19 Dec What Does Blockchain Tech Mean for SMEs?
Roll back time a few short years to 2008 and the only crypto-currency in town was Bitcoin, a unique digital currency ‘mined’ using a unique tech called the blockchain with supply strictly limited to 21 million Bitcoins.
Today there are more than 1300 new crypto-currencies available to invest in, everything from ‘coins’ allied to specific industries, like the legal cannabis industry that’s fast springing up all over the USA, to general coins mined with no specific focus in mind.
Etherium is the second biggest crypto-currency, and it harnesses a very slightly different version of blockchain tech. Then there’s Dash and Zcash, Ripple, Litecoin, Monero, The Bottom Line and many, many more. But so far Bitcoin remains at the top of the heap.
During the past three months Bitcoin values have soared. Earlier this year experts predicted that just one Bitcoin would be worth ten thousand US dollars by Xmas 2017, but the currency has already far outstripped that prediction. News items broadcast in the last few weeks have brought Bitcoin to the general public’s consciousness for the first time, investors are buying them like hot cakes and more than 100,000 savvy real-world retailers around the globe have started offering Bitcoin payment in-store and online.
It looks a lot like a brave new world is emerging. So what is blockchain tech, can it be used within any type of SME, if so how can you prepare for its implementation, and how can you ensure you use it securely? Here’s part one of our two-part series of posts about the blockchain.
What is the blockchain?
According to Wikipedia, “A blockchain is a decentralized and distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.” In other words it’s an un-corruptible digital ledger of economic transactions that can be programmed to record financial transactions as well as virtually anything else of value. This means it is inherently secure, and it also means the coins circumvent the world’s traditional banking and financial systems completely, leaving them out in the cold.
Data held on a blockchain takes the form of a shared and constantly reconciled database. There isn’t a centralised version of the data for hackers to mess with, it’s hosted by literally millions of computers at the same time. Because it stores blocks of identical information over the network, the blockchain can’t be controlled by a single entity and also has no single point of failure. As such it comes with the highest degree of accountability. Nothing can happen without the consent of the parties involved: no missed transactions, no human or machine errors, and all transactions are recorded not just on a main register but also on a connected system of interconnected registers featuring an incredibly secure validation mechanism.
Can SMEs use blockchain tech?
Financial services is the obvious sector for using the tech. That’s why the World Bank estimates that more than $430 billion worth of crypto-money transfers were sent in 2015 alone. The customers of companies like Uber and AirBnB, which operate in the sharing economy, can also benefit. Instead of users having to rely on Uber as an intermediary, for example, blockchain-led peer-to-peer payments open the door to direct interaction between customers and businesses, ultimately creating a genuinely decentralised sharing economy.
Take OpenBazaar, which harnesses the blockchain to create a peer-to-peer eBay. You just download the app to your device to buy from OpenBazzar vendors without having to pay transaction fees. Interestingly, in this kind of landscape where there’s a ‘no rules’ ethos, a person’s individual reputation will become even more important than it is right now on eBay.
Start-ups are using crypto-currencies to generate funding. And this kind of distributed database tech is set to deliver real transparency to elections and other polls. Corporate governance is set to change too. One app, called Boardroom, lets business decision-making take place on the blockchain, which means company governance itself is suddenly fully transparent and verifiable, whether it means managing digital assets, equity or information. And distributed ledgers let consumers check that the marketing back stories behind the stuff we buy is genuine, thanks to transparent blockchain-based date and location time-stamping. Ethical diamonds are a good example, where the location and time stamps correspond with a product number.
There’s also a copyright benefit, where smart contracts can be used to protect copyright and automate the sale of creative work on the web, totally eliminating the risk of unauthorised use and re-distribution. Blockchain tech even makes it possible to automate remote systems via the Internet of Things, and might eventually help us predict the outcome of real-world events thanks to its many ‘wisdom of the crowd’ applications.
Blockchain may ultimately help businesses with anti-money laundering and ‘know your customer’ systems, data management, land title registration, identity management and stock trading. By giving internet users the tools they need to authenticate digital information, a raft of new business applications will be released. But how do you know it’s secure, and how do you prepare to accept blockchain payment? We’ll talk about that next time, in part two of our blockchain series.
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