In the times of cutthroat competition, it is imperative to be disruptive and start a revolution doesn't matter if you are a startup or a small business. It is important to know what tools and technologies can help you start, in a way, a "small business revolution."
I will talk about one technology today: blockchain technology, which plays a role in revolutionizing start-ups and small businesses from the ground level.
Here's what former NASDAQ Chief Executive, Bob Greifeld has to say on blockchain technology:
"Blockchain is the biggest opportunity set we can think of over the next decade or so."
Did you know?
Gartner's latest Trend Insight Report on Blockchain-Based Transformation emphasizes on heavy long-term rewards of implementing blockchain technology right now: The firm stated:
"While blockchain holds long-term promise in transforming business and society, there is little evidence in short-term reality."
Three following specific predictions from the report show how commenting blockchain technology will stir small business revolution:
The analyst firm Gartner characterizes the time from 2018 to 2021 of 'irrational exuberance,' followed by 'larger focused investments, many successful models' (2022-2026) and 'global large-scale economic value-add' (2027-2030).
You can see what does three phases mean for businesses in terms of business growth and revenue in the chart below:
Though the journey of implementing blockchain technology is of ebbs and tides. One thing certain is that investing in blockchain now will reap big rewards in the future. This also doesn't mean that blockchain technology has no real-time benefits. Rather, these benefits have the capacity to start a small business revolution and start-up transformation across industries.
This blog is about those real-time benefits that can lead to a small business revolution if blockchain technology is applied now!
Table of Contents
1. Need For Blockchain Technology For Small Business
The two major needs of small businesses are transparency and security, both of which blockchain technology successfully meets.
Blockchain technology is dissipated and decentralized, and this means there is no single central entity that collects and stores, and controls all the data. Data is stored across several computers sprawled worldwide, which makes cyber hacks and malicious attacks on systems almost impossible, and no data is either erased or manipulated.
Blockchain gives small businesses the best of both worlds, both security and transparency since it is difficult to trust employees and vendors while beginning a business. With the necessary encryption and control mechanisms in place, blockchain safeguards transparency by storing information so that it cannot be altered without recording the changes made.
These two aren't the only elements of blockchain technology that bring about small business transformation.
The following are the other needs of small business that blockchain technology meets for them to grow:
- Increases the Number of Secure Payment Modes
- Eliminates Intermediaries during financial transactions
- Fosters Online Anonymity
- Improves Customer Data Security
- Manages supply chain
- Help raise funds easily
2. Pros And Cons Of Blockchain Technology For Small Business
Even though it is apparent that blockchain has played an integral role in small business transformation, it is still important for you to understand the effect blockchain technology brings in small businesses and startups in detail. This will help you adapt to blockchain technology for your startup or small business.
Here I have listed out the major pros and cons that blockchain technology possesses:
The pros of blockchain technology for small business are:
1. Data Security
According to the Verizon 2019 Data Breach Investigations Report (DBIR), 43% of cyber-attacks target small businesses, and only 14% of them are prepared to defend themselves.
The data stored on the blockchain is stored across thousands of devices. These devices are a subset of a distributed network of nodes. Since the nature of these nodes is distributed, the data and systems are almost impenetrable. They are shockingly immune to both technical failure and cyber frauds.
Every single one of these network nodes can store and recreate copies of the blockchain ledger database. Because of this, there isn't a single point of failure. In other words, a single node becoming compromised doesn't affect the security or availability of the whole network, unlike contemporary databases.
The information stored in the blockchain database is not reversible. Once stored, it can't be changed or even erased.
This makes blockchain technology very appropriate in storing sensitive data like personal information and financial transaction details. All updates in data are tracked and permanently stored without biases in public, distributed ledger through blockchain.
Such a stable data storage system is just what small businesses need. It helps small businesses prevent fraudulent activities by employees or other parties involved in financial transactions with the business.
This is not the case with other databases. It is very suspicious transactions can be easily masked.
3. Direct Payments
In most digital transactions, there are three parties involved: the sending and receiving party and the intermediary. These intermediaries are banks, credit card companies, or payment providers.
Blockchain technology mitigates the need for these middlemen. So, how are these transactions verified, you ask? This distributed network of nodes verifies these transactions through mining processes, which is a peer-to-peer process carried out to secure and verify all bitcoin transactions.
Since blockchain mining happens for all transactions independently, the risk of trusting one entity for all transactions is removed. This also makes it cost-effective since fees payable to intermediaries are also saved, which small businesses and startups would direly want.
And, the cons of blockchain technology for you could be:
1. 51 Percent Attacks
Even though high-security measures are in place to keep blockchain untouched by malicious attacks, it is not completely bulletproof.
