There are many situations in which small- and medium-sized businesses (SMB’s) are disadvantaged in the current business atmosphere. From the regulatory environment, to financing, to other ancillary services that are necessary but more often than not monopolize the time and resources of small businesses. Many small business owners will find themselves asking how they can possibly compete with the resources of their larger counterparts. Fortunately, the blockchain is changing this.
What is Blockchain?
Blockchain was invented ten years ago to power Bitcoin when it launched in 2009. But now, it is being used for everything from copyright protection to new business funding. To explain the technology, we have to start in the world of cryptocurrency, where a “block” refers to a record of new transactions (i.e. the location of cryptocurrency, or medical data, or voting records). Once each block is completed, it gets added to a chain, creating a chain of blocks, or a “blockchain.”
Blockchain is comparable to an incorruptible public ledger of economic transactions. Think Google Docs for banking. It is particularly powerful because it cannot be controlled by any single entity, it is fully transparent, and it cannot be corrupted. As Technology Futurist Ian Khan said in his TEDx speech,
“Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation.”
The SMB Application
But how does this apply to small enterprises? While blockchain originates in the world of financial transactions, more generally, it gives Internet users the ability to authenticate digital information. This is ability has a wide array of applications, including smart contracts, the sharing economy, crowdfunding initiatives, governance, supply chain auditing, file storage, protection of intellectual property, the Internet of Things (IoT), identity management, data management, the list goes on!
There are two arenas in particular where we have found the blockchain to be beneficial for SMBs:
Smart Contracts & Scaling
Small businesses are often focused on scaling, as they should be, but this attention often leads to neglect and strain when it comes to the basic processes of invoicing, inventory and payroll established at the outset. The bootstrapped flows that support a business’s product or service also need to evolve, otherwise, the enterprise risks bottleneck creation. While this used to mean purchasing a CRM or CMS platform, hiring new employees, or contracting with yet another service provider, blockchain provides an alternative solution via smart contracts.
Smart contracts can help small organizations economically streamline the flows that keep them in business. They use blockchain to create, check and enforce contracts between users, in this case, a small firm’s merchants, clients and customers. Whether it be invoicing, paying employees or bills, settling interest fees, creating insurance policies, handling fulfillment of inventory, closing new deals or any other transactional activity, smart contracts can provide cost savings for small businesses as well as stability in the form of all contracts being executed on schedule.
Privacy & Security Improvements
Web-based attacks cost companies valuable time and precious resources, presenting an especially formidable challenge for SMBs without the IT resources to fend off these potentially fatal intrusions. Many companies don’t consider security a major priority even though up to 14 million companies in the U.S. alone are at risk of being attacked. This is concerning, particularly in light of the fact that a majority of small businesses that suffer cyber attacks shut down less than a year after sustaining damage.
Thanks to its decentralized nature, a hacker striking a website or application hosted on blockchain needs to breach all the peer nodes on the chain simultaneously, making it extraordinarily difficult to perpetrate an attack.
For companies that handle a lot of personal data, the blockchain allows them to provide the same services without exposing their most sensitive personal financial or identifying information. Along these lines, SBM’s that need their customers’ credit card data can verify transactions without knowing the identity of the user, encouraging a system that puts users in control of who has access to their personal information.
The benefits of blockchain are immense for organizations in both sectors and a wide variety of industries. However, since it’s impossible to predict how quickly the public will accept (or reject) new technologies, it can be difficult for an SMB to calculate the financial risks involved in adopting blockchain technology. On top of that, the amount of research necessary to stay ahead of an evolving tech like the blockchain may be more than a small business owner can manage. However, the advantages of investing in or migrating to blockchain technologies provide visible and immediate results for small businesses, so we recommend at least doing your research to identify whether it’s a fit for your enterprise. Not sure where to start? We’re here to help!