How Blockchain will Improve E-Commerce
Although blockchain has been around for a decade, it’s only recently that it found its way into the mainstream, all thanks to the massive hype around bitcoin and its band of cryptocurrencies. That said, the tech community is coming to terms with its potential, not just as a more efficient way to make payments but also as an innovation that can provide solutions to numerous shortcomings in business.
Since e-commerce is currently the fastest growing business sector, it’s not surprising that developers in the blockchain space are considering it the pad that will launch the technology to global domination. Moreover, the realization that blockchain could be the biggest thing for e-commerce since the Internet is already dawning upon giant players like Alibaba and Walmart, who are all channeling millions of dollars into Blockchain R&D.
So, are you among the many online business owners wondering how the ongoing blockchain revolution will impact e-commerce? Read on for a breakdown of what is going on in the industry, and what to expect in the coming years.
What Is Blockchain Technology
A blockchain is a distributed digital ledger that records and stores transactions in permanent blocks of data. These blocks are protected by complex cryptographic algorithms which are impossible to crack unless one has the key that gives them access to the data.
Because the ledger records every bit of history surrounding a transaction, dealings made over a blockchain are always verifiable. Moreover, exact copies of the blocks are distributed among all members of the chain, and no change can be made without a majority review and approval.
The structure of blockchain networks makes them trustworthy, transparent, secure, and most importantly, self-managing. While traditional transactions require a third-party to process and verify trades, blockchain makes it possible for buyers and sellers to transact directly on an automated, independent system.
Smart Contracts in E-Commerce
Cryptocurrencies may have significantly disrupted the financial industry, but if there’s a blockchain application that is set to take over the business world holistically, it’s smart contracts.
Smart contacts are blockchain-based agreements that execute automatically when all the parties involved fulfill the terms required. These agreements can entail anything, from shopping to transferring data.
For e-commerce, smart contracts can be programmed to execute only when both the buyer and the seller have met the obligations of the deal. When a shopper checks out on a merchant’s website, the funds paid would be held in the smart contract, after which the seller would proceed to approve the transfer of ownership of the product and link the contract to the shipping company involved. Only then would the smart contract release the money to the merchant’s wallet.
Of course, this example describes just one among numerous potential applications of smart contracts. The same system can be used to manage a wide variety of organizational processes, including supply chains, company accounts, even government projects, etc. And when you consider platforms such as DAPP BUILDER, where uses can easily create smart contracts, this gets even more exciting.
Let’s now have a look at how the blockchain technology can impact the e-Commerce sector.
· Cheaper, Faster Payment Processing with Blockchain
Despite great payment services like PayPal and Venmo, online transactions are still a long way from perfect. The existence of an intermediary between two transacting parties results in high transaction costs, not to mention the time and resources wasted in resolving disputes.
By removing third-parties and automating e-commerce processes, blockchain promises easy, fast and secure transactions for all online interactions. In addition to eliminating the costly infrastructure used to manage payments, smart contracts can establish mutual trust between buyers and sellers, and therefore mitigate the need to give intermediaries personal and financially sensitive information to be allowed to use payment platforms that are not in their users’ control.
· A Decentralized Online Market
Blockchain provides a secure system for individuals and businesses to interact directly through services that are not managed by any one central party or company. In a blockchain-powered e-commerce platform, the users would set all rules that govern transactions themselves. Even the developers wouldn’t be able to upgrade the platform without consensual permission from the community.
Although you may find it hard to visualize a marketplace that isn’t regulated by behind-the-scenes corporations, blockchain experts are hard at work developing decentralized online markets. One of these emerging platforms is BitBoost, a blockchain-based marketplace that gives online buyers and sellers the change to transact directly, without any interference or monitoring from big companies or governments. As blockchain continues to take hold of e-commerce, more of these micro-marketplaces will likely emerge, from which customers will choose their favorites.
· Verifiable Supply Chains
Current e-commerce platforms have made business more straightforward for merchants and shoppers, but they’ve done little to streamline the shipping process. Packages still go through dozens of hands before they get to their intended destination. Furthermore, every handover involves the clearing of documents and multiple check-ins and check-outs in partner IT-systems, all of which make the process costly, cumbersome, inefficient and prone to errors.
As a decentralized peer-to-peer e-commerce platform, blockchain provides a reliable, transparent way to get items across borders. All parties along a supply chain would have a copy of the same ledger, detailing the origins and movement of the product as it travels to the buyer. Because everyone would no longer need to establish and manage their own databases, shipping costs will significantly decrease, and errors due to inconsistent record keeping will be eliminated. Additionally, sellers will be able to monitor the delivery of their products in real time, and as members of the same network, buyers will get access to full information about the items they buy.
· Safer Transactions
The integrity of e-commerce relies entirely on its ability to guarantee the security of funds and sensitive information on trading platforms. As it stands, however, efforts to give buyers and sellers maximum protection are exceedingly hampered by the fact that data is stored and managed by central parties, whose servers can be compromised anytime.
The distributed nature of blockchain makes it a much more secure way to store e-commerce data than current centralized structures. Because every node on the chain has the same record, it’s virtually impossible for cybercriminals to bring down the entire network. Industry players that establish blockchain-based e-commerce platforms will, therefore, spend a lot less on keeping merchant and customer data safe, and more on refining end-user experiences.
· Efficient Business Management
If you own an established online business, you can reap the benefits of blockchain in a myriad of ways. In addition to streamlining the way you interact with your customers and sell your products, blockchain applications can automate your accounting, inventory control, budgeting and payroll processes, minimizing paperwork, management costs, and errors.
For example, if you have several employees, you can delegate the task of processing salaries and commissions to a smart contract that automatically executes depending on set terms and targets. Such a step can significantly reduce the cost of running your business.
Blockchain and the Future of E-Commerce
Blockchain still has a long way to go before it completely replaces existing systems and structures, but the advantages it presents to the business world are impossible to ignore. Thanks to blockchain-based cryptos, people can send money directly to anywhere in the world instantly and cheaply, without requiring the services of intermediaries.
Cryptocurrencies only scratch the surface of possibilities that blockchain offers to e-commerce. A decentralized market can free the sector from the control of big business, while keeping records in a distributed ledger could lead to a drastic decrease in transaction fees. Customers would feel safe to share personal information with sellers in a blockchain network, and online merchants will have an easier time managing their business with blockchain applications.
Therefore, it is seemingly inevitable that the technology will be an integral part of e-commerce in the coming years. The benefits that it brings could soon put the players that adopt it in the lead, and those ignoring or undermining it struggling to stay in business.
If you intend to position your online enterprise in a competitive spot for the future, the time to start looking into blockchain is now.
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