April 16th, 2024

Blockchain for Business: Top Use Cases, Benefits & Pitfalls in 2024

A blockchain is a shared and immutable data storage technology that is used for payments, supply chain management, trade operations, tokenization, and privacy solutions.

The technology is finding its way into the corporate world because of its unique properties that allow the creation of programmable, transparent, accessible, secure, and trustless systems.

Anndy Lian, an intergovernmental blockchain expert, told Techopedia:

“It is not just financial systems; blockchain can empower individuals to take control of their personal data and privacy, mitigating risks associated with centralized data storage. We’re at the early stages of understanding how blockchain and crypto can revolutionize various industries. From supply chain management to healthcare, the potential applications are vast.”

What are the benefits of blockchain applications? What are the challenges that companies may face when adopting blockchain tech? We explore these and highlight some of the most popular use cases of blockchain for businesses in various sectors.

Key Takeaways

Blockchain tech has unique properties that allow the creation of programmable, transparent, accessible, secure, and trustless systems.
Blockchains are used for payroll, supply chain management, trade operations, tokenization, privacy, and retail operations.
Businesses can use public blockchains like Ethereum or create their custom private blockchains.
Businesses can use blockchain to build trust, improve privacy, reduce costs, facilitate cross-border payments, and more.
Uncertainty around crypto regulation is a key hindrance in adopting blockchain technology.

What Are the Major Blockchain Applications Across Industries?

Here are some of the most popular blockchain use cases and examples of using blockchain for small businesses and large corporations.

Payroll

Payments are an obvious use case of blockchain technology. The cryptocurrency industry has used blockchain technology as a bedrock to build peer-to-peer payment systems, while governments are leveraging blockchain technology to create central bank digital currencies (CBDCs).

But what about businesses? The use of blockchain payroll solutions has grown in popularity over the years as more people are in favor of accepting their salaries in cryptocurrencies like Bitcoin (BTC), Ether (ETH), and stablecoins.

The growth of remote work has also helped this trend grow as crypto payments facilitate easy, quick, and cheap cross-border payments.

For example, the human resources (HR) management platform Deel allows companies to pay and contractors to receive their salaries in BTC, ETH, USDC, Dash (DASH), Solana (SOL), and BUSD.

Supply Chain Management

Blockchain supply chain management solutions modernize complex chains that have numerous intermediary parties, processes and endpoints.

The transparent and immutable nature of a blockchain ledger ensures that all concerned parties have a single trusted source of information while providing information in real time to all concerned parties.

Blockchain supply chain solutions also reduce paper-based processes and email exchanges and allow automation, thereby increasing transaction speeds.

Trade management company Covantis created a network to process the execution of bulk agricultural trade operations from the appointment of third-party providers to sharing of documentary instructions and generating drafts and final documents.

Trade & Commerce

Blockchain solutions for trade and commerce created a reliable platform to help buyers find sellers, negotiate with each other, and complete the trade without having to meet each other.

These trading platforms store agreed-upon contracts on the blockchain, while smart contracts custody funds and automate payments when real-world conditions are met. All the information remains visible to all parties on the blockchain.

IBM created a blockchain-based trade management platform we.trade that solves the issue of lack of trust. Importers and exporters that don’t know each other can securely connect with each other on we.trade.

Real World Asset (RWA) Tokenization

Tokenization of real world assets is a promising blockchain use case for businesses that want to increase market liquidity for illiquid assets like real estate. Tokenization can also be used to safeguard intellectual property like copyrights and patents by storing them on an immutable blockchain network.

RWA tokenization is among the top five crypto market trends and technologies in 2024. Traditional finance companies are tokenizing illiquid real estate and fine art into thousands of digital tokens, bringing down the entry barrier for small investors. At the same time, the global nature of public blockchains like Ethereum (ETH) has allowed RWA tokens to reach investors from across the world.

Lian said:

“I believe that tokenization has the potential to democratize access to investment opportunities, allowing individuals from diverse backgrounds to participate in previously inaccessible markets.”

The world saw the first tokenization of real estate in June 2019 when a luxury property called AnnA Villa in France was divided into thousands of digital tokens on the Ethereum blockchain with a minimum entry ticket of investment of €6.5. The tokens came with ownership rights, voting rights, and a one-year vesting period for initial token holders.

Decentralized Identity

Data privacy and security are key issues that businesses have to deal with every day. Using blockchain technology, corporations can leverage a privacy-preserving identity management system called decentralized identity.

