When Does Blockchain Increase Business Profitability?

As Bitcoin and other cryptocurrencies have attracted investor attention many businesses have been interested in blockchain technology. Investors looking for blockchain investment opportunities find that the blockchain is a tool. The profitability of an investment in a company that uses the blockchain will depend on the “fit” of blockchain with the business and the efficiency in how well the company applies blockchain technology. The question of specific investments should be when does blockchain increase business profitability?

Business Uses of Blockchain

Because the blockchain is a decentralized function it can simplify and streamline cross border business activity. International payments and transfer of money from one nation to the next occurs with a tamper-proof record as noted by Insider Intelligence. They cite the example of Banco Santander’s money transfer service that made international money transfers possible with a single day. At the base of this process is the elimination of intermediaries which not only makes transfer more efficient but reduces the “middleman” cost as well. It is this last factor that investors need to look for when looking for increased profitability resulting from the use of the blockchain.

Ways to Increase Profit With Use of Blockchain

IBM offers businesses pre-packed blockchain technology so that they do not need to create the process from the ground up. Does blockchain increase business profitability for companies that work with IBM? In their article about learning to increase profits with blockchain IBM starts by writing about supply chains. This is an important issue in this day and age as China’s Covid shutdowns are gumming up the already-covid-damaged supply chain of the last couple of years. The argument that IBM makes for using blockchain to run a supply chain is that the blockchain is “immutable” which lets all interested parties to spot and deal with fraud, theft, or other issues like bottlenecks. They go on to promote their own product, IBM Blockchain Transparent Supply which (they say) uses smart contracts and advanced programming that allow users to spot issues like foodstuffs that have been infected and contaminated and need to be dealt with promptly.

The savings they cite, such as millions saved from pulled infected food out of the supply chain, would certainly increase business profitability. Other functions such as a consumer being able to scan a packaged chicken sandwich and find out where the chicken was raised appear to us to be extras that are less likely to lead to company profits. And these features could be achieved with standard computer programming without having to go through the blockchain.

When Does Blockchain Increase Business Profitability

Where Are the Blockchain Profits?

Show me the money is what investors need to say when considering investments related to the blockchain. Bankless notes that Ethereum seems to be a profitable business run on the blockchain. Otherwise, they note that blockchains are hemorrhaging money. Using blockchain as a tool to increase business efficiency can be profitable.  As always, the proof will be in the results. However, crypto businesses like Ethereum typically issue their cryptocurrency to pay for expenses and are, in reality operating at a loss which is 64% in the case of Ethereum. When a company uses a blockchain based program for a business function like making money transfers or tracking inventory it may or may not be doing the job more efficiently than with a standard computer program. The proof will be in the profits.

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