When you think of blockchain technology, chances are it’s in connection with cryptocurrencies. But that’s only scratching the surface of what it can do.
Here’s a brief look at how blockchain technology works and how you can use it to give your small business an edge.
What is Blockchain Technology?
Blockchain technology — or, more simply, the blockchain — is a database of independently-verified information. Think of the blockchain as an incredibly large spreadsheet. There are copies of it on thousands of computers, called nodes. And these nodes connect to each other, forming a chain.
When you make a new entry, every copy on the chain gets updated. Every entry has a time-stamp too, so tampering after the fact is almost impossible. The blockchain is also cryptographically secured, which makes hacking extremely difficult.
How Does Blockchain Technology Process Information?
Step 1: The information enters the blockchain. The data could be the details of a financial transaction. Or something else altogether, such as the details of a contract.
Step 2: The information, together with a unique, encrypted digital signature, goes through the network of nodes in the blockchain for verification.
Step 3: Each node carries out a series of complex mathematical calculations to validate transactions based and achieve the distributed consensus. This algorithm is known as proof of work, or proof of stake.
Step 4: If a majority of nodes agree that the information is correct, it gets verified. The validation leaves a permanent record on the blockchain.
What are the Advantages of Blockchain Technology for Small Business?
Blockchain technology has many advantages. These include:
It’s cheaper than traditional technology. Simply because it uses a vast, decentralised system of nodes, so there’s no need for go-betweens
It’s safe. The information has a time-stamp, so tampering is extremely difficult. What’s more, there’s a copy on every node in the chain. So, if a node leaves or runs into issues, this won’t affect the database
It’s simple and saves time. The blockchain acts as a single, shared database that’s always updated. If you’re on a blockchain network, there’s no need to create and maintain your own database
It’s transparent. Everyone on the network can see what’s on the blockchain (as long as they have access through a secure key). Consequently, there is no room for disagreements or arguments.
How Can Blockchain Technology Help My Small Business?
While we usually associate blockchain technology with cryptocurrencies, you can use it with any type of digital data. The possibilities are endless.
Here are just four ways you could use blockchain technology to help your small business run more smoothly:
Blockchain-based apps like SmartContract or BlockCat can monitor, execute and enforce legal agreements. Let’s say you’re a writer. You agree to deliver an article on the 28th of the month. A smart contract app can check whether you’ve delivered the work. Once it confirms delivery, you immediately receive your fee — no need to chase for payment.
Is your small business involved in shipping or logistics? Use a blockchain app like Modum to keep track of deliveries in real time. Without getting bogged down in paperwork.
Blockchain-based cloud storage apps like Sia and Stori allow users to rent out hard-drive space from each other. At the same time, the platform keeps everything encrypted and allows access to the data only if you have a special key.
Blockchain-based apps such as CoinPip can handle international payments, including payroll, in several different currencies almost instantly. And because there’s no need for financial intermediaries, fees are a fraction of what you’d pay a traditional bank.
Tips on Getting Started with Blockchain Technology
So you’re sold on the benefits of blockchain technology. But how do you start using it in your small business? Well, here are a few tips:
First things first, study up as much as possible. While the blockchain has a ton of potential, there are also pitfalls you need to be aware of. Thus, it’s best to get up to speed before you dive in.
Blockchain for Dummies–which you can download as a pdf for free–and The Business Blockchain book are great places to start
Understand the why. As with any new tech, incorporating blockchain technology into your business will involve a learning curve. Before you invest the time, make sure you’re doing it for the right reasons. Typically, this means a blockchain-based app is going to save you time, money or otherwise make your life easier in the future
Start small. Pick one app and get accustomed to it instead of going all in. Working with one app will give you time to adapt instead of having to cope with a slew of changes at once
Choose wisely. The blockchain is a huge deal right now. Which means hundreds of developers are launching apps to try and ride the wave, even though they might not be mature enough as yet. We suggest proceeding with caution. Look up reviews online and, wherever possible, take the app out for a spin before you commit