Blockchain technology often succumbs to malicious attacks, called 51 percent attacks.
These attacks happen when one party gets its hands on 50% of a node network's encryption power, allowing them the capability to disrupt the blockchain system and erase or modify entries in the ledger.
It is important to note that Bitcoin's blockchain has never faced the 51% attack because of the high-security level of a network used by so many people. Having said that, small and medium-sized businesses would have a very small ledger compared to those of Bitcoin. Therefore, they are susceptible to 51% attacks.
2. Handling Keys
Blockchain technology pivots around public-key cryptography or also called asymmetric cryptography, to enable ownership over blockchain data when combined with a private key.
Unlike the public addresses that can be shared like a Bitcoin wallet, private keys are meant to be discreet. They're required to decrypt and access the data on the blockchain ledger. A private key turns encrypted characters into actionable info, just like a PIN on a debit card.
So, if an employee or a user loses or forgets their private key, they will lose their data, and it will also compromise the security and integrity of the entire ledger.
3. Massive Storage Need
Bitcoin's blockchain ledger storage requirements as of January 5, 2020, are over 250 gigabytes of text data. This goes on to say the massive data requirements using blockchain technology possess.
This is not that big a problem since data storage is now cheaper than it ever was. But, growth in blockchain use outpaces growth in hard drive space standards when accumulating ledger lines.
When this happens, the blockchain network is at the risk of losing nodes. The reason for this is each node requires to possess a copy of the full ledger stored on their machines.
Now that you have understood the pros and cons that blockchain technology may possess for your small business or startup, it is time for you to understand how you can start your small business revolution.
Here are four different ways to help you with your incite startup transformation or a mighty small business revolution leveraging the power of blockchain technology:
3. 4 Ways to Transform Small Business With Blockchain Technology
The four different ways blockchain technology can enable a small business revolution are:
1. Smart Contracts
Blockchain-enabled smart contracts can automatically create, track, and modify contracts. These smart contracts are self-executing contracts with the terms of the agreement between the two parties, namely the buyer and seller being written directly into the code. This agreement written in code exists across the decentralized and distributed blockchain network. These code-controlled and deployed transactions are not only trackable but also irreversible.
One good example of this is royalty payments. If you have created and sold a patent, a smart contract can be used to collect license fees when due automatically. As transactions from both sides are automatically verified, all parties can know that the terms have been met.
2. Smooth payments to vendors
Recently, one of the major reasons that small businesses use blockchain technology is to enable smooth online payments. Blockchain allows for digital payments. Not only are digital payments safe, but they are also convenient.
Moreover, one futuristic use of blockchain when it comes to financial transactions is: businesses utilizing blockchain to pay sellers and providers with cryptocurrency, yet this is not mainstream; it’s even not out of reach.
Saving on transaction charges, safe and convenient transactions make cryptocurrency a likely business possibility in the coming years.
3. Supply chain operations will be streamlined
The applications of blockchain are limitless. They are not only used for cryptocurrency and other financial services, but they are also widely used in the ease of management of supply chains. Blockchain technology allows businesses to keep an immutable record of various transactions and variables across the supply chain. This makes it easier to manage, store, manufacture, source, and distribute raw ingredients, materials, and products.
Blockchain, when combined with other technological advancements like the Internet of things, Machine Learning, and Artificial Intelligence, can do wonders for SCM.
Here's how blockchain technology can help supply chain management:
- It increases transparency and access to information to all
- Does rapid troubleshooting of waste of endproducts and inefficiencies at any point in the transit
- Useful in the authentication of goods.
- Captures and verifies the number of products or units
- Tracks the location of goods at any time
- Maintains suitable conditions for the products in the transit
4. Getting funds for businesses and start-ups globally
The advent of blockchain helps you raise funds globally since digital currencies offer opportunities for investors across the world to fund your small business or startup securely from any different part of the world.
If you're considering raising funds for your startup, it's always a good idea to pitch to investors across the globe. Because not only you're more likely to be understood, appreciated, and draw constructive criticism from global leaders, but also you might end up getting the funding you deserve.
Blockchain technology is pioneering the evolution of capital raising by increasing the number of ways early-stage startups or small businesses can access funding.
Three blockchain-based businesses can fulfill their funding needs: initial coin offerings, security token offerings, and initial exchange offerings. These are also collectively called blockchain-based offerings (BBOs). These new capital-raising mechanisms or BBOs have helped businesses raise a staggering $30.6 billion between 2017 and Q2 2019.
I hope with this blog you have found the right recipe to bring about a startup transformation or a small business revolution. Blockchain technology when paired with Artificial Intelligence, Machine Learning, Robotic Process Automation, Internet of Things, can give your small business startup the right foundational pillars needed to disrupt the market now and in the future.