Unless you’ve been hiding under several very large rocks for several years, you’ll have heard the term ‘blockchain’ thrown around with reckless abandon, usually in association with cryptocurrencies like Bitcoin.
Blockchain technology has been touted as revolutionary for all sorts of industries, everything from real estate to healthcare and everything in between. The world of eCommerce is no different and if even half of the hype is true, blockchain could change the way all sorts of things in online selling are done.
The most obvious thing blockchain offers eCommerce is cryptocurrency payments, but there could be a lot more utility than that.
It’s not fair to assume anyone reading knows what blockchain is and in fact, it’s probably a safer bet that you don’t! As a nascent industry that is little understood and lightly regulated, wading through the jargon and grifting for a truthful definition can be tough. Investopedia is a pretty neutral source to start with:
“A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.”
If that’s still a little bit like double Dutch to you don’t worry, you’re not alone! For an explanation in (slightly) plainer English, check out this video:
The bottom line and perhaps the simplest way to look at blockchain is as a technology that removes the need for trust. Trust is needed when carrying out any online translation, meaning the trust that Party A has the funds to pay Party B for goods or services, and trust that Party B will deliver upon payment. A third party like a bank is typically used to act as a guarantor. Blockchain eliminates the need for this and creates an environment where both parties can have full confidence in the other side.
As we all know, there’s much more to eCommerce than payments, so let’s dive into four non-crypto-related benefits of blockchain.
Fraud is a growing problem in eCommerce, just look at the data. According to Statista, global eCommerce losses to payment fraud hit US$20 billion in 2021, up from $17.5 billion the year before, an increase of more than 14%. The obvious way blockchain would help tackle this problem is via cryptocurrency payments, but it’s not practical to expect millions of customers to start using crypto for their purchases.
Luckily, there are less obvious but no less valuable ways blockchain could enhance security for eCommerce websites and therefore save them money. For one, a secure blockchain would make data breaches much less likely to happen. Blockchains are decentralised, meaning a bad actor can’t simply corrupt the data or take over the system; different versions of the data they want to corrupt are stored in plenty of other blocks.
Furthermore, blockchain technology can provide more secure storage of customer data. If a bad actor wants to do more than corrupt data and say acquire customer data, that can be devastating for a business. Some 48% of customers said they stopped using the services of an organization post-breach. Blockchain’s ability to allow for trusted identities verified by multiple trusted parties will keep your customer data very safe.
Keeping transactions secure is key to success.
How many contracts did your business sign with outside parties last month? If things are going well, the answer is probably a lot. But how long after the signing of the contract did its contents start being executed? The answer to that can often be frustratingly long. Smart contracts on the blockchain though, eliminate this problem. Let’s turn to Investopedia for another definition:
“A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.”
The key part of that is “self-executing”, meaning that if certain conditions are met, the contract will automatically perform a task. For example, say a company orders 10 laptops for new staff members and signs a smart contract with a computer wholesaler. The contract can be written to hold the funds for payment until the laptops are delivered and once they are delivered, pay the supplier in full automatically. A small thing, but something that will free up staff to do more difficult work and the prompt payment will be appreciated by the supplier.
If that still isn’t clear, check out this explainer on smart contracts:
We’ve all read enough about supply chain woes over the last two years to last a lifetime. What’s the takeaway? Well for one, COVID sucks. For another, a broken supply chain means a broken business. It’s logic a five-year-old could follow but something that seems to astound newspaper editors the world over: if a business can’t get hold of its supplies, it can’t sell. Can blockchain magically end lockdowns and shipping container blockages? No, but it can make your supply chain operate with less friction and therefore provide efficiency gains.
Say goodbye to a lot of the manual paperwork related to shipping as with blockchain, bills of lading for cargo can be recorded with complete trust and transparency for all involved parties. This will go a long way towards reducing the time and money you spend on administration regarding logistics, while also making shipments easier to track. Certificates of authenticity and best before dates also become virtually impossible to fake once put on the blockchain, so you can rest assured there’s no funny business going on with your supplies.
We’re loyalty programme evangelists here at SmartOSC, so count us in for anything that makes a loyalty programme better. Once again the decentralised nature of blockchain technology is a big boon, as it should make loyalty programmes much more frictionless for your customers. In addition, blockchain updates much faster than whatever tech you likely already use for your loyalty programme, and we all know how much happier that will make your customers.
The boffins at Deloitte also reckon it will cut your costs:
“Although blockchain incurs upfront expenses, we believe that the trade-off cost savings will be identifiable on three major levels–system management, transactional, and customer acquisition. A blockchain-based loyalty rewards program should reduce system management costs with smart contracts that report secure, tracked, transparent transactions to legacy systems, reducing costs associated with errors and fraud.”
It’s clear that blockchain isn’t a technology of the future - it’s a technology of the present.
You can also learn about our work with new technologies like blockchain at SmartOSC Fintech here.