Decentralized identities are stored on the blockchain and are not controlled, managed, and stored by centralized third parties. The use of zero-knowledge proof technology, which is gaining popularity on public blockchains, allows organizations to create identifications and certificates that can be verified without revealing any information. Decentralized identification prevents certificate fraud, fake credentials, slow verification processes, and data leaks.

Health-focused enterprise enablement company BurstIQ provides a blockchain-powered platform called LifeGraph that manages sensitive health data. Healthcare and life sciences companies can secure customer data to a single source where participants can control others’ access to their data. Permissioned data can be analyzed, without violating data privacy norms, for improved efficiency, better decision-making, and increased effectiveness in medical processes.

Non-Fungible Tokens (NFT)

Although crypto NFTs are typically associated with absurd market prices, their broad use cases are often misunderstood. Consumer brands like Nike, Puma, and Louis Vuitton have used NFTs as a marketing tool and as a way to digitize and enhance shopping experience.

Since acquiring digital art studio RTFKT in 2021, Nike has occasionally released exclusive NFTs that can be redeemed for physicals. Similarly, in 2023, French luxury fashion house Louis Vuitton sold “phygital” NFTs called Treasure Trunks – worth €39,000 a piece, as reported by Vogue – that granted owners access to goods and experiences.

In September 2022, Starbucks piloted a customer rewards program powered by NFTs called Starbucks Odyssey. However, the company later shut the program in March 2024.

Benefits & Pitfalls of Blockchain for Business

Benefits

Trust
Improved Privacy & Security
Reduced Costs
Faster Settlements
Programmability & Customizability
Tokenization

Challenges

Technical Expertise & Investment
Regulation Uncertainty
Risk of Hacks
Limited User Adoption
Energy Consumption
Scalability & Interoperability

Benefits of Blockchain for Business

Here are the key benefits of using blockchain tech for business operations:

1. Building Trust

Blockchains when paired with smart contract technology can create trustless systems that are immutable, transparent and objective in nature. In a world where there is growing distrust over corporate practices, the use of blockchain technology can help generate trust.

2. Improved Privacy & Security

Although blockchains are not immune to hacks, the development of cryptographic technologies such as zk-proof can ensure data privacy and safety. ZK-proof technology is especially useful in protecting private data as it allows data verification without revealing any information.

Businesses can also leverage public blockchains such as Ethereum to store data and transact upon. The decentralized nature of public blockchains ensures that no centralized party has the power to modify or delete stored data.

3. Reduced Costs

Blockchain technology can help organizations reduce costs by making supply chain and trade management systems efficient, transparent, and accountable. This is especially useful for corporations that have to conduct business operations on the assumption of trust.

4. Faster Settlements

The use of blockchain technology shines when it comes to payments. Cryptocurrency blockchains are global in nature and operate 24/7 making them perfect channels for cheap and immediate cross-border payments.

Unlike the traditional banking sector, businesses will not have to wait for banking hours for settlement and will not incur multiple fees applicable in international money routing.

5. Programmability & Customizability

Businesses have the choice to use different types of blockchains depending on their needs. For example, public crypto blockchains are suitable for handling payrolls, while private blockchains can be developed to allow access to only concerned parties within a supply chain or trade operation.

Furthermore, the use of programmable smart contracts allows the development of applications that use the underlying blockchain networks for data storage and transaction settlement. Smart contracts also allow automation where transactions self-execute when specific conditions are met.

6. Tokenization

Tokenization fits financial use cases. The borderless nature of public blockchains like Ethereum and Solana allows tokenized financial assets to attract a wider pool of investors from across the globe.

Potential Challenges & Pitfalls

Here are the biggest barriers to blockchain adoption in business:

1. Requirement of Technical Expertise & Investment

Businesses will incur costs when recruiting blockchain experts and implementing blockchain technology. The use of public blockchains will require businesses to pay gas fees and auditing fees when setting up applications and smart contracts. Meanwhile, the development of private blockchains from scratch may be expensive and time-consuming due to its complexity.

2. Regulation

The uncertainty around cryptocurrency regulations is one of the biggest challenges in implementing blockchain technology for businesses. Cryptocurrency and blockchain applications often face difficulty finding banking partners in regions with unfriendly and unclear crypto regulations.

The uncertain crypto rules and regulations can hamper business progress and discourage customers from using blockchain-based applications.

3. Hacks

Blockchains are not immune to hacks. 51% attacks, double-spending, and sybil attacks are key risks to public blockchains. Furthermore, businesses must conduct thorough audits of their smart contracts before deployment or risk being compromised.

