Blockchain for online businesses is a game changer
ZorroSign, a multi-chain blockchain-backed platform in the GCC, is using AI and blockchain to deliver secure digital signatures (including legal docs), digital document transactions, and fraud detection for businesses in the region here.
Shamsh Hadi, Co-founder & CEO of ZorroSign is an industry expert in the blockchain genre, and cloud computing, and is well-versed with topics related to the blockchain, web3, and cloud security industry.
In an effort to find out how is blockchain changing the landscape of online businesses in the region, and the strategies that these companies should follow, Economy Middle East asked Shamsh:
1- What should online businesses’ blockchain strategy be when it comes to deciding to use the technology?
For ZorroSign, it was a simple decision to use blockchain as part of our technology architecture for digital signatures. My co-founder and I saw that the digital chain-of-custody is of utmost importance for document creation, review/edits/approval, distribution, signing, and executing, as well as document storing, and tracking— with an immutable record —was an ideal business case for blockchain.
Similarly, any online business that aspires to securely manage the workflow of data should consider blockchain as a potential technology.
That said, there are various types of blockchain architecture, starting with how easily endpoint nodes that store data can be added to the blockchain. Public or permissionless blockchains allow (essentially) any endpoint to join. This is the model of bitcoin and the architecture for cryptocurrencies which allow nodes to mine (or stake) for access.
Alternatively, there are private, or permissioned, blockchains where a central authority grants access for endpoints to join. This is the model of Hyperledger Fabric and other enterprise blockchains where a consortium or authoritative body controls what nodes may participate.
Both public and private blockchains have their value and benefits, but the added security control of private blockchains—where access is limited by some standard or another—may be a better fit for some business cases.
Eventually, any public or private blockchain that utilizes a proof-of-stake (PoS) consensus mechanism for validating entries onto the distributed database consumes far less energy than proof-of-work (PoW) blockchains where miners must solve increasingly elaborate cryptographic puzzles and validate transactions in order.
In what 3 key ways does blockchain “changes” online businesses?
First is security – leveraging a blockchain architecture can elevate the data security of your online business. Blockchain’s cryptography, designed to enable two parties to communicate over an unsecured medium (the Internet), includes hashing algorithms to ensure the integrity of the blockchain, and cryptographic digital signatures that ensure the authenticity, non-repudiation, and integrity of events within a transaction. By employing such cryptography for a distributed database (“distributed ledger”), blockchains provide a layer of data security beyond that of centralized databases.
For example, in phishing attacks that seek to steal data, blockchain presents a data architecture where no single endpoint node controls the data set. Even if an individual endpoint is hacked through phishing or other social engineering, the data set is distributed across many nodes. This decentralization of data and access means even successful phishing attacks that penetrate a blockchain endpoint only gain a small piece of system access.
And in cyber-attacks that seek to inject malware such as ransomware, the distributed nature of blockchain defeats those seeking to breach a system and then holistically ransom the data files stored therein.
Finally, on security, recovery from cyber-attacks can be quicker with blockchain, too. With blockchain, each endpoint node has a unique encryption key to access and write to the distributed ledger. If any one of those endpoints is successfully hacked (compromising their access key), the blockchain can simply remove distributed ledger access for that compromised key, issue the endpoint a new key, and allow that endpoint to quickly regain distributed ledger access (as a new endpoint).
Second is competitive advantage – Today’s most-talked-about ‘web3’ is built on blockchain. In quick summary, web3 aspires to break web2’s data centralization models for commerce, and instead distribute data ownership in a more democratic and user-controlled way. The distributed nature of blockchain lies at the heart of web3 architectures, and there are competitive advantages to online businesses who are early adopters and early successes with blockchain solutions.
The third is customer experiences – In today’s digital world, government, business, education, entertainment, logistics, and transportation, and almost every industry relies on information technology (IT) to operate effectively. For their constituents, clients, customers, employees, and partners, IT efficiency is vital: Saving time and effort, automating processes, and digitizing operations can result in real dividends in efficiency and effectiveness, resulting in employees with more time to work on the most important projects, and more constituents/customers served and satisfied.
If your online business delivers your solutions via the cloud or digital endpoints, then decentralized solutions can speed up the efficiency of such systems.
Does going with blockchain means that online businesses need to start thinking to trade using cryptocurrency or utility tokens?
The cryptocurrency markets are certainly part of the blockchain/web3 technology ecosystem, but are not required elements for businesses that engage blockchain technologies for apps, processes, security, or data management.
An important distinction to make is that while cryptocurrencies run on public blockchains—where anyone willing to mine can be an end-user (node), the process of mining is one of the highest areas of energy consumption, plus validating each new transaction across the broadly distributed network requiring massive computing power—but business applications typically run on private blockchains that cannot be used for cryptocurrencies.
In short, adopting blockchain technologies for business does not require trading or engaging cryptocurrencies, nor using utility tokens or NFTs that dominate so much of the press coverage of blockchain deployments.
What role can fintech play to develop online businesses on the blockchain?
For financial service organizations, adopting emerging technologies has historically been a slow, prove-it-before-you-move-it endeavor. With the boom in fintech across the past ten years, however, financial institutions from accounting firms to banks, credit unions, credit-card companies, insurance and more, have all moved faster to adopt new technologies and gain a competitive advantage in serving customers.
With blockchain, however, it may be a case of many financial institutions being pushed into new technologies by customers, rather than pulled in the hunt for larger margins and higher profits, as what sets web3 apart from web2 is ownership and control of data. Already, “a few banks are using blockchain to power real-time transactions,” writes Emily McCormick for Bank Director. Meanwhile, “FinTech competing with banks are also taking advantage of the disintermediation trends promised by a Web3 economy.”
Again, cryptocurrencies and decentralized finance (DeFi) platforms challenge traditional banking for services and control of consumer monetary systems. But while cryptocurrencies provide an exciting alternative to the constraints of fractional-reserve banking, financial services providers need not abandon central bank currencies to adopt blockchain strategies. The distributed ledger technology of blockchains can also support financial service applications above-and-beyond cryptocurrencies.
“Unlike the cryptocurrency market, for example—which is built on a digitally native system—Vikram Pandit, CEO of The Orogen Group and former Citigroup Inc. CEO, said that innovations in the traditional banking sector are based on applying new technology to improve old architecture, citing the use of distributed ledger technology in cross-border payments as an example,” notes a recent S&P Global Market Intelligence report.
Payments are another area ready for blockchain transformation. With blockchain networks, you can now transfer money directly to anyone with an Internet connection on a peer-to-peer basis.
Further, securing digital transactions and the digital chain of custody is critical for financial organizations. Even as some financial assets move to the metaverse—NFTs are an early example—a technology that immutably tracks and reports the provenance of assets is necessary to ensure ownership and enforce agreements across transactions and holdings.
Blockchain, built for zero-trust environments, is the ideal architecture for tracking and storing digital transactions and documentation, and another way web3 technologies support evolving financial services.