whether payments were indeed made.
Now Think About Your Invoicing Process
As a supplier, you receive a purchase order – usually by email or fax. An amount may or may not have been determined prior to receipt. But when that amount is agreed upon, you then fill the order and ship it off. At some point, you must generate an invoice and send it over to the customer, with a due date.
If there is a discrepancy, either in the amount of product a customer received or the price, there are several more layers of talk and sorting out what is wrong and fixing that. There are a lot of points at which human error can occur.
Here’s Another Option
A purchase order is entered into a block on a chain. The price as agreed upon is also entered by you. There, both site, forever unchanged. Once you fill the order, you enter that information in a block and then track the shipment from point to point. If there are more than one carrier involved, then each carrier enters the details upon receipt, date and time stamped upon receipt and upon sending forward. Both parties know these details – no one can change them.
Your invoice is also entered into a block, and, because it is based upon the price that was recorded earlier, that price will not be in question.
This process eliminates so many issues – human error in transferring amounts and figures, theft, fraud, and disagreements on the details of the original purchase agreement. It is also more efficient and will reduce personnel costs. And if users have currency “wallets” also stored in the blockchain, payment, payment is immediate without the need to send an invoice. This also eliminates banking functions of both seller and buyer.
Are There Objections?
Of course. Here are a couple.
- A private blockchain can be hacked.Yes, this is true. While the technology is not hackable, users with key codes can have those keycodes compromised if they don’t keep them secure. While a hacker cannot change any data already stored, s/he could add something new or access a wallet.
The answer, of course, is the security of keycodes. They cannot be stored in any system, but rather, should be in an external piece of hardware that is only inserted during times of use.
- It has too much transparencyActually, it does not. Personal and financial information is all encrypted and cannot be accessed except via a permission-based key. Consider that personal and financial information housed in large database systems can be hacked and stolen – just ask Target, the IRS, and Equifax.
But the Benefits are Huge
- Blockchain does not require “human trust.”The trust is built into the chain automatically. And this is a huge plus. All business relationships rely on trust among the parties. And often, those parties do not know one another well. A lot of business takes place online among relative strangers. And in cyberspace, there is malware, security attacks, identity theft, etc., all of which can lead an individual to release funds to the criminal.
When blockchain is used to verify all identities of parties to a business transaction and to authenticate the agreed upon pricing, there is no need for a paper trail.
- Blockchain is Fast and Efficient.Traditional financial transactions move through a through a process, usually several steps, and there can be a hold up at any point along the way. After all, humans are moving it along. Blockchain removes all of this. Every party to a transaction is seeing the same thing at the same time and verifying it together. No need for emailed, canned or faxed invoices. The intermediaries who handled all of that are eliminated.
- There is an Immutable Audit Trail.A blockchain records and stores each and every detail of a transaction. And each transaction is time and date stamped as it is entered into a block. If changes are to be made, by mutual agreement of all parties, then those amendments are verified by all parties and entered into another block, again time and date stamped. This guarantees full transparency and prevents both misunderstandings and fraud.
Conclusion
As stated before, blockchain can track can tack and record the movement of goods during their transport to anywhere else on the globe, identifying and verifying them at each point.
Blockchain has already disrupted the financial services industry. It has now moved into so many areas. Even governments around the world are experimenting with its use to verify identities and record health records. The energy industry is finding an array of uses for it.
Businesses who position themselves to utilize this new technology now will find themselves ahead of their competitors quite quickly.
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- Blockchain – The Future of Invoicing - May 9, 2018
