How can a Small Businesses Benefit Out of Blockchain Technology
- May 30, 2018
- Posted by: Vivek Shah
- Category: Blockchain Technology
Introduction to Blockchain
Most Small Organisations start off with acute requirement of cash flows. And presences of middlemen in all businesses are one of the strongest reasons for payments getting delayed. Now if we were to think that how can we build technology that can improve the way businesses are conducted can’t it be a revolutionary measure?
After years of observations people have realised that it is us people because of whom the delay is happening. If instead of people we bring in technology to control the transaction, we can solve the problems of cash flow and removing the middlemen form all transactions.
In Indian Economy we have also observed that middlemen are the people responsible for corruptions. Most government schemes do not reach people properly, because of the presence of middle men in transactions relating to implementation of scheme. Hence along with businesses it is very important and urgent to implement blockchain technology for all government spending, but that being a separate topic, let’s cover it in some other blog.
Let’s here first understand what blockchain is and why should small businesses adopt blockchain.
What is Blockchain?
I am sure most people reading this article know what is Google sheets. Traditionally before google sheets, let’s say someone wrote some data in an excel sheet and somebody else wants to update it from a different location. Then this sheet had to be closed first and then sent to somebody else. The first user is locked out of the sheet till the second person is appending the file. The file is then received back by the first person and then he can check it again.
But with google sheets, there is a single copy of a sheet, open at multiple places, and the moment one person updates it, the sheet gets updated everywhere. Similar is the case with blockchain. Blockchain is basically a ledger book, or book that just keeps tracks of transactions. But not at one place (as in first case, we had just one sheet). It decentralizes the record of a transaction, and these transactions when recorded in one sheet it is called a “Block”
Each block has 3 main values
A. Block id
B. Reference to the old block
C. Set of transaction records
Now as each block is referring itself to a previous block, preparing a chain like structure.
Now the next question in your mind would be that whether the system is decentralised or not how does it matter to me. Let’s consider an example. You and I are strangers who met over the internet, and I gave you a project to make a mobile app for me. To start off the project there would be a few basic questions in
1. How do we trust each other
2. How would we transfer money and provide services.
Let’s imagine a scene where technology comes to our rescue. We both commit certain deliverables and certain money into an algorithm. Now the moment your work is finished the system checks the work and transfers the committed money straight to you. This method helps in three ways
A. The buyer and seller who might or might not trust each other and completely dependent on the system to check whether the services are upto the mark, and the money is already committed and locked by the system hence there is no chance of fraudulent transactions.
B. There is no mediation such as a bank or a payment gateway which charges money such as 2-4% of the transaction costs.
C. The transactions are immediate, hence there is no delay. And above all of that the system is completely free. Imagine how much value blockchain can generate by removing the middleman completely.
How can a small businesses benefit from blockchain technologies?
From this entire transaction, here are a few things that we can understand and value that a small business can generate out of blockchain technology
1. Easier monetary Exchange
The day you start accepting money in any cryptocurrency built over blockchain technology, your monetary exchange becomes easier. Both ends receiving as well as taking money becomes easier. If you use blockchain technology for getting money from your customers and [providing to your suppliers, it also creates transparency and is easier to account for.
2. Faster monetary Exchange
There is no middle man who takes 5-7 working days to transfer the money into your account. As we hadstarted, cash liquidity is what ruins a lot of businesses. Blockchain technology can become the solution for it. There would be nobody in between except an algorithm that demands no money or time to complete a transaction.
3. Smart Contracts
Now with blockchain technology you can create contracts that are extremely smart, do not need any trust worthy middlemen such as a bank or any other financial institution. The contract would then be fed as algorithm to the system. Thus our contracts would become more appropriate, stronger, and easy to
execute. The frauds of buyer not paying would reduce.
4. Identity verification
As all of these transactions are stored as blocks within a system you can check anybody’s transactions. Not their bank accounts, but the transactions they have committed. This helps us do common identity verification and understand who do we wish to work with and who we do not wish to work with.