Blockchain is widely known as the underlying technology that enables the cryptocurrency known as Bitcoin. It is a public ledger of all Bitcoin transactions that have ever been executed and it is continually increasing as other completed blocks are added to it. A blockchain is typically managed by a peer-to-peer network jointly observing a protocol for authenticating new blocks.
This technology is gaining popularity due to its ability to secure online transactions. The growth of blockchain can be clearly illustrated by the unfathomable combined market capitalization of cryptocurrencies currently standing at a staggering $100 billion. The blockchain traction is set to continue since scientists may have found a way to overcome blockchain’s biggest threat; ability to be breached by quantum computers.
IMPACT ON SMALL AND MEDIUM BUSINESSES
So, what does all this mean to small and medium businesses? The current buzz surrounding blockchain and the fact that the technology is about going mainstream could be good news for small and medium businesses. Blockchain has the potential to transform transactions in many ways improving bottom lines, efficiency, and competitiveness.
No more middlemen
Since blockchain digital ledgers of transactions are shared across a peer-to-peer network with each account and user on the network validated and granted access to information without the need for central oversight, middlemen of banks and other financial service providers will be rendered redundant. This will consequently enable small and medium businesses to cut transaction costs and enhance efficiency.
Increased transparency
A blockchain is decentralized and users are given specific security parameters enabling them to access information on the network without central oversight. Recorded transactions cannot be altered retroactively without the alteration of all subsequent blocks. This bolsters transparency enabling businesses to accurately track transactions.
Safeguarding competitiveness
Sustainable competitive advantage is a vital ingredient in the recipe for success. Businesses will be in a position to outperform peers if they have what it takes to safeguard the innovation that makes them stand out. Blockchain technology enables small businesses to safeguard their competitive advantage using the limited resources at their disposal.
Ease of converting illiquid assets to liquid assets
The tamperproof property of blockchain will enable small and medium businesses to efficiently convert illiquid assets such as land into liquid assets due to the subsequent ease of authentication. This will improve cash flows enabling the business to stay afloat.
Secure way of transferring digital media
Blockchain’s ability to securely carry out online transaction will offer a boost to small businesses by enabling them to securely transfer digital media through proving verification and preventing fraudulent activities of malicious parties within the ecosystem.
Improving supply chain efficiency
Blockchain can also be used to register and track assets through the supply chain. Supply chains are growing in complexity and consumers are becoming more demanding. Businesses that have an upper hand in terms of efficiently managing supply chains are in a position to enjoy customer loyalty and consequently, competitive advantage.
International fees
Blockchain will eventually be able to facilitate international transfers. Small and medium businesses will be able to increase efficiency through circumventing the conventional banking system and the associated hefty fees charged for such transfers.
Blockchain is still an emerging technology but has a large potential to transform business operating models in the long term. Observers still remain skeptical and businesses are still reluctant to place blockchain at the core of their business structure. However, the meteoric rise of Etherium, an open source public blockchain based distributed computing platform, and the cryptocurrencies combined market capitalization strengthens the opinion that adopting blockchain will deliver unprecedented benefits to businesses.
