​Blockchain digitizes hidden value

The blockchain has not gained everyone’s trust. According to the survey, 48% of CEOs said they did not trust the blockchain, but 84% were curious about the convincing benefits of the blockchain.

In today's turbulent market, the shift from a research-based thinking model to a thinking model of overcoming fear and distrust is crucial to "digital value". To eradicate the hidden value in the legacy system or the funds left over because of inefficient processes, it means turning to new technologies that can support the integration of the physical and virtual worlds to develop new business models and processes.

Whether it is independent choice, neglect or habit, the outdated system has already caused serious costs. No company can repeat the same mistakes. In order to survive, the company's top leaders must act quickly. With the digital communication of the Internet, blockchain and smart contracts will fundamentally change the way business is executed and systematically obtain hidden value.

Today’s epidemic and economic downturn have made things very clear: All companies must find ways to reduce costs and lower profit margins. Under the current pandemic, it is vital to survival. If not adopted, it will bring more With more profitable technologies, companies cannot effectively reduce costs and increase profits.

Extract value from the current process

At present, there are many legacy systems or decades of technical infrastructure, and the surrounding piles and harmonious equipment require huge funds and costs. For example, the US government wants to maintain 10 legacy systems, and taxpayers spend US$337 million each year. Elsewhere, organizations spend about 80% of their IT budget to support the normal operation of existing systems.

In theory, traditional, paper-based and manual workflows require a lot of management resources and lack the ability to unilaterally share, which leads to redundant and isolated work. These lack of innovative operating procedures hinder the sharing of information within the company and further aggravate transaction friction in business relationships, especially in contract execution and payment.

Smart contracts supported by blockchain technology can simplify operational inefficiencies, automatic invoicing and payment processes to release cash flow, and provide real-time insights into a company’s financial situation, and deal with legacy, completely different systems and outdated technical solutions. The solution is difficult, but with the blessing of blockchain technology, the reform and innovation of all outdated systems and processes seems to be easy.

How does blockchain release working capital

In the business relationship, since each participant has its own version of data or information, the traditional data transfer between companies in the contract is very time-consuming and not very costly, so monthly statements and extended days are required. Sales (DSO).

Using blockchain technology, real-world events are captured in an immutable third-party digital record that can be shared among participants. Any enterprise, supplier, or supplier is allowed to view and access the data and information hidden in the current process through the blockchain, with high visibility, transparency and accuracy, and use existing systems such as business processes, data sources and networking Industrial Internet of Things equipment can link the real overall picture with contract execution.

The function of a smart contract is like a software program, capturing the operating terms of a legal contract between companies. Smart contracts use performance indicators, use operational data from legacy systems and other information sources to ensure and verify that transaction obligations have been fulfilled, and then trigger automatic payments.

For example, in checking invoices, most companies have experienced long payment cycles, full of disputes and manual mediation processes, which caused huge time delays. For transactions on the blockchain network, the service provider can quickly get paid, while the transaction party only pays the actual received or executed fee, which brings great efficiency to the existing process.

An example of an outdated business concept is a paper invoice. When you refuel at a gas station, you can swipe your credit card and pay on the spot in real-time transactions. In a commercial contract, it is not an instant transaction. It still needs to go through a long payment cycle, which is delayed by paper records, invoices, disputes and settlement procedures.

Since there is a lot of value to be realized in an inefficient process, the existing data can make commercial invoices obsolete. In essence, the human "checker" checking correctness is an aspect of the past, or at least it can be boiled down to a wasteful program. Blockchain aims to provide access to neutral, third-party distributed source information. By spanning multiple companies and systems, extract specific data from field data and other IoT sources, and store the required data in its distributed ledger. The technology will then trigger payments, so it is a new way to improve efficiency and tap existing hidden value.

Act now, don’t wait until later: value cannot wait

There are opportunities to reduce cost and inefficiency and release working capital in terms of improving business processes in industries such as construction, law, and oil and gas. Blockchain-driven smart contracts can be processed in multiple steps and reduced to two steps. The impact is huge, especially during the economic downturn, companies must figure out how to operate at a lower profit margin in the short term.

Facts have proved that the best time to realize the value locked in the existing system is to re-examine the process and seek digitization and automation opportunities to obtain more profits.