Is your organization prepared for the risks of a blockchain-based business model?
Determine the risks of a blockchain-based business model. What will happen when technology moves from the experimental stage to production and goes mass.
Organizations can use blockchain to turn their business into a decentralized platform and change the way their businesses operate. It cuts down on intermediary entities and processes, changes transaction metrics, and creates an immutable audit trail of all transactions.
Digital transformation with blockchain is the process of using the technological capabilities of blockchain to transform a traditional business into a business at the forefront of the digital economy. Blockchain-based business models will change the core of your business.
However, most businesses are often unaware of where they are going with current blockchain projects, especially new potential risks.
Visualization of a blockchain-based business model
The blockchain-based business model can be broken down into several arrays:
- Anti-forgery data storage system
- Use transparency to enhance supply chain functionality
- Blockchain-as-a-Service model: a service that allows business customers to outsource all services such as user authentication, identity, and database management, etc.
- Tokenization of digital assets: the application “redefines” asset ownership, creating high liquidity for assets.
An organization can apply blockchain to different business activities depending on its needs and future development strategy. One of the key steps in blockchain adoption is identifying the technology’s potential risks to your business.
Identifying risks to a blockchain-based business model can be the very first step
Successful blockchain-based business models need to ensure that they benefit both company employees and end-users. According to Deloitte, the risks to a blockchain-based business model can fall into three categories:
- Standard risks:
Those that are similar to those associated with existing business processes:
- Strategic risk: Determining when to enter the blockchain application market; Determining the network of cooperation; Choosing a suitable blockchain platform based on the strengths and limitations of the platform.
Business Continuity Risks: Identify technology-related failures, cyber-attack risks, and accelerate response times to ensure system continuity.
- Security risks: Although the transaction information is well secured, there are still security risks associated with certain accounts and data.
- Regulatory Risks:
Standards and regulations regarding blockchain applications remain uncertain, affecting process automation, transparency, and operational risk.
- Operational and IT risks: including processing speed, scalability, and interoperability with legacy systems.
- Value Transfer Risk:
Those risks are associated with transferred value such as assets, identities, and information, which are previously managed by intermediaries:
- Consensus protocol risk: The risk of consensus that may never be resolved. This risk results in the ledger not completing the transfer of value.
- Liquidity risk: In finance, the ability to handle the volume, consensus, and regulatory regulation can also affect an institution/market’s ability to convert value and liquidity.
- Smart contract risk:
While setting up a smart contract, parties need to define the rules and processes since the data in the smart contract is irreversible. It can cause business, legal, and data damage. Therefore, the parties involved also need to plan to recover from malfunctions in the operation of the model.
Blockchain-based business models improve database systems and security through decentralized functionality and cryptography. They improve information flow, traceability, and auditability.
Blockchain is not just a technology project. As blockchain adoption increases, organizations will need to account for the risks of the model and plan to deal with them. If you are wondering about your decision regarding blockchain application, contact us and talk to blockchain experts in the industry.
akaChain is backed by FPT Software, a globally leading technology, and IT services provider. It is an end-to-end, permissioned, multi-chain network based on the Hyperledger Fabric. Since its establishment in September 2018, akaChain’s product has assisted many enterprises, from SMEs to Fortune 500 firms, to transform with distributed ledger technology. The company provides a broad range of permissioned blockchain-based products and services in multiple sectors, including retail, supply chain, banking and finance, insurance, shopping mall management, etc. to transform with its distributed ledger technology. For more information, please visit https://blog.akachain.io/
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