02 Jan The Blockchain and SMEs – Preparation and Security
In this post, part two of our blockchain series, we’re looking at the creative new business applications the tech might deliver, how you can prepare for it and how to ensure it’s used securely.
Preparing your business for the blockchain
More than the 100,000 businesses already accept Bitcoin, and experts predict a boom in the use of digital currencies. Some even predict the tech underpinning crypto-currencies, the blockchain, may prove even more revolutionary than the internet itself, revealing just how profound the sea change in the way we see money might be.
As we explained in our first post on the subject, the blockchain is simply a public ledger shared between countless different parties, which records anonymous transactions. As such it’s strictly person-to-person, and it means that the traditional middle men like banks and government bodies are shut out of the fund transfer process. This means, in turn, that money can be transferred a lot more quickly, at a much lower cost. And because the ‘coins’ involved are digital, it’s impossible to alter them, erase them or tamper with them, resulting in super-secure payments.
Businesses are also using blockchain tech to create something called smart contracts, which prove the ownership of intellectual property beyond doubt. And some are beginning to harness the technology to provide customers with coupons.
The blockchain lowers your transaction fees
One of the biggest small business advantages of the tech is to lower transaction fees, which tend to fall at around 2-3%, not a lot for big blue chips and super-brands but potentially crippling for an SME since the fees soon add up and can even damage cash flow. The blockchain reduces and often gets rid of these fees altogether. If fees do apply they rarely exceed 1%, simply because you’ve removed the middle man from the transaction.
Cross-border transactions are processed instantly
It takes 3-5 days to process a cross-border payment thanks to the old-school ways financial institutions transfer funds from one account to another. This can also wreck your cashflow, but because the blockchain removes third parties from the process you can get paid in seconds. Because we live in a global marketplace, it’s extremely relevant.
Blockchain, being decentralised, is a genuine international currency, so makes entering the global marketplace a whole lot easier and cheaper. And, perhaps unexpectedly, while it’s used to create digital currencies it operates more like cash than a credit card, with transactions that cannot be contested because they’re pre-agreed by both parties. Because you have to authorise and verify transactions, you won’t see many – if any – disputes with customers.
Can my SME use Bitcoin?
On the one hand Bitcoin’s early business adopters are thriving. On the other hand blockchain is both unregulated and unstable. But look where financial regulation got us in 2008, mired deep in the worst recession in living memory and left us wondering exactly why we bothered with regulators in the first place.
Do you understand exactly how the internet works? Probably not. But you still use it every day in all sorts of ways. The same goes for the blockchain. You don’t have to understand its working principles to benefit, but it does help to get a basic understanding under your belt. Your first job is to choose a Bitcoin wallet you can trust, one with some longevity and reputation behind it. It only takes a few minutes to set one up, after which you can accept Bitcoin from your website. You can also pay suppliers in Bitcoin if they accept it.
How to use the blockchain securely?
Blockchain data can’t be overwritten and it’s almost impossible to manipulate the data held on it. It’s telling that the US government believes the tech could be used as a cybersecurity shield to dramatically improve security across the nation’s military forces, prevent hacks and tampering, and stop cyber-hijacking of aircraft, satellites and military vehicles. The thing is, any changes to the blockchain database are instantly sent to all users, creating a super-secure record. This means that even if some of the chain’s users get hacked, the database remains safe.
All this makes the blockchain tamper-proof, which is why plenty of cutting-edge financial services giants are already using the technology to reduce their costs without compromising on security. As more businesses adopt crypto-currencies, even better security shields are being created and deeper investigations into their uses carried out.
Fast-increasing mass adoption means tougher boundaries and even higher levels of security protection. The security and safety of the mechanism is not a concern for them, nor should it be for you. So far it looks like the opportunity far outweighs the risk.