As you have watched the rise of cryptocurrency over the last few years, you’ve probably heard the term “blockchain” in the news and casual conversations. While many associate the blockchain with cryptocurrency exclusively, the technology itself poses many benefits and unique shifts in the way even small businesses will operate in the very near future. Let’s take a look at a few of the tech trends harnessing the power of blockchain and how it can affect even small and medium-sized businesses.
In case you aren’t a blockchain expert or need a refresher, here’s a brief overview of blockchain in simple, non-technical terms.
The blockchain is essentially a way that people or companies can create and verify transactions. With this system, they can also enforce these transactions without an intermediary, making this a genuinely decentralized monetary system. Whenever a transaction such as exchange of money, property or anything that requires a contract is made, it is recorded in the public ledger.
The blockchain is made up of data blocks. This collection of blocks is ever-expanding, and each of them hold information about transactions made within the network. For example, if you were to purchase a truck, the information about the purchase would be stored on a central computer at the DMV.
With the blockchain, however, that information is split up amongst all of the blocks on the chain. No single party has control over this information, which makes the ledger truly decentralized, and why it is so trusted amongst users.
So, how is this information kept secure? This is where cryptography enters the equation. Cryptography is a mathematical method or key that is not dissimilar to the protection your favorite online store uses to protect your credit card information.
There are typically two keys: one that you’ll have that ensures that only you can make a blockchain entry involving your personal assets, and another that a different user uses to confirm your identity as the owner of the assets.
Another important concept of the blockchain you should know about is hashing. Hashing is the method used to reduce long strings of data into manageable characters. These random characters are unique, and if you were to change only one of the letters, you would have a completely different hash. It is impossible to move backward to find the original data from a hash without the key. Hashes are linked together throughout the blockchain and whenever a change is made, all of the blocks after the hash are alerted.
If you wanted to lock down a single block on the blockchain so no one else could change it, you would need to look into mining. Mining is the process of having a computer solve complicated mathematical puzzles to verify transactions on the blockchain.
For example, if you or another user were to announce a transaction to the blockchain network, computers on the network will fire up and work to solve these equations. This verifies the transaction and ensures that the same assets aren’t used more than once.
Many think that the blockchain is only useful if you plan to create or exchange crypto, but that’s not the only benefit. The blockchain can improve your small business’ security, privacy, efficiency, and more.
The blockchain introduces a smart contract for users that not only defines the rules of the agreement but can also enforce unbreakable obligations and terms of the deal. This type of automated control can help small business owners streamline their contracts and save on transaction costs. They are still relatively new to most small businesses but have the potential to change the way businesses invoice, pay bills, handle inventory, and more.
As of now, the primary method that small businesses use blockchain technology in the form of accepting payments. Specifically, many companies are starting to use the technology to receive cryptocurrency payments from customers as a more secure and inexpensive option.
Also, businesses can use the blockchain to pay vendors and suppliers with crypto, but this isn’t nearly as common. This is still a new payment method, but the reduced transaction fees and increased efficiency of this method are expected to attract more small businesses in coming years.
This benefit is one of the few non-monetary uses that businesses are using the blockchain for but has the potential to increase your company’s security. With this method, it is possible to code an individual’s identifying factors directly onto the blockchain which serves a variety of purposes.
For one, you can use this to verify other parties in a smart contract. If you offer premium content on your website, you can set this up to verify the person before they can move onto your premium website content. This helps ensure that your premium goods are kept safe and only for paying customers.
There are many other possibilities with this technology, but depending on the format of your business, you could formulate new, and unique ways to keep your information and customers safe.
In the old days, if you wanted to fund a new business venture, you needed to go to a bank or work with a venture capitalist. With the blockchain, a new funding method known as Initial Coin Offering (ICO) is shifting companies’ strategies.
An ICO is essentially a lucrative way for companies to crowdsource funding through cryptocurrency. Companies will create a unique crypto with their name on an existing platform like Bitcoin or Ethereum. Then, investors will buy the coin with hopes of making their investment back with returns of more than 1000% in many cases. The most appealing factor for businesses is the fact they don’t need to give up equity or future revenues with this method.
This method is unique but can be risky in many cases. Depending on your business’ circumstances and how attractive it is to investors, this could either be exactly what you need to fund your new venture or an unnecessary risk.
How do you think that the blockchain could change your business? This is still a relatively new technology and nothing before it has offered the same unique benefits. It remains to be seen if it can change the way small businesses operate, but the potential is limitless.
