How Small Businesses are Benefiting from Blockchain
Blockchain continues to revolutionize solutions for the finance and big business sectors globally, and small businesses are beginning to benefit from blockchain too. Of the industries affected by the ongoing pandemic, small businesses are of those that suffered the greatest impact outside of the medical sector. The closure of small businesses affected the wider economy and resulted in government bailouts globally.
Online businesses also faced problems. Many of us were stuck inside and spending our money online. Small digital businesses still had to face issues with supply chains that no longer had the manpower to uphold them, so we began turning to online giants like Amazon and ASOS.
Even before the pandemic, small businesses were struggling to compete with conglomerate corporations as consumers were shopping increasingly in chain businesses and large online outlets.
Blockchain for Small Businesses Transactions
Crypto transactions are the greatest advantage that comes from using blockchain in a small business. With blockchain, transactions happen in real-time, rather than having to wait for them to be processed by traditional banks. This offers small business owners flexibility in their business models as it can be accepted online and in person. Not only this, but the decentralized nature of blockchain and cryptocurrencies means that small businesses can extend their services and products to be sold in more countries.
While credit and debit transactions come at a cost, usually around 0.25-0.35% for debit transactions, the costs for crypto transactions are reduced as they do not incur banking fees. They are also pseudonymous, meaning that online purchases do not require any identifying information outside of a wallet address.
Cryptocurrencies are also immutable, meaning that any transaction that takes place cannot be reversed by a third party. If a small business owner must provide a refund, only they can do this by sending the crypto back to the original buyer.
Supply chain management
The use of blockchain in supply chain processes offers small businesses security and transparency that ensures the timely arrival of goods by tracking them throughout each stage of the assembling and delivery processes. This particularly benefits small businesses that outsource their manufacturing processes and products as it reduces any potential for error in data transference between subcontractors.
Small businesses can enhance their credibility in the market by capitalizing on blockchain’s transparency. Businesses can demonstrate the legitimacy of the product and its manufacturing process, whether by ensuring the legitimacy of a branded product like a high fashion handbag or demonstrating fair trade practices in the manufacturing process.
In the US, it has been suggested that small to medium businesses spend about $120 thousand on cloud storage per year, which is predominantly entrusted to centralized storage providers. Blockchain can reduce these costs by offering cheaper, decentralized storing methods than Google or Amazon. These centralized storage providers are susceptible to hacking, putting all stored data at risk. While blockchain is not completely infallible, decentralized storage minimizes the risk to the data owners.
Storj is an alternative blockchain solution to data storage, which provides limited access to stored data via a cryptographic key. The data is also encrypted onto multiple hard drives, reducing the risk far below that of centralized providers.
The proper execution of contracts is integral to a functioning business. Traditional contracts in small businesses are often subject to much bartering and mediation and take time to establish. Smart contracts, established through blockchain offer a solution to this. Smart contracts can not be manipulated once coded onto the blockchain network and only follow through once all conditions of the contract are fulfilled. These can be used by businesses in supply chains with vendors, leases, and employee contracts.
Not only does this offer small businesses security, but as they are also trustless, there is no need for an attorney or solicitor, removing costs that the business owner may not be able to afford.
Using Blockchain to Raise Capital
Small business owners can benefit globally from the use of Initial Token Offerings (ITOs). ITOs are an alternative way for small business owners and startups to raise capital for their business. The tokens can represent a share in a company and can be bought by interested investors.
They allow business owners to offer shares without the need for traditional banks or lenders, making for more efficient, faster transactions at a reduced cost. The improved processes for acquiring funds in this way improve market accessibility for aspiring business owners, by removing the hurdles that they would normally face.
Banks are exclusive when it comes to who they do business with, but the use of blockchain and ITOs gives access to anyone with an idea. Even sourcing funds through standard crypto by crowdfunding creates a greater opportunity for anyone to get their business off the ground with the right backing.
Blockchain overall reduces costs at every corner for small businesses and makes what can customarily be a risky market far more accessible. The use of blockchain holds greater implications for the global economy at large since it often rests on the backs of small businesses. This is something that could be essential to the economic recovery post COVID.
Other articles to continue reading
- How to Create Your Own Digital Business
- How to use blockchain for your ecommerce?
- What are Hierarchical Deterministic Wallets (HD Wallet)?
- Blockchain in the Pandemic: How it is Crucial in Aiding a Post-COVID Recovery
- How Will Using Blockchain Be In The Future
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