4. Limited User Adoption

Blockchain technology is relatively nascent, and therefore, businesses may encounter resistance from trade partners, supply chain management parties and consumers when they introduce blockchain-based solutions. Low awareness about blockchain and cryptocurrency technology among concerned parties is a major hurdle in this area.

5. High Energy Consumption of Proof-of-Work Blockchains

Proof-of-work (PoW) blockchains like Bitcoin are criticized for their high energy consumption rates and carbon footprint. Businesses looking to use these blockchains may attract criticism from customers and investors.

6. Scalability

Public blockchains like Bitcoin and Ethereum often face scalability issues that have resulted in limited network throughput. High transaction volumes on these networks can result in transaction execution failure, exorbitant transaction fees, and delayed transaction processing.

7. Interoperability

Blockchains are often referred to as “data silos” as they tend to exist in isolation from other blockchain networks.

The lack of interoperability between blockchains leads to inefficiencies as businesses will have to rely on third-party solutions to retrieve data from a foreign blockchain.

Fragmentation of data can also hinder collaboration and stifle innovation between businesses or departments within a corporation.

The Bottom Line

Blockchain is a revolutionary technology that offers unique value propositions like trustlessness, transparency, immutability and decentralization.

When duly implemented, blockchain can help corporations make their business operations more efficient and bring about a social and cultural change where trustless and transparent systems become the norm.

Source: https://www.techopedia.com/blockchain-for-business-your-enterprise-guide

Anndy Lian

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com

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August 28th, 2023

Stablecoins in Singapore: Navigating Between Promise and Pitfalls

In recent years, Singapore has emerged as a global leader in embracing cryptocurrency and blockchain technology. With a forward-thinking approach, the city-state has been at the forefront of fostering innovation while maintaining a keen eye on regulatory safeguards. As the discussion around stablecoins gains momentum, the question arises: Is Singapore truly ready to harness the potential of stablecoins, and what implications could this digital evolution bring?

What is Stablecoin?

A stablecoin is a type of cryptocurrency specifically designed to maintain a steady value relative to another asset, which could be a fiat currency or a commodity. This unique characteristic sets stablecoins apart from more volatile cryptocurrencies like Bitcoin and Ethereum.

Stablecoins can be categorized into two main types:

Fiat-backed stablecoins: These stablecoins are backed by traditional fiat currencies, such as the US dollar or the euro. To ensure their stability, the issuer holds reserves of the corresponding fiat currency in a bank account. Each stablecoin is intended to be redeemable for a specific amount of the backing fiat currency.

Crypto-backed stablecoins: In this type, stablecoins are backed by other cryptocurrencies like Bitcoin or Ethereum. The issuer maintains reserves of these cryptocurrencies in a wallet, with each stablecoin representing a defined amount of the backing crypto.

There are algorithmic stablecoins as well, which lack direct backing by physical assets. Instead, algorithms are employed to regulate their value, often involving the burning or minting of tokens to maintain stability.

Stablecoins serve various purposes, including:

Payments: Stablecoins can be utilized for everyday transactions, such as purchasing goods and services or transferring funds between individuals.
Investing: Some use stablecoins as a means to invest in other cryptocurrencies or as a tool to hedge against the price volatility of more unpredictable cryptocurrencies.
Decentralized Finance (DeFi): Stablecoins play a crucial role within decentralized finance applications, enabling activities like lending and borrowing in the DeFi ecosystem.
Speculation: Certain individuals engage in speculative trading of stablecoins, aiming to capitalize on potential price fluctuations and generate profits.

Stablecoins have gained prominence due to their potential to combine the advantages of blockchain technology with the stability of traditional assets. Their versatile applications across various sectors underscore their significance in shaping the future of digital finance.

Singapore’s Crypto-Friendly Stance

Singapore has long been acknowledged as a welcoming environment for the crypto sector, a stance that’s been in place since the beginning. The Monetary Authority of Singapore (MAS) has actively fostered the growth of fintech ventures, attracting investments and entrepreneurial endeavors aimed at contributing to the country’s advancement. The MAS has undertaken a thoughtful and deliberate path toward regulating cryptocurrencies, striving to strike a balance between promoting innovation and ensuring the safeguarding of consumers and investors from potential hazards.

Singapore has successfully introduced several crypto-friendly frameworks, some of which encompass:

Payment Services Act: Commencing in January 2020, Singapore saw the implementation of the Payment Services Act. This step was a response to the Financial Action Task Force’s updated 2018 guidelines concerning Anti-Money Laundering (AML) and the Combatting of Financing of Terrorism (CFT) risks that cross borders in relation to cryptocurrencies. The Payment Services Act establishes an adaptable structure for overseeing payment systems and providers of payment services in Singapore. It sets forth requirements for registration, in addition to guidelines for AML and CFT targeted at cryptocurrency businesses.

