5 Ways Blockchain Is Changing E-Commerce
“Bitcoin just hit $15,000.” “People are spending millions on CryptoKitties.” These stories are creeping into the mainstream and creating much more general awareness of cryptocurrencies and the blockchain than even a few short months ago.
It’s still early in terms of the public’s understanding of blockchain technology, but the application that could change that quickly is e-commerce. Once blockchain comes to household-name retailers, interest is going to reach even more of a fever pitch.
In anticipation of more informed consumers, retailers and brands should already be bracing themselves for the impact of blockchain. Companies that can leverage it effectively are going to find themselves at a significant advantage over those scrambling to figure it out. With that in mind, here are five major ways that blockchain is changing e-commerce.
Sparking a Data Security Overhaul
Massive data breaches have become a constant for the retail and payments industries. From Target to Equifax and beyond, the vast majority of shoppers have now had their personal information stolen at some point. With its use of smart contract software, blockchain is the innovation to stem the tide of stolen consumer data.
A blockchain is a highly secure and decentralized digital ledger system that allows retailers to create better, nearly frictionless solutions for connecting to their customers. How? Blockchain technology creates transaction records shared across a network of computers.
But instead of creating one blockchain that contains all the records, the transaction records are also distributed across every blockchain in an entire network. Therefore, blockchains cannot be altered without the other blockchains in the entire network also being changed. The decentralized but connected nature of blockchains makes them much more secure than a set of separate digital ledgers stored on a centralized server.
Once everyone on the supply chain can commit to exchanging data with the more secure, decentralized verification that blockchain enables, they’ll have more time to spend on their core business and less spent worrying about security.
Advertising Made More Direct and Respectful
The blockchain can further shrink the distance between retailers and their customers when it comes to advertising. One of the most discussed methods for this is using micro-transactions to pay consumers directly for their views, and shifting away from paying a middleman to push ads into web browsers. An example of such ingenuity is the Basic Attention Token, a project that has developed a way to monetize and verify engaged ad views through — you guessed it — the blockchain.
It also has important implications for treating consumers with greater respect and reversing the animosity most have for the way internet retailers handle their data. Today, massive amounts of data are packaged, sold, repackaged and resold without the source of that data (the consumer ) knowing anything about it. The blockchain can stop what most consumers consider a violation of personal information by introducing mutual consent into advertising. In this format, brands can make more genuine and precise connections since they’re only dealing with those potential customers who have acknowledged they want to interact in the first place.
Ensuring Product Quality and Fighting Fraud
Counterfeit and unsafe goods continue to hurt businesses and, more importantly, pose risks to their customers. Intuitively, companies that worry about the integrity of their products and the health hazards of consuming fraudulent versions of edible merchandise are the earliest adopters in using blockchain to combat these issues.
For a good idea of where this is headed, take a look at the alliance of major food companies that IBM has brought together to address food safety through the blockchain. The open environment for sharing data about product authenticity and quality will allow people at all steps of the supply chain to trust and verify the goods being distributed before they hit shelves and arrive at customers’ doorsteps.
Reducing the Cost of Doing Business
Just as blockchain in advertising is bringing retailers closer to their target audiences, applying blockchain to the vast network of vendors that retailers deal with on a daily basis can create new efficiencies. Currently, these relationships are siloed and spread across many platforms, which raises the cost of doing business. If these networks can be brought into a single blockchain-backed ecosystem, which will still allow for separate, private and secure interactions, a lot of the friction and extra costs that retailers currently face will be a thing of the past.
Unlocking the Advantages of Direct Payments
Restructuring payments into a true peer-to-peer model is perhaps the best-known use for the blockchain, and its transformative power is especially relevant to the world of e-commerce.
The simplicity of how blockchain-based digital currencies (or cryptocurrencies) work is in stark contrast to the complexity of the international financial system. There are only three components: the buyer, the seller and the marketplace itself (the blockchain). The blockchain is built with security and simplicity in mind. Adding third parties to the mix, as we do today, introduces unnecessary fees and risks. Isn’t this new format something all of us — buyers and sellers alike — can at least be willing to pilot?
Patrick Palacios is the CEO of Appsolutely, a Philippines-based company that helps major brands strengthen their loyalty programs across web and mobile..
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