FAB Use Cases: E-Commerce

In this series, we tackle different potential use cases of Fast Access Blockchain and how we can build a better world through our solutions.

New Applications, New Business Models, New Possibilities

Applications which are an ideal fit for blockchain technology have the following characteristics:

  • Involve multiple organizations
  • Where trust is key, or trust is presently severely eroded
  • Proof is key
  • Involve exchange/transfer of assets or value
  • Involve data sharing or presently suffers from silo’d data
  • Benefit from micro transactions/streaming
  • Have opportunities for new business models, products or services

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While E-commerce has come a long way in the last decade, as buyers and sellers have become more sophisticated, people see some compelling benefits that blockchain technology could bring to address both long standing gripes and growing mistrust.

The first and very obvious application is to dis-intermediate marketplaces dominated by large players, especially the likes of eBay, Amazon, Alibaba, Rakuten, AirBnB, Uber and Upwork with decentralized apps (DApps) that are more open, transparent and not controlled by any one entity. Many blockchain startup projects such as BeeToken, Storiqa or OpenBazaar have already made a foray into this market as competitors to the traditional giants.

Buyers and sellers can be matched directly and transactions conducted with lower transaction costs as there is no profit collecting marketplace entity. Of course, payment intermediaries such as credit card companies and Paypal would also be eliminated along with their transaction fees, replaced by much lower transaction fees of cryptocurrency transactions and their reduced settlement times.

Today, the combination of the marketplace and payment intermediary fees means an added 7%-15% cost on top of every transaction. In addition, if the supply/delivery chain tracking is also blockchain based, the buyer can track the delivery of the product in quasi-real time and obtain greater sense of assurance and comfort regarding the time of delivery. Payment would only be released once the product is delivered.

Marketing, cash back, referral and loyalty programs are massive areas for E-Commerce businesses to thrive using blockchain networks. Firstly, loyalty points programs on the blockchain would be in real time, triggered through smart contracts and without benefit delays like regular loyalty programs. They can also be automatic, without the need of an opt-in, and done with the local cryptocurrency which is much more useful than a loyalty point as it could be spent on anything.

Another major opportunity for disruption is advertising. With a blockchain based system, customers can be paid for viewing ads, clicking links, sharing materials and even for providing their personal info for analytics. Currently, major content aggregators such as Facebook and Google take this information after customers opt into their user agreements. There are a myriad of negative consequences of major corporations having access to more personal information than some governments. Companies pay these data aggregators for access to this information. With blockchain, companies can cut out this middleman and offer their advertising funds directly to the customer.

Referral and affiliate programs would work much the same. All of the materials created by the affiliates can go on the blockchain to verify accuracy, and ensure transparency. Every person sent to your site, or for each purchase coming from an affiliates link can be paid out instantly through a smart contract.

Javelin Strategy’s 2017 report on the impact of fraud on E-commerce found that fraud and fraud prevention costs on average 8% of merchants’ annual revenues, based on data from 500 merchants. To help mitigate this, protection for both the buyer and the seller can be enhanced by the use of smart contracts, that for example automatically release payment when goods are delivered.

For buyer protection, in case of defective or unsatisfactory product for example, a reverse transaction can be set up via smart contract that reverses the charge if the digital signature of buyer is received within a specified number of days. Product warranty smart contracts can also be set up in a similar fashion. For disputes, a smart contract can be set up that reverses the charge if the signature of an agreed upon 3rd party arbitrator and the signature of the buyer or seller is received within x days. Of course, payment via Bitcoin or other secure cryptocurrency means that sensitive credit card information does not have to be sent over the internet or stored on merchant’s computer databases, becoming a big honeypot for malicious cyber-hackers. (The public addresses used for cryptocurrency cannot be used to steal funds.)

As selling online has been made extremely easy, the problem of counterfeit and low quality goods has exploded. For products where this is more of a concern, blockchain technology can be easily applied to guarantee authenticity of products with traceability back to the original manufacturer, via secure digital signature. This digital signature can be provided to the buyer before purchasing for them to independently verify the authenticity of product.

The problem of low quality goods can be largely mitigated by improving the trustworthiness of reputation reporting. While buyer ratings, reviews, feedback and comments are available on just about every e-commerce site, it is still difficult for potential buyers to trust this, as they may be manufactured data from fake profiles and not real customers. How the data may be collated or selectively filtered by the marketplace entity under the hood is hidden from customers. Using an open, blockchain based application, one can imagine how ratings, reviews, feedback and comments can be verifiable by potential buyers using secure digital signatures to trace back to actually completed purchase transactions. This would mean a whole new different level of openness, transparency and trust that is not available to us when there is a profit-motivated organization controlling the marketplace.

Taking this one step further, if all transactions are transparent (with buyers’ personally identifiable information removed to protect privacy), buyers can independently verify seller’s on-time delivery record, popularity, etc. and sellers can run analytics on the data to more quickly respond to changes in market demand.

The payment of manufacturers’ rebates can also be made immediate and automated on the DApp platform rather than waiting for the rebate to arrive in the mail after 4–6 weeks, since transparent transaction data is available as proof of purchase to manufacturers’ automatic software agents online. We are all increasingly wary of how E-commerce giants like eBay and Amazon collect and use our browsing and purchase habit data for their own gain, and invading our privacy, so the paradigm of a completely open and transparent marketplace that is not controlled by any one entity, especially one that is a for profit entity, is extremely appealing.

Written By: Ken Tang and Eugene Cofie

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