Blockchain for Business
The technology behind Bitcoin and other cryptocurrencies is called blockchain—and it has the potential to revolutionize how businesses of all sizes operate. While blockchain has mostly been used to underpin digital currencies, many other powerful applications are emerging. This distributed digital ledger technology can add new layers of speed and security to your operations, lower costs associated with payment processing, simplify record-keeping, and even create entirely new business models. Whether you run a bakery, a law firm, an e-commerce store, or a logistics company, blockchain offers tangible benefits you can begin exploring today.
What Exactly Is Blockchain?
At its simplest, blockchain is a continuously updated digital record of who holds what. Information about a transaction—the date and time, the value, and the participants involved—is encrypted into a "block." That block is then linked to other blocks, forming a chain. Here's a concrete example: suppose Mr. A sells three coins to Mrs. B for $75. A computer record lists all these details, including digital signatures from both parties. Computers in the network (called "nodes") check the transaction to ensure it's valid. Accepted records are added to a block. Each block contains a unique code called a hash, as well as the hash of the previous block in the chain. These hash codes allow the blocks to be linked together in order.
A hash code is created by a mathematical function that takes digital information and generates a fixed-length string of letters and numbers from it. Whether the original file is a short tweet or the entire novel The Lord of the Rings, the resulting hash code is always the same length. This is what makes blockchain so secure: once a record is added, changing even a single comma would generate an entirely new hash code. To restore the chain, a hacker would need to recalculate that hash and every subsequent hash—a task requiring enormous computing power and time.
The blockchain database is shared across a network of computers, so no single computer holds the master copy. The network constantly checks that all copies match. There is no central authority controlling the blockchain; each participant can access the same information, providing transparency and continuous reconciliation. Because the blockchain exists on many computers without a centralized version, there is no single database for a hacker to attack.
To join a blockchain network, computers must pass tests called consensus models. In proof of work, a computer solves increasingly difficult computational puzzles to add a block (a process called mining), earning rewards like tokens. In proof of stake, participants buy tokens that allow them to join; the more tokens they hold, the more they can mine.
Real-World Examples Already in Use
The financial services industry is an early adopter. The Australian stock market announced it would use blockchain to settle transactions, recording shareholdings and managing the clearing and settlement of equity trades. Abra, a money transfer platform, lets people working abroad send money home in 54 different currencies faster and cheaper than traditional services like Western Union, which charges an average 7% fee. The World Wildlife Fund partnered with blockchain firm ConsenSys, IT firm TraSeable, and tuna processor SeaQuest Fiji to track exactly where, when, and how tuna are caught and sold in the Pacific Ocean—ensuring sustainability. Jewelry companies are exploring blockchain to prove their diamonds are conflict-free. Major corporations like Microsoft, IBM (with over 400 blockchain projects), Unilever, and Toyota are all investing heavily.
Beyond finance, blockchain could store land records, drastically reducing costly title research and insurance while proving ownership in politically unstable regions. In healthcare, your medical history could be securely stored and controlled by you rather than by your doctor. And blockchain could create tamper-proof election returns.
How Blockchain Can Directly Benefit Your Business
The cost to incorporate blockchain is far less than most small business owners assume. Vendors have emerged that provide blockchain-based technology not just for Wall Street, but for Main Street as well. Blockchain is not only for digital-first companies; bakeries, gyms, nail salons, restaurants, and other brick-and-mortar businesses can get started today.
1. Accept Cryptocurrency as Payment
The simplest first step is to begin accepting Bitcoin or other cryptocurrencies. Platforms like Shopify already offer this option for online stores. Transaction fees are low and fast, and there are no chargebacks. You'll need a digital wallet and possibly a merchant gateway, but the long-term benefits—attracting new customers who see you as forward-thinking, dealing directly with customers without paying third-party transaction fees, and receiving permanent, irreversible payments—outweigh the setup costs. Chargebacks, where customers cancel credit card payments after receiving goods, become a thing of the past. If customers want a refund, they must contact you directly.
2. Streamline Money Transfers and Payments
Blockchain excels at money transfers. You can pay employees anywhere in the world without expensive intermediaries. For documenting transactions with multiple parties, new Distributed Ledger Technology (DLT) applications are emerging. Ethereum, created in 2015, enables special "distributed applications" or Dapps. Permissioned ledgers blend blockchain advantages with business security, reducing supply chain instability and creating unbreakable agreements.
3. Smart Contracts
Smart contracts are self-verifying and self-enforcing agreements stored within a blockchain ledger that cannot be changed or manipulated. They cover commercial leases, supplier agreements, and employee contracts. Because they eliminate the middleman (usually an attorney), they save significant money. As long as the contract conditions are met, the value transfer happens without fail. Ethereum was the first to introduce smart contracts and remains one of the most advanced platforms for coding and processing them.
4. Raise Capital Through Initial Token Offerings (ITOs)
Your company can issue tokens or coins using platforms like Ethereum as an alternative to banks, lenders, private equity, or crowdfunding. Interested investors buy into your offering and receive blockchain-based tokens that may have utility with your product or service, or simply represent a stake in your project. These tokens can be traded on the open market, creating a new realm of liquidity available to the general public. ITOs have grown in popularity as a viable capital-raising alternative for businesses of all sizes.
5. Bounty Campaigns
You can grow brand and product awareness by giving customers small cryptocurrency rewards. Your company issues blockchain-based tokens that can be exchanged for future products or services. You initiate a bounty program on a specialized forum; anyone can join, promote your company, and get paid in tokens for simple online tasks.
6. Supply Chain Transparency
If you belong to a supply chain, your partners may soon want you to digitally track your processes. Being able to track products back to their sources adds tremendous value. Imagine a fishmonger who can prove their products were harvested sustainably—they could charge a premium. The combination of blockchain, smart contracts, and the Internet of Things will allow companies to track shipments and automatically make payments when conditions are met (e.g., a product is delivered). Maersk, the world's largest shipping company, is already testing blockchain to track cargo. Smaller companies can use the same technology.
7. Safer, Affordable Data Storage
Businesses and personal users spend over $20 billion annually on cloud storage. Blockchain storage applications allow users, including small businesses, to store data safely at a reasonable price without compromising security. Stored data can be encrypted so only those with a crypto key can access it.
How to Get Started
Do your homework. Read resources like Blockchain for Dummies (free PDF) and The Business Blockchain to understand both the promise and the drawbacks.
Ask why. Only add blockchain if it saves time and money or makes your business life easier and faster.
Start small. Pick one application and get comfortable with it before expanding. Concentrate your efforts on a single system rather than trying to adopt everything at once.
Challenges Ahead
Despite the potential, three key issues must be resolved before blockchain goes mainstream: energy use (verifying transactions is computationally intensive), processing speed (the massive number of computations slows things down), and interoperability (different blockchains currently don't communicate with each other). The next generation of blockchain technology is actively working on solutions to all three.
Blockchain is a fast-moving train with Bitcoin as its backbone. Many businesses have already incorporated it and are recording exponential growth. From contracts and secure transactions to digital exchange and smart contracts, blockchain offers small business owners substantial savings of time and money. You're getting in on the ground floor—do your research, pick the right platform, and you can only go up.
