If you own a business, it’s highly likely that you’ve experienced a quarter or year in which you’ve captured and performed a large amount of work, served thousands of clients, and ended up barely breaking even.
The current business ecosystem is difficult for businesses of all sizes. Hundreds of different factors can cut into profits, creating cash flow issues that are virtually impossible to trade through. Procedural delays, overheads, middlemen, and human errors all contribute to the cost of doing business, making it difficult to scale and generate profit.
The primary factors that cause the obstacles outlined above are a lack of automation, siloed data structure, poor intra-business communication, and middlemen. Blockchain technology, however, holds the potential to eliminate these obstacles, allowing businesses to speed business up, prevent human error, and deal directly with other parties without middlemen.
But what is blockchain technology, and how can it enhance your business productivity?
What is Blockchain?
Blockchain technology is a decentralized means of recording transactions to a digital ledger that prevents the falsification of data. Blockchain networks are the moving parts beneath major cryptocurrencies such as Bitcoin and Ethereum but are capable of far more than transmitting or storing value.
A blockchain network exists across thousands or hundreds of thousands of computers around the world, which all run the software that powers it. This process is called cryptocurrency mining and it means there’s no central point of failure or control — nobody is in charge of a blockchain network.
Blockchain networks are self-policing by nature, with all network participants working together to prevent the recording of false data. Transactions that are made on a blockchain network such as Bitcoin are collected into “blocks” by participants called miners, who then encrypt the block and publish it to the network in a manner that makes it impossible to alter.
Each block in a blockchain contains a reference to the previous block, ad infinitum — a “chain” of self-referential blocks. What does this mean for your business, though?
Major blockchain networks such as Ethereum offer programmable functionality. It’s possible to build applications on blockchain networks that leverage the immutable, transparent, and the decentralized nature of the technology that drives them.
Blockchain can dramatically boost the performance of your business. Here’s how.
1. Eliminate Counterparty Risk with Smart Contracts.
“Smart contracts” are self-executing, programmable contracts that exist in the blockchain environment. A smart contract has all of the terms outlined by the parties involved written directly into its code, and can’t be interfered with once it starts.
Smart contracts ensure that the parties that sign it follow the terms of the contract and are enforced by code, not other humans or law.
Why are smart contracts important to your business, though? Smart contracts can be used to establish escrow, ensuring that your business gets paid once you’ve performed the work you’ve been commissioned. Smart contracts eliminate the need for lawyers or other intermediaries that exist to settle contract disputes. By bringing your contracts onto the blockchain, you can ensure that they’re enforced by immutable code.
2. Accept Faster, Cheaper Payments.
The primary use case of blockchain technology is as a means of storing value and transferring it between individuals. Cryptocurrencies have experienced rapid adoption across multiple industries, with major tech players such as Microsoft offering Bitcoin as a payment method.
Cryptocurrencies offer a number of distinct advantages over traditional payment methods. Debit cards and credit card payments are susceptible to chargeback fraud in which customers fraudulently dispute the payment with their card provider after receiving a product. Cryptocurrency payments, once sent, can’t be unsent — it’s not possible to chargeback a cryptocurrency transaction.
Cryptocurrency payments are cheaper than credit card payments. Major card payment processors typically charge between 2 percent and 10 percent of a transaction in fees, which can rapidly eat into profits. Cryptocurrency payments, in contrast, can be executed for as little as a fraction of a cent.
Choosing to accept cryptocurrency as a payment method gives your business the option of either holding crypto to make a long-term profit, or trading it for fiat currency immediately. Major cryptocurrency exchanges such as Rubix.io allow cryptocurrency holders to rapidly and easily trade cryptocurrency for other currencies, allowing businesses to access fast fiat cash flow when needed.
If you’re considering accepting cryptocurrency as a payment method at your business, it’s best to understand your tax obligations. Professional small business accountants can point you in the right direction and help you understand what you need to report and well in order to avoid overpaying on crypto tax.
3. Reduce Your Marketing Costs.
Effective marketing is essential to the success of almost every business — but marketing is expensive. The number of businesses competing in any given marketplace makes it difficult to establish a point of difference between your business and your competition.
Blockchain networks provide several solutions to the problems presented by the modern marketing paradigm. The digital marketing ecosystem, for example, is saturated with middlemen that sit between companies that want to advertise and the publishers that will distribute their ads, increasing the overall cost of marketing.
Blockchain-based projects such as the Brave Browser reward internet users with small amounts of cryptocurrency for viewing ads instead of blocking them, allowing businesses to spend marketing budget on connecting with prospective customers without the need for marketing middlemen.
Other blockchain marketing platforms solve the problem of ensuring your message is delivered to your target demographic. Marketing campaigns that integrate blockchain-based tokens allow advertisers to view a vast amount of analytics that reveal who is viewing your marketing campaigns, and for how long.
Lastly, the publicly verifiable nature of blockchain technology allows businesses to ensure that their marketing analytics aren’t being boosted by bots, ensuring that each campaign viewer is a real human.
Blockchain technology isn’t restricted to currency applications only. Integrating blockchain technology into your business processes will allow you to eliminate counterparty risk, chargeback fraud, high payment acceptance fees, and extortionate marketing costs.