What is data management in business? Simply explained, it’s the process of acquiring, evaluating, storing, and analyzing data to gain valuable insights. Every business needs quality, clean, and reliable data to make better decisions and generate revenues.
How does blockchain fit in? The technology, in its essence, is a very special type of database that stores data across a decentralized network. The very purpose of blockchain is to enable access to timely, trusted, and secure data, which is a major advantage for any type of business whether these are writing companies, insurance firms, or shipping agencies.
Because of the real promise of blockchain to enhance data management, many companies from different industries are experimenting with the technology to see potential benefits.
So far, a number of ways to use blockchain to improve data management are known.
1. Creation of a Joint Register to Advance Accounting
Today, financial accounting runs on the double-entry system, the essentials of which were invented centuries ago. Designed to help with verifying own books, it leaves out one huge concern: the verification of a business’s financial information. To address this issue, accountants have to run expensive, time-consuming audits.
Blockchain is emerging as a solution. A joint register can be developed to avoid keeping transaction-based separate records. It would be a database of financial information where falsification or removal of entries is almost impossible because of their wide distribution and cryptographic sealing.
According to Deloitte’s recent report on blockchain in accounting, companies could benefit from having a blockchain-enabled joint register in multiple ways. The first major advantage is the standardization that helps auditors to verify data in financial documents automatically. Subsequently, the time to conduct an audit would also be significantly reduced, allowing them to focus on critical areas.
2. More Control Over Individual Financial Data
In recent years, the notion of allowing people to manage and protect their own data has gained immense popularity. With a lot of data breaches happening recently – Capital One has reportedly lost Social Security numbers and bank account numbers of over 100 million customers – giving people more control is increasingly seen as a good idea.
Technologies like blockchain can make this idea a reality. Some of the most promising benefits include the following:
- More transparent use of personal data. Thanks to blockchain, the history of all transactions with data could automatically be shared with owners. Having a decentralized network of data sharing would result in removing the “central body” in charge of controlling personal data
- Online identity verification. Bank customers, for example, can’t keep a permanent digital ID card on record, which makes it impossible to verify if it was exposed to changes. Blockchain-powered ID solutions eliminate middlemen and give complete control over data for the user.
- More effective fraud prevention. Blockchain technologies like a digital fingerprint can help financial institutions to have a unique customer identifier to reduce fraud. According to Mckinsey, ID fraud and other tools can save between $9.5 and $13 billion for the financial industry.
3. Improve Access and Security of Information for Government Agencies
We know about quite a few potential applications of blockchain in the public sector.
Protection of sensitive data is the obvious first use case because the current encryption methods aren’t 100 percent reliable and safe. If a government uses blockchain to store and manage the data of citizens, the latter will be stored on a network of computers. Any changes to the files are trackable, but unauthorized tampering can be easily identified and prevented.
Another technology that has already shown promise in countries like Sweden and Georgia is the digitization of information about asset ownership. It allows the citizens to perform such operations like property selling or buying without going through tons of unnecessary paperwork.
If blockchain registers are used to store ownership information, governments can create online platforms for transactions involving all players in the real estate market: sellers, buyers, agents, and banks. By tracking and monitoring each transaction, the government can also increase transparency and reduce fraud.
Smart incorporation is also underway in many governments around the world. Thanks to blockchain, they eliminate paper-based exchanges and design services based on smart contracts and blockchain records. In Delaware, a U.S. state with business-friendly laws, the authorities have tested a blockchain filing system for businesses that automatically tracks stocks and other assets in real time.
4. Make Claim Management Easier for Insurance Clients
The insurance industry stands to benefit from blockchain in many ways. Complex insurance contracts are one of the most pressing issues right now, and the technology might be able to help.
The problem with the contacts is their inherent complexity due to difficult language and numerous conditions. Facing increasingly tight regulations, insurers need to organize the contracts this way (plus there’s the need to protect their businesses from fraud).
Blockchain-powered “smart contracts” could make insurance contracts more manageable, transparent, and easier for both insurers and customers. For example, if they record a contract on a blockchain network, only valid claims will be paid, because the network would check the validity. This nature of smart contracts eliminates the need for writing traditional, paper-based agreements that are hard to understand.
Moreover, claim enforcement is something that can even be automated; a smart contract could trigger payment or another feature when the network receives the information that the required conditions were met and verified.
The automatic feature of smart contracts can also advance the existing peer-to-peer (P2P) insurance models. Moreover, new models can arrive in the future when the industry begins a widespread use of cryptocurrencies.
Data Management with Blockchain: Final Thoughts
Blockchain’s promise for data management is very real. The transactional nature of the technology makes it applicable in many industries, not just for storing data, but managing and creating value. Blockchain won’t serve as a replacement for traditional databases, but rather a tool for making it more secure, useful, and applicable.
Daniela McVicker is a passionate digital marketer. Daniela is interested in everything related to SEO and blogging. She contributes to Essayguard and other websites where she shares her experience and helps marketers make their names in the online world.