How Blockchain Can Benefit Your Business
As small businesses seek better and more efficient ways to serve their clients, blockchain can be especially useful as a way to conduct transactions and even to raise capital.
The cost to incorporate this technology is far less than you might assume.
Many small business owners think that only large companies have the money to afford expensive designers to develop such advanced technology.
The truth is, Entrepreneur writer Drew Giventer says, vendors have emerged who “provide blockchain-based technology, not only for Wall Street, but for Main Street as well.”
And blockchain technology isn’t just for digital-first or online-only businesses. Bakeries, gyms, nail salons, restaurants, and other small businesses that rely on a physical space in the real world can get started using blockchain today.
Let’s take a look at some of the ways blockchain technology can benefit entrepreneurs who want to take their business to the next level.
The first thing your business can do to adopt blockchain is simply to begin accepting cryptocurrency as a method of payment.
“What signals more of a commitment to blockchain,” asks Giventer, “than allowing customers to pay with bitcoin or other cryptocurrencies?”
Some larger e-commerce companies like Expedia and Overstock accept bitcoin. And this option is also open to online stores through platforms like Shopify, too.
This platform offers several advantages to small businesses, as the transaction fees are low and fast, and there are no chargebacks.
Of course, traditional merchants just aren’t set up to accept cryptocurrencies, so rolling out this plan will require a lot of planning and testing.
You’ll need to evaluate and spend money on a digital wallet, a merchant gateway, or a combination of services needed to accept cryptocurrency from your customers.
However, the benefits of accepting cryptocurrencies will outweigh these costs in the long run.
First, your customers can see that you’re willing to expand your services, and that’s something that will bring in new business.
Cryptocurrencies also allow you to directly deal with your customers. That will reduce transaction costs as you won’t be paying a third party for those any longer.
Another big advantage is that payments will be permanent and irreversible.
This will leave your customers with no choice but to contact your business directly if they want a refund—and that will end the problem of chargebacks, where customers purchase services or goods, then cancel the payment on their credit card, leaving the business in the hole.
Blockchain technology is particularly recognized for its applications and platforms which aid money transfers and payment transactions. Your business can utilize this to transfer funds securely without heavy costs.
For example, you could transfer money to employees anywhere in the world without worrying about using an expensive intermediary.
What about a situation where you want to properly document transactions with several parties involved?
You might be able to use some of the new business applications for Distributed Ledger Technology (DLT) that are being investigated currently.
You could have an accounts audit trail, ties in a supply chain, or steps to the execution of a deal. Ethereum, created in 2015, is an easy way to make special “distributed applications” or Dapps.
Another variation, called permission ledgers, blends the advantages of a blockchain with business security. You might not realize when an underlying device begins using DLT, but you can see certain changes:
Reduced instability in supply chains:
With many small businesses, shipping and logistics activities can be a resource-eating, admin-heavy mechanism.
And with each supply chain partner, the work is multiplied. DLTs can make some of these activities easier and far more secure.
Unbreakable agreements:
Businesses deal with contracts of all sorts on a daily basis, and signing those contracts means placing your confidence in a piece of paper.
The difference with a blockchain is that it’s digital and cannot be changed or tampered with.
Smart contracts also don’t require a lawyer to negotiate the agreement, saving you time and money. So long as the conditions of the contract are met, the value transfer will happen without fail.
Safer data storage at a reasonable price:
Blockchain allows users to store data in a safer digital form for a fair price. The stored data can be encrypted so that only those with a crypto key can access it.
And how about data storage? “Blockchain storage applications,” says Giventer, “allow users, including small businesses, to store data in a safe way, and at a reasonable price, without compromising data security or overspending.”
Businesses and personal users spend more than $20 billion every year on cloud storage. Imagine saving that money instead of throwing it into the cloud.
Businesses can also use blockchain for smart contracts, which are self-verifying and self-enforcing contracts between the business and the client.
The contract is stored within a blockchain ledger and is recorded in a way that cannot be changed or manipulated.
Some examples of smart contracts include commercial leases, agreements with suppliers or vendors, and employee contracts.
A smart contract offers your small business a level of protection it would otherwise not be able to afford. You’ll be eliminating the middleman (usually an attorney) with a smart contract, and that will save you a ton of money.
“Global blockchain platform Ethereum,” Giventer notes, “was the first to introduce smart contracts to the cryptocommunity, and is considered one of the more advanced platforms for coding and processing of smart contracts.”
Blockchain technology can give your small business an alternative method of raising capital through Initial Token Offerings (ITOs) or Initial Coin Offerings (ICOs). These are a virtual form of investment created with blockchain technology.
Your company can “issue” tokens or coins by using a platform like Ethereum to create and record the distribution of these tokens as a form of investment in your company.
