Blockchain and E-commerce

Multiple applications of blockchain technology in the future of e-commerce

Exploding into popular discourse recently, it seems that everyone is talking about blockchain.

More importantly, it seems that everyone is trying to get involved and secure themselves a slice of the pie. A lot of buzzwords are flying around, most people can make a vague connection to cryptocurrency, but a lot of people are still confused: What exactly is blockchain, and what does it have to do with e-commerce?

What is blockchain?

Originally, blockchain was developed as a method of timestamping digital documents in such a way that manipulating this information would be awfully difficult. In short, blockchain originated as a means for digital security.

In simple terms, imagine a game of telephone, except in our version, there is no communication, but each person has the message of the previous person clearly written down. This creates a trustworthy chain of information: even though each individual only knows their information per se, they can easily reference the information of the previous person.

Now imagine you approach a person in the chain and alter the message they receive. Whatever your intentions might be, the evidence of tampering is jarringly clear. After a very specific point in the chain, all of the individuals start to receive a different message. This means that if you try to alter the message at any point in the chain, it’ll be impossible to do so without being noticed.

Now, consider that the message each individual holds is information about transactions, and call each individual a block — now we have a blockchain.

This ledger of backward-referencing structures of data gives us a sturdy and secure means of keeping track of transactions due to its construction and one more factor: decentralization.

Instead of having this whole structure running in one place, everyone who wishes to partake receives a copy of the chain, meaning that any changes made to the chain can be observed in real-time by a network of individuals.

Fast forward some time and it was realized that this method of securing data transactions was a great way to make cryptocurrency more robust, and thus Bitcoin became the first cryptocurrency to harness the blockchain power.

The buzz around Bitcoin, if you’ll recall, is that transactions are so secure that Bitcoins cannot be replicated despite having any tangible representation.

Bitcoin is a testament to blockchain’s incredibly secure method of recording transactions and assets, but that leads us to our next question: how does this help us in e-commerce?

Let’s take a look at some of the exciting applications in e-commerce that blockchain has to offer.

Cost optimization

Remember the point about decentralization? The peer-to-peer network blockchain runs on has an important implication for transactions. These happen between peers on a one-to-one basis, no middleman.

Usually, with transactions, both individuals and brands have to take into account that banks and other financial institutions will be charging a fee for facilitating the exchange. With blockchain, that transaction fee is practically negligible, making it the obvious choice on a cost scale.

Not only are transactions significantly cheaper, but they’re also faster. Blockchain is usually instantaneous, which would make waiting hours or even days for transactions to clear a thing of the past.

This can be incredibly useful for brands that could build customer confidence and loyalty by being able to ship out products almost instantly.

Security

We already mentioned how this technology makes this data storage and transfer incredibly secure, which has immediate benefits in e-commerce. One of the biggest hits to credibility a brand can have is sub-par security, especially when it comes to handling sensitive customer data.

It seems not so long ago that Apple was having its brand crisis for their infamous privacy backdoor. While that multi-billion-dollar brand has managed to bounce back and rebrand itself as being security-forward, smaller brands probably can’t afford to take that PR hit.

The robust asymmetric encryption paired with the hash system and decentralization of blockchain makes its trustworthy security a warm welcome to anyone worried about handling sensitive information.

Whether it’s private information or product data, having a good and secure handle on the data you manage is no trivial task.

Supply chain and transparency

A steady trend in successful e-commerce brands and marketing is being transparent at every step of your process. Consumers want to trust the brands they commit to, and trust comes with transparency. Luckily, blockchain can help here too.

The decentralization of the chain means that it’s a public record, and the chain being quite difficult to manipulate discretely means that that public record hasn’t been doctored. Therefore, customers are able to examine the details of the supply chain and see for themselves whether or not they agree with the process.

While consumers aren’t likely to go to this level of scrutiny, what blockchain brings to the table here is, if nothing else, transparency. This can help with brand image and, of course, customer loyalty.

These are just a few examples of the benefits that blockchain can bring to e-commerce but, truthfully, the benefits are practically limitless. Blockchain is one of the most impressive advances in technology in modern history, and we’ve only just scratched the surface.