Blockchain technology, the new kid on the block, seems to slowly regain its foothold after Bitcoin (the world’s most popular cryptocurrency) crashed in 2017. In fact, its business value-add is expected to go beyond $3.1 trillion by 2030. Initial friction aside, the many applications of this technology prove that blockchain outgrew its exclusive financial tool usage and is definitely here to stay.
If anything, it even resembles a familiar pattern. When the internet appeared almost three decades ago and information was finally democratized, businesses that chose to adopt (and utilize) the e-commerce playbook came through successfully.
Think Amazon for example – established in the early ‘90s, the e-commerce giant has not only survived the dot.com crisis but has managed to thrive ever since.
Fast forward to today and we can see how disruption moved from a ‘rare bird’ occurrence to a way of doing business and this is particularly true with e-commerce.
Data released earlier this year, by eMarketer, indicates that digital sales reached a total of $2.304 trillion in 2017 (almost 25% above 2016’s results) with mobile commerce accounting for 58.9% of the amount. It sure looks like e-commerce is running out of space to ‘hide’ from blockchain disruption.
What is it? – a data structure that represents a financial ledger or a transaction record, with each transaction digitally signed so that its authenticity and integrity may be guaranteed. As a result, the entire ledger and all its composing transactions are assumed to be trustworthy and intact.
Blockchain differs from other technologies by way of how it distributes the digital ledger data (a.k.a. nodes) within the infrastructure. All nodes retain copies of the authenticated ledger and they act to establish consensus on the state of a specific transaction, at any given moment.
How does it work? – when a new transaction or a modification to an existing transaction appears, a majority of blockchain nodes execute distinct algorithms in order to verify the newly submitted block. If that majority reaches a consensus on the authenticity of its history and signature, the proposed transactions block is accepted into the general ledger and a new block is added to the structured chain of existing transactions.
If the majority does not reach said consensus, the addition or modification of the ledger is not permitted. This working model is what allows blockchain to function as a distributed, shared ledger thus cancelling the need to have a central authority deciding which transactions are valid and which ones cannot be trusted.
What’s In It For You
What businesses find most appealing about blockchain is that they no longer have to pour their own resources into protecting and centralizing databases, creating a proper infrastructure or maintaining the entire system’s security. For eCommerce however, things are still a bit controversial as many players continue to lobby in favor of maintaining the existing private P2P marketplaces, despite the fact that they presume significant running costs and leave little place for improvement.
Since blockchain technology comes with straightforward payment security and transparency standards, it also doubles as a supply chain ledger thus adding to the resistance some companies show towards adoption. But this technology has clear merit and could be instrumental to solving ecommerce issues such as:
· Consumers Trust
We all love to interact and exchange information with people we trust and are consequently reluctant to engage with new individuals. The same happens with commercial transactions; no business can survive if customers place no trust in it. Today ensuring the confidentiality of private data represents a priority. This is why legislations such as CanSpam or GDPR have gained serious momentum in a very short period of time.
The blockchain technology consolidates this trust by adding layers of transparency to each transaction. Every time a purchase is made, the transaction data becomes part of the information stored within chain thus ensuring its trustworthiness. The buyer’s personal info is not public anymore but, the unique code assigned to each individual transaction, offers the means to verify and correlate the ID data in question with a future purchase.
· Costs Control
Using a blockchain driven infrastructure will help you get a better grip over operational costs and returns. Budget lines related to tracking supply chain cycles, verifying products’ sources, ensuring quality standards, monitoring product manufacturing and shipment schedules etc. become redundant.
An equally important aspect is that of payment platforms expenditure. Since transactions happen within the blockchain, middleman services (i.e. credit card transactions facilitators) are no longer necessary. With fewer fees and fewer intermediaries to include in your pricing strategy, you can come up with more attractive prices for your customers.
Additionally, the boost in operational efficiency is bound to improve the way product warranties are delivered, if such be the case. No more frustration and miscommunication of seller or service center data as all the required information already exists in storage.
Implementation is not an easy task for now, especially for ecommerce businesses which need to reconfigure their entire backend tech system to make any kind of blockchain base work. There’s still ‘uncharted territory’ to deal with and best practices have yet to cover all possibilities.
But, it’s going to be worthwhile to plan ahead and invest in specialized help – blockchain is coming and, if history is any indication, it’s the early adopters who stand to gain the most.