Often called the engine of the global economy, blockchain technology is poised to become the engine that drives financial transactions worldwide. With the global eCommerce market expected to reach $135 billion by 2023, it is clear that adopting blockchain eCommerce technology in the near future is more than necessary.
A blockchain is actually a database in which bits of information, called blocks, are linked into the chain. The database is shared and managed by many parties which makes it a trustworthy system in which irregularities are easily spotted.
Blockchain technology enables distributed public ledgers that hold immutable data in a secure and encrypted way and ensure that transactions can never be altered. There are two forms of blockchain - decentralized and centralized.
Centralized forms require knowledge of the participant’s identity while the central organization stores the data.
Decentralized blockchains tend to be permissionless, which means that anyone can participate anonymously. There are several unique advantages of blockchain:
- It decentralizes control over assets and achieves trust that is based on consensus without the need for a central authority
- The technology is fundamentally transparent
- Blockchain allows customers to connect with each other or with companies excluding the middlemen
These peer-to-peer connections give users full control over transactions. For example, let’s say that you feel reluctant to pay for merchandise until you receive the package you ordered. Blockchain technology enables just that - only when you confirm the receipt the money will be transferred to the seller. This is done automatically through coded instructions called smart contracts.
In its nature, a smart contract is a digital agreement between parties that automatically executes itself. It consists of a couple of lines of code that specify the details of the contract between parties. This omits the middlemen, which significantly lowers the costs of transactions while at the same time increase transparency and trustworthiness.
Electronic commerce or eCommerce is best defined by five activities:
- Commerce implies the matching of customers to retailers and the establishment of transaction terms.
- Collaboration means creating a connection between individuals that may surpass national boundaries, time, and organizational affiliation.
- Communication implies interaction through the distribution channel of goods.
- Connection is the ability to establish a network of contacts.
- Computation implies the computational and storage resources that are enabled by the internet infrastructure.
Ecommerce is an exchange of goods between parties enabled by a globally standardized network structure that brought down the barriers that were limiting cross-border exchanges.
How eCommerce became a large part of our everyday lives
Under the influence of growing trends as well as the global pandemic, our shopping habits have changed along with our everyday lives. During the times of social distancing people are ordering online everything from home appliances to groceries. Today, there are so many platforms that strive to make life easier for their clients while claiming to provide data protection. According to the New York Times, eCommerce sales increased by 38% in the United States during the COVID-19 pandemic. While eCommerce platforms offer many advantages like flexible buying hours and the ability to shop while at home, they do come with risks.
Customers reported a large number of frauds where a transaction is made but no product was delivered. Even the products that were delivered were of questionable quality. Sellers, on the other hand, reported logistical challenges as well as difficulties of getting to know their customers through online market platforms.
While the eCommerce itself evolved with the adoption of new technologies that aim to provide a more secure environment for both sellers and buyers, online paying methods have remained relatively unchanged. Sales are usually processed through credit cards, and this adds extra expense.
This is where blockchain enters the scene
With Bitcoin, Safex Cash, Safex Token, and other cryptocurrencies being the most popular examples of its usage, blockchain is on its way to becoming the primary technology for facilitating financial transactions around the world. An increasing number of app development businesses are discussing the probable application of blockchain technology for eCommerce. The use of blockchain for eCommerce would help in establishing a revolutionized economy and facilitating cross-border trade while making the transactions even quicker and more secure than ever. It can manage end to end user experience, from product search and selection to payment and post-sale customer queries.
There are four types of commonly used blockchains for eCommerce:
- Bitcoin - Bitcoin is a cryptocurrency that has been adopted by many popular organizations, such as Tesla, Microsoft, Google, and Shopify.
- IBM - While IBM doesn’t have its cryptocurrency, the blockchain platform they offer is powerful for online retailers with large and complex operations.
- Ethereum - Ethereum is a cryptocurrency much like Bitcoin, but less widely adopted. However, its network is capable of hosting various other forms of cryptocurrencies. The most notable use of Ethereum is hosting smart contacts.
- Custom - This is the most convenient and flexible blockchain solution for eCommerce since it can help businesses customize blockchains to match their business goals and objectives. It is also highly economic to use to boost the profit margin in the long run.
The upsides of blockchain for eCommerce
Integration with business processes
Blockchain has the ability to easily integrate with new and existing systems. For an eCommerce retailer, this means integration between their web store and numerous internal and external processes, systems, and partners.
Blockchain can combine product images and descriptions, online payments, and inventory management with other business processes. This brings reduced system maintenance, a lesser requirement for IT support personnel, and fewer administrative activities. For eCommerce businesses, this means investing more time in the core business operations and less time in managing an eCommerce store. Additionally, blockchain is an open-source technology with no central entity that keeps and owns the platform. It equally belongs to all users.
Ease of use
Currencies powered by blockchain are extremely easy to use. Unlike with traditional currencies, there is no need to visit a regulatory authority to register an account, since you can accomplish this process from the comfort of your home. Further on, creating your account is free.
Traditional transacting takes an enormous amount of time since transferring money across countries and continents may take up to several days. On the other hand, blockchain-based transfers are very swift. It takes only a few minutes to accomplish a money transfer. Unlike banks and other intermediary institutions, blockchain technology has no working hours. As every transaction is made within the network, transfers can be processed anytime, from anywhere, and almost instantaneously.
Distributed Ledger Technology facilitates the highest level of security for online databases. Although there have been some examples of vulnerabilities or loopholes, there have not been any verified frauds occurring due to a major blockchain backbone framework. Even a single data attack can cost an eCommerce retailer millions in revenue, not to mention a blow to their market share and reputation. Since blockchain is decentralized, the data stored in it are also decentralized. Blockchain provides a level of security that safeguards the entire data structure and prevents possible data breaches in the future as it is virtually impossible to hack an entire blockchain.
Another major advantage of adopting blockchain technology for eCommerce is that it allows for incorruptible visualization of supply chains. once the blockchain gets widely adopted, the entire chain of events of a product will be only a click away. You will be able to find out whether a product is authentic, organic, whether it contains chemicals, and much more, directly from the blockchain. Since information on the blockchain can not be tampered with, supply chains will be completely transparent and customers fully informed.
Blockchain technology can make for a secure and efficient backup system for companies. The technology can perform many tasks such as:
- Inventory control
- Payroll system
With the addition of thresholds, limits, and timestamps to blockchain applications, the managerial processes will become fully automated vastly reducing the costs of running a business.
The best example of using blockchain technology for eCommerce
Safex serves as a great example of how to integrate blockchain technology in the eCommerce marketplace. It is an open-source, privacy-based decentralized marketplace. Safex’s forward-looking team understood very early all the benefits that blockchain implementation into eCommerce may bring. Their blockchain was developed along with their ASIC resistant proof-of-work cryptocurrency Safex Cash. The low barrier to entry offers the opportunity for small businesses to enter the digital age. Safex provides a user-oriented experience with a low 5% fee and charges only $0.01 for a product listing. This way users can privately shop at a lower price and sellers can reach their maximum profit margin thanks to low fees and fair prices.
It is evident that there are massive opportunities and benefits of blockchain technology for eCommerce vendors. In the fast-paced digital retail world, keeping an edge over your competition is crucial. From adding transparency to your transactions to safely managing your customers’ data and lowering fees and costs, blockchain technology will keep you at the top of your game.