Is blockchain ready for retail?
When blockchain technology first surfaced, it quickly became a popular word in the business world as a bottleneck-killer across industries. Stacey Soohoo, research manager, customer insights and analysis at IDC, reported that blockchain solutions in 2018 will total around $2.1 billion. The e-newsletter CPA Insider also found that critical adoption of blockchain could happen as early as next year, while general consumer acceptance will follow by 2025.
Blockchain technology became a buzz word because of its defining characteristic: immutability. This technology takes sensitive company information and secures it on a decentralised ledger. Individual nodes on the network therefore have the same real-time access to verified and tamper-proof transactions, free from the security threat of a common server.
This does wonders for industries on three fronts:
Security
In order for a transaction to be recorded on the distributed ledger, it must be approved by the network then encrypted and linked to the previous transaction. Given that this network comprises countless nodes instead of a single information source, the stored transaction is significantly less vulnerable to hacking. This aspect of blockchain appeals most to government institutions as well as firms providing financial services that must protect sensitive customer data.
Traceability
Because a verified transaction is linked to the previous transaction, it serves as a real-time audit trail that tracks the exchanges of goods. Historical data on blockchains help to verify the authenticity of assets as well as prevent fraudulent activity as the goods are processed through multiple touchpoints on its journey to the end user.
Transparency
All nodes in the blockchain network are granted the same access to important information such as relevant documentation for transactions. Changing a single recorded transaction becomes incredibly time-consuming because of the number of nodes that must collude to confirm the change and alter all subsequent records.
How has blockchain changed the way retailers do business?
Payments
One of the most common applications of blockchain is payments. Customers can pay retailers using tokens. With this new payment mode came the use of digital wallets by retailers to receive multiple cryptocurrencies.
Resale Marketplace
Especially for high-involvement purchases, customers will want to check the authenticity of a second-hand product. Blockchain technology can trace the ownership of the product to provide more credibility to sellers.
Supply Chain Tracking
With the rise of global supply chains, blockchain has proven useful in tracking actions taken by multiple touchpoints to deliver goods from point A to point B. This paperless method saves on paper expenses, speeds up the access of information and hastens the movement of goods through customs.
The potential use cases of blockchain are boundless, but is this technology ready to scale? There are still some major roadblocks faced by all adopters of blockchain:
Energy consumption
Miners currently require 0.2% of total electricity used, but the increasing burden on processing power could require more power than the world can provide by next year.
Processing speed
Increasing users on the network is a good thing, but it also increases traffic and lengthens the processing time of transactions. Therefore, users need to wait longer to confirm their transaction and face higher costs in the process.
Privacy
Private information can be secured on the blockchain, however the open-source ledger can be accessed by all participants of the network. This inherent clash spells trouble for customers that seek the solution for privacy purposes.
Regulation
Governments have been polarized by blockchain technology and cryptocurrency, with broad international guidelines yet to be solidified. Therefore, adopters of the technology must be careful and responsible in creating their blockchain solutions.
Taking all of the above into account, it is easy to see why blockchain technology needs some more development and time to become a viable solution for industry bottlenecks. While adoption has certainly started, it has some ways to go before unlocking more sophisticated use cases.
