There are many disadvantages that small businesses face when compared to their larger peers in the current business economy and atmosphere.
Despite the fact that these companies are integral to the growth of GDP and other national barriers, many of them face high barriers to entry and cannot protect themselves from factors that barely affect their larger peers. The current regulations and restrictions make it difficult and more time consuming for smaller businesses to finance, scale operations, process payments, and recruit other ancillary services.
Businesses can put blockchain’s capability to achieve autonomous and remote consensus between users to far multiple uses and purposes. It can help products and transactional services to market quickly and inexpensively and offload traditional high costs associated with security, Know your customer (KYC) protocols, data storage and other such costs. Blockchain will not only reduce costs but also allows businesses to compete on an equal playing field.
Below we take a look at some of the ways in which blockchain can benefit smaller businesses.
The primary way that small businesses can be benefited from blockchain is by accepting cryptocurrency as a form of customer payment. These form of transactions might lead to lower transactional fee and better contractual agreements.
Small businesses often work on the concept of scaling as they should. However, this strains the basic processes of invoice, inventory, and payroll that were created at the outset. Earlier, this meant that the businesses had to obtain a CRM or CMS platform but with blockchain these problems can be solved much more effectively.
Smart contracts can be used to create, check and enforce contracts between users, such as a young business’ clients, merchants, and customers. It can be used to handle invoicing, paying employees or bills, closing deals, financial contracts like startup business loans, insurance policies, etc.
An example of such a smart contract can be when purchasing a property through cryptocurrency. Property can be purchased and the transaction recorded on a blockchain where some amount of cryptocurrency is held in escrow till the seller hands over the key. When the seller sends a private access key to the buyer through a blockchain transaction within a stipulated period of time, the amount would automatically get released to the buyer. In case the seller fails to transfer the amount to the buyer, the blockchain company will refund the cryptocurrency to the buyer. In this way, smaller companies can remove the cost of middlemen from the transaction.
Smart contracts can also help small businesses achieve a consistent cash flow. Smaller companies, quite often than not, do not have the endless pockets as their enterprise peers do. In the past one year, 40% of the small businesses registered in USA, reported facing cash flow issues. Since there are less doubts about when funds will be released, companies can focus on delivering services and the cost savings can be passed on to the customers.
Another way in which blockchain could impact small businesses is by transforming the industries where contracts are prevalent. The reduced need to enforce contracts might also affect law firms, clearinghouses, title companies, etc. who might get reduced to an old fashioned way of doing things. Though this is not a pressing issue, this change is expected to occur in industries that thrive on contracts.
Blockchain’s meticulous record keeping also provides real time insights into complete supply chain data allowing retailers, manufacturers and folks involved in logistics to plan and execute their supply flawlessly. .
Ledger entries make these agreement irrefutable and non fungible, thus reducing the time that is usually spent by companies in filing, verifying, and providing legal support for such issues. Blockchain also reduces the effort that needs to be spent on customer service and arbitration due to the immutable records on blockchain. Hence, the only errors that occur on blockchain are human errors which can’t be avoided.
With blockchain, it is possible to code a business’ or individuals’ identity directly onto blockchain. The blockchain can then be used to verify the digital identity of the person before passing them on from a digital access point such as when customers hit a paywall on the website.
Young companies can take advantage of some of the earliest participants in this arena. Instead of spending on building a system on Ethereum, they can use products of companies like dApp builder that allow users to create and launch smart contract portals quickly and efficiently.
Security and Transparency
Security and complete visibility are other added advantages that blockchain can provide. A tight knit system of private and public keys underneath a layer of cryptography ensures that participants of the service can be verified by those same services without exposing their most sensitive personal, financial or identifying information.
This allows companies to avoid the risk of handling large quantities of personal data and allows users to remain in control of who should see their personal data. A small business that needs to store credit cards can verify transactions without knowing the identity of the user.
Additionally, once a transaction is recorded on blockchain, it cannot be altered. This is because a transaction is stored on multiple ledgers across multiple nodes. In order to alter a transaction, you would need to find a way to alter it followed by altering more than 50% of the ledgers in the network.
Cheaper data storage
Small businesses can also use blockchain for storing data instead of using the costlier applications such as Amazon web services or Google. Such businesses can choose to rent customized decentralized hosting space from a blockchain platform. Businesses can buy as much local space as they like which is collected from users within their closest proximity. This provides increased data integrity and a cost efficient plan as well.
Another advantage of blockchain is to ensure security of your system. Web based attacks cost companies a lot of time and precious resources. Security is often the most neglected field and yet the most formidable challenge that small companies face. According to some studies, more than 14 million US companies are at risk of being attacked. Statistically, a majority of the companies shut down within an year of being attacked.
Due to the decentralized nature of blockchain, a hacker or website would need to breach all peer nodes on the chain simultaneously making it very difficult for him to perform DDoS attacks.
Real time transactions
It currently takes around 20 seconds to 10 minutes for a transaction to be verified on the blockchain based on the decentralized ledgers. A traditional transaction can take around a day to be verified.
These real time transactions become beneficial when the traditional transaction time is longer. For example transfer of a title deed can traditionally take upto 30-45 days while it can happen within a maximum of an hour when using blockchain.
An example of how blockchain can be used in Art world
Consider that a modern art painter completes his work and decides to provide it to an art gallery. The art gallery puts the item on display and when its sold, the art dealer would get paid. A blockchain network consisting of multiple art dealers validate and record the transaction once the painting enters the art gallery.
Once the painting is purchased and changes hands from a person to person, all relevant transactions are recorded on the blockchain. Since all transactions are present at every node all the time, it provides searchers insight into the exact location and selling price of the painting.
In such a scenario, this type of validation would help any prospective customer interested in purchasing the painting confirm the authenticity of the art piece pretty quickly without the hassles of involving a trustworthy art expert. The blockchain would provide the entire transaction history for the art piece pretty quickly.
Thus, we see that the benefits of blockchain is not limited to large businesses and enterprise alone. It also provides multiple and unforeseen benefits to startups and small organizations. All we need to do is remember the benefits and think how and why to apply it to our businesses. Adoption of blockchain is not necessarily a costly measure. It can be pretty light on the pocket in the long run.