It’s a costly and slow process when a company with a large supply chain has to choose a partner in business, or when banks have to make risk analysis of potential customers (KYC). Blockchain technology creates trust in this process and removes risks, says experts.
In most business, we can never be sure whom to trust. As a result, we spend a lot of time evaluating the risk of a business relationship, or we pay a lot of money to third-party intermediaries like lawyers to make sure, that a trade or collaboration goes down the right way.
This is especially a big problem for companies with large supply chains, because even after they carefully choose one of their many business partners to handle their product, how can they be sure the partner handles the product correctly and does not add anything to make a bigger profit for himself?
The answer could be blockchain technology, according to Torben Craner, an expert in the field with experience in implementing blockchain solutions to manage the supply chain for big companies.
“The blockchain can benefit all companies that are a part of a supply chain or handles dataflow, because the distributed ledger creates transparency in every transaction,” he says.
A distributed ledger is at the core of blockchain technology. It is a public record of all actions and transactions on a given network, which is impossible to manipulate or change.
Let’s say, for example, that a dairy company created a blockchain solution for their export of milk to China. Every intermediary that the milk goes through in the supply chain would need to register exactly how they handle the milk, while also approving the previous intermediaries work on the blockchain. If the weight of the milk, the time of arrival or something else doesn’t add up, the company can use the blockchain to trace back through the supply chain and find out who is responsible for the anomaly.
Today this process is done with paperwork, signatures etc., but this process is often subject to manipulation. The data on the blockchain, however, cannot be manipulated and it replaces all the paperwork which saves money and time.
“The blockchain makes small companies actions transparent and reveals if they are trustworthy. Big companies benefit because they can see with a clear conscience that their product is being handled correctly throughout the supply chain,“ says Torben Craner.
Torben Craner is helping several companies with the implementation of blockchain solutions. One of these companies is Danish Blockshipping that is creating the world’s first real-time register for shipping containers for the industry.
Building decentralized solutions is a growing business according to a recent report from PwC, one of the world’s largest consultancy firms. The report revealed that 84 percent of companies are ‘actively involved’ with blockchain technology.
A new way to create trust in banking and business
The trust aspect of blockchain has potential to do more than creating a transparent supply chain. Trust also plays a huge part in banking and building up small businesses.
When a bank is lending money or doing business with a potential customer, it is obligated to follow the KYC protocol, which is an obligatory risk analysis of a client. This is done to ensure that they are not using the banks services to launder money. The bank also evaluates the customer’s credit rating, to make sure they can pay back their loan.
This is a slow and costly process, which blockchain solutions can solve within minutes according to Sofie Blakstad, former bank builder and now CEO of the financial trust platform Hiveonline. Hiveonline uses blockchain technology to create a transparent picture of small companies’ credit history and how they conduct their business. This way banks or potential customers can look at a company’s profile on and decide if they want to lend them money or work with them based on their reputation.
“The biggest challenge for small companies is creating trust around how they do business. We have built a platform with behavioral analytics tools and blockchain technology that can support facts based on the reputations of the clients. This is so banks and potential customers can decide with certainty whether or not to work with them based on how they have conducted business in the past,” says Sofie Blakstad.
Hiveonline is a platform were companies can administer cash flow, lend money and house administrative paperwork. They can also receive and send payments with a stablecoin (a cryptocurrency that always preserves its given value). This all happens on the blockchain and it is by analyzing these activities that Hiveonline can decide if an actor on the platform is trustworthy to do business with.
According to Sofie Blakstad it is only blockchain technology that is capable of creating a foolproof reputation of a company’s trustworthiness.
“Companies like Trustpilot also try to evaluate trustworthiness in business, but everyone can create a user or write fake reviews to boost their own ratings – or maybe it’s only the angry customers that bother to review you. We have created a decentralized system, where no central authority controls the data. The companies trust ratings are based on every action the companies make with clients, payments, administration etc… This gives an accurate image of how trustworthy your company is,” says Sofie Blakstad.
Blockchain technology is decentralized. Therefore no central authority can edit or control the data (contracts, records, loans, credit history etc.) written on the public ledger, and data cannot be changed once it is in there. Consequently, you can trust what is written, which removes the need for third parties, like lawyers or banks to approve the data’s legitimacy.