As an alternative to banks, lenders, private equity clubs, and even crowdfunding, ITOs are available for exchange where they can be freely traded. ITOs are comparable to equity or revenue share in a typical company.
Interested investors can buy into your offering and receive new blockchain-based tokens from your company. These may have some use with the product or service your company offers, or it may simply represent a stake in your project.
“The growing loyalty of token investors,” says Giventer, “has made ITOs much more popular over the years, and a viable capital-raising alternative for businesses of all sizes.”
The ITOs can be bought and traded on the open market, where “a new realm of liquidity is made available to the general public.”
A small business can also grow its brand and product awareness by giving customers a small reward in cryptocurrency. This is known as a bounty campaign.
How it works is that your company issues blockchain-based tokens that have some utility. Perhaps they can be exchanged for some of your products or services in the future.
You then initiate a bounty program on a specialized forum or platform, and, as a result, anyone can join the bounty, promote your company, and get paid in tokens for doing simple online tasks.
If you’re in the business of verifying any sort of transaction, investigate how blockchains could impact your company. Think about the threat of clearing and settling stock trades and you’ll see that the disruption to many back-office functions and other services could be substantial.
If you belong to some sort of supply chain, your partners may want you to start digitally tracking your processes, especially if you supply a larger corporation.
Start thinking about where you fit into your customer’s supply chain and how you might be asked to participate in a blockchain.
If you supply anything to consumers or other businesses, think how valuable it might be to be able to track your products back to their sources.
Imagine how much a fishmonger might be able to charge if he or she could reliably prove their products were harvested using sustainable methods.
“In supply chain logistics,” says Gillian Ellas, “the combination of blockchain, smart contracts, and the Internet of Things will allow companies to track shipments and make payments when certain conditions are met (i.e. a product is delivered).”
An example is Maersk, the world’s largest shipping company. They began testing blockchain to track their cargo in conjunction with Dutch customs, the US Department of Homeland Security, and the companies sending the goods.
Smaller companies could easily utilize the same technology.
“Imagine a grocery store where inventories are getting low,” Ellas says. “Smart containers holding the goods could be programmed to inform a wholesaler that they need to be restocked.
The wholesaler would contact a trucking company to pick up the goods and deliver them to the retailer. Each step would be recorded and payments made via a blockchain because all would be verified.”
Here are some tips on making progress with blockchain technology:
Do your homework.
While blockchain has a lot of promise, there are also drawbacks you need to be aware of. Thus, you should know as much as possible before you jump on the bandwagon.
Blockchain for Dummies (which is a free pdf) and The Business Blockchain books are great places to get started.
Ask why.
Before you spend the time learning a new blockchain system, make sure you’re adding the tech for the right reasons.
In general, your reason should be to save time and money or otherwise make your business life easier and faster.
Start small.
Pick one app and get used to it before you go all in and sign up for everything out there. This will allow you to concentrate your efforts and get used to just one system instead of trying to do it all at once.
Final Words
Companies are always getting bombarded with “hot new tech” that’s going to change their game.
Some of this technology ends up being useful, but some of it ends up wasting a lot of time, energy, and resources. Deciding which tech will work with your business can feel like a full-time job.
Blockchain has been touted as one of those technologies that’s going to solve all your problems. You might even have heard it praised as a solution to any number of business problems, both large and small.
However, it’s also been vilified—and it remains a mystery to many business owners.
But in the end, there are some realistic practical applications for small to medium business owners. You just need to do your research and decide which ones will work best for your situation.
Despite all the potential, Ellas says we’re still in the early days of blockchain technology. Three key issues need to be resolved before it goes mainstream:
Energy Use: verifying the transactions to add to a blockchain is energy-intensive because it takes a lot of computer power to perform all those calculations, solving equations by trial and error.
Some technology firms are working on ways to keep the security high but lower the energy cost.
Processing Speed: the massive number of computations also slows the processing speed. Researchers are now working on ways to simplify calculations and increase the number of transactions performed.
Interoperability Across Blockchains: the many blockchains (public and private) currently don’t “talk” to one another much. The next generation of blockchain technology may correct this problem.
“Blockchain,” says Tanvir Zafar of B2C, “is a fast-moving train that has bitcoin as its backbone.”
Many businesses have already incorporated blockchain into their working scheme and are recording exponential growth.
From contracts and secure transactions to digital exchange and smart contracts, blockchain has a lot to offer the small business owner.
The main advantage of incorporating blockchain into your small or medium business is the savings of time and money it can afford you.
Although there are numerous benefits of incorporating blockchain, you should do your research and figure out which blockchain application best suits your business.
You’re getting in on the ground floor here, and if you pick the right platform, you can only go up!