Blockchain technology has become something of a buzzword, first in cryptocurrency circles, but quickly in the world of business, too. There’s no doubt it’s a hot topic, but has the hype left you wondering what it’s all about? We take a look at what blockchain is, how it works, and the surprising ways it could benefit your business.
What is blockchain
Blockchain is a ledger that is publicly accessible and inalterable. It was used first to trade the cryptocurrency bitcoin but has since been co-opted for use in trading platforms and businesses around the world. It offers unparalleled security and transparency. While the benefits of using blockchain are still being discovered, it’s a good idea to have a brief understanding of how it works.
An entity (person or business) will request a transaction (a contract or invoice, for example). The request will be sent to a decentralised network of computers which use algorithms to verify the request. Once the request is verified it is stored as part of a ‘block’ of data and added to the blockchain. The transaction data is only accessible by those holding both the public key (the ‘address’ of the data) and the private key (the key that allows access to view that data). These keys are randomly generated strings of numbers and must be kept securely.
Much like driving a car or using a computer, you don’t need to understand the specifics of how the technology works in order to use it to great benefit. There are many user-friendly guides online that explain the blockchain process in more detail, if you’re curious. Now let’s look at how you can use the blockchain to great effect within your business today.
Security and Privacy
Using blockchain can reduce overall costs for a small business. After budgetary considerations, data security and privacy are rightly the next most pressing concern. Because blockchain is decentralised and anonymised (using cryptography and private and public keys), identifying data can be completely left out of transactions. This alleviates the security burden on small businesses and gives comfort to security-wise clientele. In a post-GDPR world, this burden reduction can be a significant reassurance for both sides of the trading arena. The handling on sensitive and secure documents, along with everyday trade can be conducted without bearing the cost of heavily centralised servers. When bandwidth is drawn from local and decentralised providers, the risk of a targeted data breach is drastically reduced. Instead of the need to layer protections to defend company servers, only appropriate cryptographic standards are needed – a far simpler and more cost-effective solution overall.
There are many initial costs related to establishing a new business. While naturally many of these costs are incurred through scaling, some outlays are required from the outset. Technical infrastructure, accounting and inventory packages must be paid for regardless of the initial size required. This often necessitates purchasing a CMS system along with other costly software. Small businesses often operate at a loss in the early days, which means that late payments or shipping delays can be the difference between success and failure. More established businesses can absorb these costs of course, but smaller businesses are certainly more vulnerable to cash flow issues. Instead of creating expensive vulnerabilities through large but necessary outlays, small businesses can look to the blockchain to host smart contracts between them and their clients, customers and suppliers. When all parties create transparent and permanent records on the blockchain, there is a far higher level of accountability on both sides. This can be deployed for insurance purposes, payroll, inventory and other transaction-based relationships. Smart contracts on the blockchain eliminate the need for many software management systems and are often easier to verify. Any issues can be followed up and arbitrated in a simple manner, as all details are irreversibly recorded and accessible. The elimination of these overheads and the increased transparency should see a significant reduction in costs, which can be passed onto consumers in the form of more competitive pricing models. Smart contracts can be easily managed through third party apps. While the learning curve may be steep initially due to the nascent nature of the technology, the savings and future-proofing benefits are worth the effort. Oftentimes it is easier to find an IT support company to assist with the implementation of blockchain for your business.
As mentioned above, small businesses are often sensitive to cash flow, particularly in the pre-launch and launch periods. In the past, entrepreneurs had to secure business loans, which often required repayment long before income was being generated. Venture capital is a commonly sought alternative, whereby business plans are promoted to conglomerates that try to invest in the next big thing. This avenue also comes with risk, and often a loss of control in the direction of the business as it grows. Blockchain offers a new potential stream of income. Cryptocurrencies have been making the news for some time now, and there’s no reason why small businesses shouldn’t investigate to see if this system can work in their favour. New businesses can offer ‘tokens’ or ‘coins’ at an Initial Coin Offering, much like a traditional company may offer shares when opening up to investors. These cryptocurrencies are purchased with fiat currency by market speculators, who hope the value of the tokens will rise over time. What this means in the short term is that small businesses can access a large injection of cash, with relatively low risk and no interference in the direction of the business. This style of fundraising has been used very successfully by businesses across many sectors. Like any venture related to blockchain technology, there is some background establishment time and cost involved, but the benefits have the potential to change the trajectory of the business with very few strings attached.
About EC-MSP, your IT support partner
EC-MSP are one of the most trusted IT support providers in London. If you would like more help advice and support to understand how blockchain technology could be integrated into your business to reduce overheads and increase earnings, or any other IT support issues, contact us today to see how we can help.