Don’t be mistaken by the blockchain benefits for your small business. The blockchain is an innovative way for small businesses to record a variety of ordered transactions, like the exchange of money or property without the middleman.
One common misconception about blockchain is that it is solely for cryptocurrency exchange. For instance, exchanging cryptocurrency like Bitcoins. This, however, is simply not all blockchain is useful for, especially when it comes to small businesses.
Let’s take a deeper look into how blockchain works, how small businesses can utilize it, and the benefits it can have for your bottom line.
What Exactly is the Blockchain?
Blockchain is a technology that applications can be built upon. It serves as a decentralized ledger that records, verifies, and enforces transactions between people, businesses, or a combination of the two.
Each transaction is a single block on a chain that is recorded, verified, and enforced using encryption. The long chain and its blocks are then secured over time as the chain grows. This is what sets blockchain apart from centralized ledgers financial institutions use.
Blockchain technology can be used to securely exchange property and money quickly, implement business contracts, speedily enforce those contracts, verify identities, and more.
Three Main Aspects of a Blockchain Transaction
When a transaction is being processed on the blockchain, three things happen to ensure a secure processing.
- The transaction is created: The transaction is first created by the blockchain and records it on individual decentralized ledgers. For instance, if a customer makes a $100 purchase, the amount and terms are recorded across multiple ledgers.
- The transaction is verified: After the new transaction is recorded, each individual ledger it was recorded on verifies that it is indeed a valid transaction. The information of the transaction must match a minimum of 51 percent across all ledgers.
- The transaction is enforced: Once verified, the blockchain can then enforce the transaction terms. For instance, if you purchase a service from a vendor, the terms of the agreement will be automatically enforced before money is exchanged.
How Can I Use Blockchain for My Small Business?
Presently small businesses use the blockchain to accept payments of cryptocurrency, like Bitcoins. However, the decentralized nature of blockchain can be utilized in a number of ways.
For instance, if your small business needs to verify someone’s identity you can use the blockchain. It is also very useful for contractual purposes with clients, vendors, or investors.
Three ways you can implement blockchain into your small business processes include:
Many small businesses are already using the blockchain to accept and send cryptocurrency. While cryptocurrency may be trending, you will also find it it to be a more efficient and effective form of payment processing.
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There are numerous platforms where you can set up a blockchain account to accept cryptocurrency payments from customers. In fact, you may already be using blockchain technology without knowing it. It is simply a more cost-effective and secure way to process customer, client, and vendor transactions.
Blockchain transactions are commonly known as smart contracts. Smart contracts allow your small business to operate in a safe and secure way, mitigating fraud while speeding up negotiations, as well as being more cost effective.
At the core, a smart contract is a protocol that is coded on a blockchain. It is what verifies and/or enforces the terms and agreements of a contract. This can have a big impact on your small business.
Let’s say you create a transaction for a realty purchase using the blockchain. According to the terms of the contract, cryptocurrency will be held in escrow until the seller releases the digital access key to the transaction receipt holder.
If the key access key is not set by the date detailed in the smart contract, the escrow funds will be digitally returned to the buyer. This is all done automatically and securely. The automation speeds up the sales process as well, and cuts out any middleman or financial third party.
Small businesses can use the blockchain for non-monetary purposes as well. You can use blockchain technology to verify identities of people by using coded information about someone’s identity. This verification can be used to protect digital access points on your website, like a paywall for example.
This is called, “proof of existence.” As a small business owner you can verify a customer’s identity to keep sensitive business and customer data secure. Data protection is a big deal after several corporations have had client and customer information hacked.
Blockchain Benefits for Small Businesses
There are a number of blockchain benefits for small businesses, because blockchain technology changes how business transactions are created, negotiated, recorded, verified, and enforced.
The decentralized ledger of the blockchain makes it very enticing for small businesses. It can cut out any middlemen while saving time and money. Four benefits for small businesses include:
- Lower transaction fees: When you use the blockchain there are nearly no transaction fees. This is because there are no middlemen or central governing authority over the transaction. If any fee at all, it is generally a monthly service charge for using merchant wallet accounts. That is a much better fee than the two to three percent fee credit card companies charge per transaction.
- Smart contract transparency: Each block on the blockchain is given a unique number and a key that identifies it. This keeps transparency at the forefront of every smart contract. For instance, Bitcoin transactions are all public. There are, however, cryptocurrencies, like Zcash that keep some transaction information private.
- Safe and secure transactions: In the age of hacking, safe and secure transactions and information is crucial to any small business. Each transaction on a blockchain that is verified can never be changed. Transactions are also recorded and verified across thousands of decentralized ledgers, making it impossible to alter.
- Fast transaction processing: Most blockchain transactions take less than 30 seconds, and at the very most 10 minutes. This makes each transaction not only safe and secure, but processed in real-time. This could make payroll or vendor payments more efficient.
Is Your Small Business Ready to Ride the Digital Currency Wave?
There are a number of ways you can use the blockchain to cut small business costs and time. The decentralized ledger your business transactions will be verified across makes it safer and more secure for you and your customers as well.
In fact, industries like banking, digital publishing, medical, legal, real estate, and insurance can all benefit from blockchain technology in the very near future. If you want to streamline your small business contracts and transactions, paddle out and start riding the blockchain wave.
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Author: Megan Ritter