Blockchain was originally developed to prevent fraud in digital currency exchanges. But fast forward to 2018, and many industries are finding that blockchain serves endless protective and even disruptive use cases for their businesses—ones that could change processes and wipe out both fraud and “the middle man” altogether. Let’s take a look at how businesses can combat fraud with blockchain.
Hello, Smart Contracts—Goodbye, Old School Escrow?
If you’ve ever purchased a house, you know how taxing the escrow and underwriting process can be. Every other day, you’re sending proof and more proof of where your money has been, where it’s going, and where it came from. With blockchain, both old school escrow and underwriting may be a thing of the past. What’s more, online buying and selling of just about anything could become an even bigger industry.
With the use of smart contracts, such as those developed by Ethereum, sellers of anything—from Lularoe leggings to entire buildings—can combat fraud with blockchain technology. How? Smart contracts allow both buyer and seller to create “if / then” contracts in which one step of the process won’t be fulfilled until the one before it has been verified complete.
For instance, if you’re buying a pair of shoes online, the payment is held in a “digital escrow” until the package is marked “shipped.” This way, the buyer isn’t taking a chance on losing their money—and the seller isn’t risking the chance of not getting paid. This concept can be used in literally ANY exchange, deal, or agreement. It doesn’t matter how big or small—both parties can combat fraud with blockchain, and it removes the need for a physical mediator like an escrow company to ensure it. This is going to be a huge game-changer in almost every aspect of our lives. (And it isn’t good news for escrow companies, either.)
A Smarter, Tighter Supply Chain?
In my opinion, one of the most exciting places to see blockchain grow is the supply chain. In today’s global economy, we’re seeing companies all over the world partner for manufacturing, agriculture, pharma development, and everything in between. That’s great, right? But as the distance between these companies grows, so does the ability to ensure that the products and processes agreed upon are actually followed when the final product is made. As a buyer, we are well aware of this issue. Were the expensive free-range eggs we purchased really created at a free-range farm? Was the gold ring I bought online really made with 24K gold? Companies can combat fraud with blockchain by verifying the legitimacy of every part of the supply chain process, helping both the buyer and manufacturer. You’ll never have to question that organic produce and those free-range eggs.
Goodbye, Identity Fraud
Research shows identify fraud cost consumers $16 billion last year—not to mention lots of headaches and sleepless nights. For me, the ultimate hope for blockchain is that we’ll see personalized, secure digital IDs become a “real thing” in this generation. The development would be a game changer on two levels. For one, it’s so easy to combat fraud with blockchain because the ledger is constantly reconciled—and can only be updated when verified by both parties or users. And second, because blockchain allows for permissioned networks, it could finally level up the playing ground in today’s digital environment and empower users themselves to determine what personal data and information they share, where, and with whom. Imagine: a world where Facebook, Alexa, and Google can’t track your moves or share your interests unless YOU allow them to. It could be huge for consumer protection—and change the big data game altogether (again, that’s another story.)
When it comes to blockchain, the long and short of it is this: it can serve as an objective, trustworthy, third-party mediator in pretty much any interaction, deal, or partnership you can imagine. It helps ensure trust and transparency, even amongst those who don’t trust each other. It can be used in copyrighting, divorce mediation, online shopping, and pretty much any other transaction you can think of—and its potential is just beginning. Fraud will be a thing of the past. Yes, there will be some time until you, your network, your business partners, and all members of your supply chain are up and running with blockchain. It might be a decade before you see and feel the results. But when blockchain sees mass adoption, the digital marketplace will be changed forever, and everyone—err, almost everyone—will stand to benefit.
Latest posts by Daniel Newman
- 3 Ways Blockchain Can Help Combat Fraud - April 17, 2018
- Adaptability: The Key Leadership Trait in the Digital Transformation - August 1, 2017
- How To Capitalize On Your Digital Ecosystem - July 5, 2017