Cryptocurrency Consumer Protection Law: In the middle of January 2022, Singapore’s MAS enacted a set of laws focused on safeguarding investors from the relentless exposure to digital asset content through mediums like billboard ads and crypto ATMs. This initiative led to the prohibition of all cryptocurrency-linked advertisements and the operation of crypto ATMs in public spaces. The MAS, in its communication, emphasized its encouragement of blockchain technology development and innovative applications of cryptocurrencies. However, it cautioned against the high risk associated with cryptocurrency trading, discouraging any presentation that downplays these substantial risks.

Pioneering Role and Recognition: Singapore has emerged as a trailblazer in the cryptocurrency arena, attributed to its favorable regulatory and tax frameworks, as well as its broad incorporation of blockchain technology across various sectors of its economy. By the close of 2021, the reputable global crypto rating firm Coincub conferred Singapore with the top ranking of the world’s most crypto-friendly country. This accolade was attributed to factors such as a robust economy, a supportive legislative environment, and an elevated level of cryptocurrency adoption.

In August 2023, the MAS introduced a comprehensive regulatory framework tailored to stablecoins. This move followed an extensive consultation with the public in October 2022 on this specific topic. The framework is designed to ensure stablecoins regulated within Singapore maintain a substantial degree of value stability. It permits single-currency stablecoins pegged to the Singapore Dollar or other G10 currencies, issued within Singapore. These stablecoins are required to facilitate full cash withdrawals within five days upon customer request. Furthermore, issuers must possess a minimum base capital of one million Singapore dollars or half of their annual operating expenses. They are also mandated to maintain a corresponding level of capital and liquid assets to safeguard against insolvency and effectively manage any related consequences. Stablecoin providers that fulfill these rigorous criteria receive the coveted “MAS-regulated stablecoins” endorsement. This signifies to the global community that these instruments offer a level of security on par with other financial instruments.

This newly established regulatory framework underscores the MAS’s unwavering commitment to promoting transparency and diligent oversight over the burgeoning crypto sector, all while invigorating innovation within the city-state. By instituting robust regulations, firms that adhere to the stipulated criteria and address the multitude of associated risks can thrive and operate. This approach not only fosters innovation but also serves as a shield, protecting consumers and investors against potential threats. Singapore is positioning itself favorably for the anticipated developments of 2030, when an economy centered around tokenization is expected to take shape.

Benefits on the Horizon

The adoption of stablecoins and Central Bank Digital Currencies (CBDCs) holds transformative potential for Singapore’s financial landscape. Efficiency gains are a driving force, promising quicker and more cost-effective payment solutions. Moreover, these digital currencies could attract increased investment, bolstering the country’s economic prospects.

Financial inclusion could experience a boost as well. Stablecoins offer a digital alternative to traditional banking, providing easier access to financial services. This accessibility is crucial in a digital age where the barriers of physical proximity are being dismantled.

Mitigating the Risks

While the promise of stablecoins is enticing, it’s essential to navigate the potential pitfalls diligently. One concern lies in the volatility of stablecoin prices. Despite being pegged to real-world assets, market dynamics could still lead to fluctuations, potentially exposing investors to financial risks.

Cybersecurity remains another significant challenge. As digital assets, stablecoins are stored on vulnerable digital ledgers, susceptible to cyberattacks. Ensuring robust security measures is imperative to safeguard users’ funds.

The regulatory landscape is yet another dimension of consideration. As governments worldwide grapple with the evolving nature of cryptocurrencies, regulations could change, impacting the use and trade of stablecoins.

Balancing Act: Embracing the Promise, Managing the Risks

Singapore’s readiness for stablecoins rests on a foundation of thoughtful regulation and an environment conducive to innovation. As the government collaborates with the private sector to develop CBDCs and pioneers stablecoin frameworks, the nation is poised to capitalize on the benefits of these digital assets.

The road ahead entails a delicate balance, where the potential for financial inclusion, streamlined payments, and enhanced security must be weighed against market volatility, cybersecurity risks, and evolving regulations. Singapore’s journey into the realm of stablecoins is an ongoing narrative that showcases the city-state’s commitment to harnessing the power of innovation while safeguarding its citizens and investors.

In this dynamic landscape, the question of whether Singapore is ready for stablecoins takes on greater significance. The answer may very well shape the trajectory of digital finance not only within Singapore but on a global scale.

Source: https://www.techopedia.com/stablecoins-in-singapore-a-promising-path-or-potential-pitfalls