Originally developed to ensure the legitimacy of digital currency transactions (by tracking them in a public distributed ledger), Blockchain is now serving endless protective as well as disruptive use cases to various industries like healthcare, commodities trading, shipping and logistics etc. Blockchain has the potential to eliminate both fraud and middlemen, thereby enhancing trust in any business transaction.

Here are three ways in which businesses can combat fraud with blockchain.

1. The use of Smart Contracts

One of the most powerful uses of blockchain is its ability to facilitate smart contracts. unlike a standard legal contract, which must be litigated, a smart contract is executed easily when certain pre-agreed conditions are met. In case of any breach, the contract is automatically revoked.

By using smart contracts, from SME’s to corporate behemoths, every organization can combat fraud easily with blockchain technology. Smart contracts allow both buyers and sellers to create “if/then” conditions in which, one step of the process won’t be fulfilled unless and until the previous step is executed as per the pre-defined conditions.

For example, smart contracts could enable the following scenario - if you are buying a watch online, your payment will be held in a ‘digital escrow’ until your order is shipped. This ensures that the buyer’s money is safe and the seller too can avoid the risk of not getting paid. This process can be leveraged in any exchange, agreement or deal. Thus, Blockchain helps both buyers and sellers combat fraud, without involving any physical mediator like an escrow company to ensure it. If implemented successfully, it will revolutionize the process of buying and selling goods.

2. A transparent Supply Chain

The supply chain is the most obvious place where you can see the blockchain disruption. In today’s global economy, companies all over the world partner for agriculture, manufacturing, pharma development and everything in between. But, it’s often difficult to ensure the quality of the products or whether the processes agreed upon are properly followed when the final product is made. As buyers, we will never know whether the expensive free-range eggs were really created at a free-range farm, whether the vegetables labelled organic at the supermarket are really organic produce or whether the gold ring that I purchased online was indeed made with 24K gold. Blockchain can help companies combat fraud by allowing them to track every part of the supply chain. This will benefit both buyers and manufacturers.

3. Elimination of Identity Fraud

An alarming increase in the reported cases of identity theft and fraud has cost consumers billions in the last few years. However, blockchain technology can actually make secure personalized digital IDs a reality. With this development, identity fraud and theft will almost become a thing of the past. The blockchain ledger is constantly reconciled and can be updated only after verification is done by the users on both ends. Moreover, blockchain’s “permissioned” networks will allow users to determine what, where and with whom they share their personal information or data. This will undoubtedly ensure a level playing field in today’s digital environment and be a game changer in consumer protection.

Blockchain ensures trust and transparency even among those who do not trust each other in businesses. However, some types of fraud or theft can still occur even with blockchain in place. But those thefts are mainly the results of attempting to layer services on blockchain, and not due to the core technology. Hence, it is crucial for enterprises to use blockchain on the right infrastructure and with the right services to prevent fraud and systematic abuse in business.