In recent years, the internet has rapidly expanded into every part of our lives. With that growth, the very mechanisms the internet is built upon have had to grow to meet the demands of the public. While some of these changes can be scary, others bring with them new opportunities poised to radically change the way we use the internet — for the better. Enter blockchain networks and applications.
Here’s what you need to know about these two gamechangers and how they can help your small business benefit from blockchain technology, now and in the future.
What is a blockchain?
A blockchain network is a distributed public database that shares responsibility between a group, rather than relying on a third party to record transactions. Within this group, parties are free to trade amongst each other, with each trade being recorded independently by the group members.
Basically, what you need to know is that the parties mentioned in the definition are actually computers, not people, so instead of the group members agreeing to confirm trades, the system runs a “consensus mechanism” to confirm trading codes.
Blockchain applications, meanwhile, are programs built on a blockchain network that provide a variety of functions to network users. The most popular offering involves cryptocurrencies like Bitcoin.
Most of the developments in blockchain technology so far have been in applications, but as they continue to grow at meteoric rates, the blockchain networks will soon need to develop to manage them. We’re currently entering our third generation of blockchain networks. The advent of this new network has made the technology more accessible, scalable and secure for business owners to invest in, allowing small businesses to take advantage of this new frontier.
The benefits of the blockchain
The main reason blockchains are so enticing is they include a system of hash codes that keep transactions encrypted and ensure all governing parties are accountable and honest. These hash codes provide a “proof of identity” unmatched by other technologies. Unlike current password-based systems, blockchain-based authentication systems use identity verification that tracks unique digital signatures. This is a much more secure authentication method, as each digital signature cannot be copied and is completely unique to that particular user, unlike often lacking password practices.
The future of blockchain
The possible implications for blockchain technology are limitless. For example, by eliminating third-party intermediaries, you’ll be able to change your living will without an executor, instantly and legally. If blockchain technology decentralizes digital identification, then a social security breach like the one Equifax experienced wouldn’t have put half of Americans at risk. With this technology, we’d potentially even be able to vote in presidential elections from the comfort of our home computers or mobile devices.
Other potential benefits include:
Payment and money transfers
Look to the source of blockchain’s popularity, Bitcoin, as an opportunity for small businesses to send money. Via blockchain technology, you can transfer funds securely to anyone in the world, almost instantly, with very low fees. Since there aren’t banks slowing down the transfer or charging transaction fees, you save time and money. This practice is especially useful if you have remote employees or if you trade in the global marketplace. Companies like Abra and Bitwage are already using blockchain to handle their payrolls.
Smart contracts are self-automated computer programs that carry out the terms of any contract. Smart contracts run as programmed and accrue no downtime, censorship, fraud or third-party interference and cannot be broken by either party — a good example of this is the aforementioned altering of a will without a third-party intermediary. The company Synaps is already using blockchain smart contracts to improve the syndicated loan market.
Blockchain technology can also provide cheap and instant notary services. The app Uproov is a smartphone platform that allows users to have images, sounds or videos notarized instantaneously. Taking this a step further, Stampd.io actually provides notarized proof of ownership for digital creations. Imagine a world where ideas are legally copyrighted instantly and securely, eliminating the slow and costly patent process.
Loyalty programs and gift cards
Due to blockchain’s unique verification abilities, the technology could improve loyalty services and gift card use by making the process cheaper and more secure, all while cutting out middlemen and reducing costs.
Cloud-free data storage
By crowdsourcing data storage, blockchain has already been manipulated to store information in unscalable ways. Data storage is currently centralized, forcing users or businesses to place their trust in a single storage provider. With the blockchain, you could improve security and decrease your dependence on third parties. Additionally, users could rent out their excess storage capacity to create new marketplaces and income opportunities, while reducing costs for companies in need of storage.
Upon its release, the creator of blockchain technology, Satoshi Nakamoto, announced an inherent security flaw: if more than half of the computers working in a blockchain report false data, the majority opinion will allow the lie to become the truth. This is called “the 51% attack.” For this reason, communities closely monitor transactions to ensure no one unknowingly gains the necessary majority to influence a network and spread false information.
Secondly, businesses usually miscalculate how quickly new technology will take to catch on in the public. Since it’s impossible to predict how quickly the public will accept (or reject) a new technology, it can be difficult for a small business to calculate the financial risks involved of adopting blockchain technology. This is not to mention that the amount of research necessary to stay ahead of an evolving tech like this may be more than most small business owners can manage. The return on investment might cost more than an average small business can afford.
However, the advantages of investing in or migrating to blockchain technologies provide visible and immediate results for small businesses. On a macro-level, the blockchain offers extraordinary opportunities to level the playing field between small businesses and industry juggernauts. By investing in the future of technological advancements, small businesses can establish their footing as the vanguard of innovation and reduce a monopoly of ownership in future technologies.