Blockchain technology is becoming the driving force for global financial transactions. With worldwide ecommerce revenue set to hit the $135 billion mark by 2023, the adoption of blockchain technology isn’t just a passing idea anymore.
But, how is blockchain technology shaping ecommerce? Most industry experts believe it will shape ecommerce in many favorable ways. But, before we get in to how it may affect ecommerce, let’s review what it means and the different types out there.
What is Blockchain Technology?
A blockchain is a shared (or distributed) ledger that allows digital assets to be stored securely, shared, and acted upon (either automatically or manually).
So, in laymen’s terms, blockchain is kind of like a Google Doc or Google Sheet: anyone with access can update it in real-time, see who updated it in the past, what was updated, and so on. This is great because every transaction is transparent, and everyone can be held accountable. It removes the possibility of corruption and other shady business deals.
Here is a great breakdown of how it works:
Types of Blockchains for Ecommerce
Essentially, blockchains are nothing more than special databases coupled with sophisticated software that connects them to the outside world.
However, not all blockchains are created for the same uses. Blockchain technology has the capability to handle the whole user experience, including searches and selection of products, payment processing, and post-transaction customer service.
For ecommerce purposes, there are four types that are typically used.
Bitcoin was the first cryptocurrency and the main reason blockchain technology was created. It is now accepted by many mainstream companies such as Shopify.com, Tesla, and Microsoft. More ecommerce retailers are also accepting Bitcoin as payment for their products. Adding Bitcoin to the payment options you accept is a fairly straightforward way to start using blockchain.
Like Bitcoin, Ethereum is a cryptocurrency framework, but it has some benefits and drawbacks that make it different from its older counterpart. Ethereum isn’t as widely accepted as Bitcoin, but its network is able to host other cryptocurrencies. It’s also the platform most commonly used for hosting smart contracts.
Ethereum is a practical platform for ecommerce businesses that need a location to operate their own full-fledged blockchains.
While IBM doesn’t offer its own cryptocurrency, it does provide users with a powerful platform that is ideal for larger ecommerce blockchains. From tracking shipments to keeping up with each step of a food supply business, the sky is the limit with IBM.
Ecommerce sellers also have the option of using custom-built blockchain solutions. Obviously, this is the most flexible option as it allows users to build exactly what their businesses need. Additionally, it can be a cost-effective choice than other SaaS platforms.
Benefits of Blockchain for Ecommerce
Online security threats, competition, and changing customer expectations are all daily concerns of ecommerce business owners. Blockchain technology can solve many of the challenges ecommerce sellers face. Three of the main benefits of blockchain are:
Distributed ledger technology (DLT) provides the highest level of security out there for online database platforms. In fact, to date, there have been no verifiable breaches of a major blockchain framework. It offers a security level that ecommerce retailers need.
Using blockchain technology allows retailers to combine inventory management, payment processing, product descriptions and images, and other key business processes. Merging all these operations in one place allows ecommerce businesses to operate fewer systems. It also means fewer IT support employees and administrative tasks.
Blockchain isn’t merely a payment processing solution. It can integrate with a host of internal and external systems that ecommerce vendors already have in place.
How Blockchain Technology is Revolutionizing Ecommerce
As the acceptance and usage of DLT continues to grow among ecommerce businesses, the number of ways that retailers can engage and service their customers increases exponentially. Currently, there are just a few methods that blockchain technology is used in ecommerce (described below). Expect the number of practical applications to continue to grow in the not-so-distant future.
This is the most popular application of blockchain. Essentially, a smart contract is a small program that allows sellers to create and execute legal documents, without an attorney or notary present. This could be used as an invoice, receipt, or other type of agreement.
You can track stock quantities by updating as they sell (as with any other inventory management software), and automatically reordering when it reaches a predefined threshold. There are a multitude of other functions you can automate to ensure that you never run out of stock or have excess stock collecting dust on shelves.
Blockchain technology can keep track of product descriptions and images and share updates to your online store, suppliers, and content creators.
Loyalty Rewards Programs
You can completely automate customer loyalty rewards programs.
Supply Chain Management
It’s essential that ecommerce retailers stay on top of their supply chain operations. Blockchain allows retailers to track every step of the supply chain, ensuring transparency with the amount of products ordered, where those products came from, and when they arrived.
Final Thoughts about Blockchain Technology for Ecommerce
Ecommerce business owners all over the world are beginning to turn to blockchain technology as a way to operate more efficiently at a lower cost.
While payment processing is the main application of blockchain for ecommerce right now, it is set to revolutionize many other processes in the near future. It’s faster, cheaper, and sure to become much more mainstream for ecommerce businesses very soon.
Have you used blockchain technology before? Let us know how in the comments.