Ways Small Businesses Could Leverage Blockchain Technology
For the average person, the concept of blockchain is usually misunderstood. What often comes to mind when blockchain is mentioned is cryptocurrency; its creation and exchange. But there’s so much more to the blockchain technology only very few have been able to grasp it, and even fewer understand the numerous applications of the nascent technology. Unfortunately, I recently discovered via some engagement with business owners on blockchain, that more than 90% of them fall into the latter.
Hence, I began exploring the plausible ways SMEs could leverage the technology in their ventures. But it’s best to first shed a better light on the technology itself before digging into its possibilities and implications for small businesses.
What is Blockchain?
Blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography (a technology that prevents third parties or the public from reading private messages). Each block typically contains a cryptographic hash (a function that enables private messages to be encoded ) of the previous block, a timestamp, and transaction data.
How it works
When a transaction takes place, a single block on a chain is created. These blocks are secured as transactions, which added to the chain continues to grow. Transactions are verified by third parties (miners) to make sure they are valid and correct. It is essentially a way to cut out the middleman of centralised ledgers presently used today
The three main processes of blockchain transactions are:
- Transaction Creation: when transaction like a customer payment is made, the transaction is recorded across several decentralised ledgers.
- Transaction Verification: Once the transaction is created and recorded, the multiple ledgers the transaction was recorded on are verified. The secure nature of the verification process requires a minimum of 51 percent match across all ledgers.
- Transaction Enforcement: After verification, the terms of the transaction are enforced. This could be a hold of funds until the agreed terms of the contract are satisfied.
The blockchain technology is a lot more than the cryptocurrency it was initially designed to support. Although the demand for bitcoin is enormous, the application of blockchain is much bigger. Some of the many importance of blockchain application includes its use in accounting, quality assurance, supply chain management, stock exchange, energy supply and voting.
Exploration angles for SMEs
On a small scale, there are many ways businesses could begin leveraging the blockchain technology. We’d examine a few below:
Security: this is one of the strongest points of the blockchain technology. Once a transaction is recorded on the blockchain, it cannot be changed thanks to a cryptography which enables tighter security on each block. There is no telling the benefit of a secured transaction to businesses which are susceptible to fraudulent activities. Having a cost-efficient security to safeguard your transaction records will protect the business from possible damage.
Feedback utilisation: the transparency of data allows for a fast audit and efficiency in the pool of feedback is a blockchain technology that allows information regarding installation, maintenance and decommissioning which are relevant factors significant to the growth of any business.
Transparency of data and Quality check: these transactions are recorded, therefore anyone can access activity and certain transaction data. The only thing that can’t be accessed is the details of the parties involved in the transactions. Since there is transparency of data, then it can be easily audited.
Cost reduction: Blockchain can help with the reduction of costs by eliminating certain activities that require manual labour including middlemen and third-party. By enabling a verification system with blockchain, SMEs could run their operations on a more cost-efficient scale. Also, a tight verification process will eliminate, the possibility of spending money twice on the same transaction.
Smart accounting: SMEs can leverage the blockchain feature of sending and receiving payments. It offers a speedy payout transactions, highly secured money transfers, with no location limitation. You can do transactions all over the world without fear of fraud and security breach.
Accelerated transaction: With blockchain, it takes as little as 20 seconds for a transaction to be verified by the network. Immediately the transaction is done, it is recorded in real time. This process is way faster than manual verification which usually takes days.
Increased profitability: SMEs could create a faster and more secure way of distributing products as well as monitor the flow of supply and distribution, thereby ensuring smoother transactions. This results in a higher profit margin.
Although blockchain is still waiting for a breakthrough that will trust it to the mainstream, you should join the early adopters and not. If small businesses choose to play it safe, they’d have to wait until the new system is fully accepted and recognised across several industries. But I’m sure you wouldn’t want your business to be behind or late in adopting technological advancements.