As the hype continues to grow and organisations adapt, we are starting to see a gradual evolution of the blockchain ecosystem in 2020. Of course, as a technology with truly revolutionary potential, much remains unexplored. But enterprise-level deployments of blockchain technologies in sectors as diverse as fintech, the Internet of Things (IoT), cybersecurity, logistics, the supply chain, insurance, and digital media are all a reality now, and in the years to come.
Predictably, large multinational corporations such as Amazon, IBM, and American Express have implemented blockchain into their operational practices, but so too are newer startups such as Circle, Ripple, and Gemini. Therefore, it's worth exploring what blockchain technology can offer small businesses, and whether or not it's worth getting on board.
To get a clearer picture of the benefits of blockchain, here are some of the ways that it can improve your organisation.
Blockchain in Small Business: The Current Picture
There is no doubt that the growth of the internet has led to a certain level of democratisation when it comes to access to technology. In the past, for instance, only large corporations had the wherewithal to afford cutting edge tech.
These days, however, we are bearing witness to a faster rollout of new technology to small and medium-sized enterprises than ever before. Blockchain has definitely gone mainstream in this regard, but we are still some distance away from seeing large-scale adaptation by SMEs.
This is because further progress is still required in fleshing out services based on blockchain. Many implementations of the technology are still in testing and experimental stages, while regulations are another area in which small business has a lot of catching up to do.
Nevertheless, the fact that big brands are spending hundreds of millions of dollars is a clear sign that blockchain is here for the long haul, and that business owners looking to future proof their enterprises should be looking to adopt and implement blockchain when the scope of its practicality becomes clearer.
The Benefits of Blockchain for Business
Here are some of the more viable ways in which it could be adopted to your organisation's benefit:
Small businesses are almost always in search of reliable sources of finance, be it starting capital, short term loans to solve cash flow issues, or trade finance. Unfortunately, access to credit is a major hurdle for SMEs in most parts of the world.
Blockchain can change this, though. Credible studies by Bain & Company, the World Economic Forum, and the Asian Development Bank have all found that blockchain can enhance transparency and consensus mechanisms, bypassing traditional verification methods and widening access to funding for entrepreneurs that would have previously been denied or overlooked.
Blockchain – and, in particular, peer-to-peer (P2P) funding – can provide solutions in emerging markets, too, where banking systems are grossly underdeveloped. Indeed, entrepreneurs in emerging markets have the most to gain, with the Harvard Business Review recently claiming that the world's next big brands and platforms will be "born far away from the traditional centers (sic) of technology development".
This isn't just speculation, either. Alternative forms of finance have already made huge inroads in China and Southeast Asia using P2P networks, and it has proven a viable form of finance for small businesses in the early stage of their growth. Companies can use blockchain-based funding platforms to issue "tokens" of equity, with interested investors then buying these tokens and injecting fresh funds into the business. As in smart contracts (see below), the distributed ledger can be programmed to automate the complex paperwork involved, while at the same time maintaining transparency. There are already such platforms in place, using the popular Ethereum ecosystem.
Cash Flow and Smart Contracts
Small businesses are plagued by delays in payment of invoices, often leading to cash flow issues that can snowball into significant problems. Indeed, in many industries, the existing system of contracts is bloated and ineffective, requiring authorisation at several levels on both the buyer and supplier sides of the transaction.
With blockchain's distributed ledger technology (DLT), though, buyers and vendors can create smart contracts. The terms of such a contract would be programmed through code and remain stored securely with both parties having access. When the goods or services are delivered by the vendor, the programme would then execute the code, quickly authorising payment on behalf of the buyer. Since the DLT is both secure and transparent, all parties would be free to verify the validity of the contract execution.
This has the potential to speed up the clearance of invoices in business organisations drastically. Faster payments will reduce the chance of cash flow woes, while also reducing the expenditure on verification and validation of contracts. Crucially, it can also remove the need for a middleman such as a bank, escrow provider, or third-party payment provider, mitigating the need for unnecessary commission payments while still ensuring that both parties are legally protected.
Logistics and Supply Chain Management
These days, even small businesses have access to global supply chains spread across continents. However, while increasing choice and access to cheaper suppliers, this openness also comes with additional challenges related to compliance and quality control. Enter blockchain.
Compliance and Quality Assurance
Blockchain deployments in logistics can make it easier for small businesses to check the origin of their raw materials and components. When both vendors and buyers use the same platform, they both get full access to the records of the transaction.
The main advantage here is the immutable nature of the distributed ledger; once a record is created, it cannot be altered by any party. This allows you to reliably verify if the supplier has complied with the relevant quality standards.
Keeping track of shipments is another area where a combination of IoT sensors and blockchain software can make a huge difference. When all the records are placed in a decentralised ledger, you can get real-time visibility on the status of your shipments across the globe.
Many companies have already started incorporating blockchain into their logistics management; Maersk, FedEx, Walmart, and Nestle all use blockchain to track their global shipments. It is only a matter of time before this capability is accessible to small businesses, too, which will provide unprecedented levels of accuracy and information within the supply chain management cycle.
Gaining Access to Blockchain
Of course, cutting edge digital technology can be incredibly expensive to acquire and maintain, which is why large, resource-rich corporations such as Amazon, IBM, and Microsoft have restructured their business models to incorporate the provision of cloud-based services. While they take care of the costs of installing and maintaining huge cloud storage facilities, SMEs get access to innovative services.
Unsurprisingly, then, it is expected that blockchain will work in a similar way in regard to access for small businesses. Much like Software as a Service (SaaS), Blockchain as a Service (BaaS) will have several benefits for small businesses; with minimal infrastructure investment, you will be able to upgrade your systems to handle blockchain-based services.
Such a delivery system also reduces the need for extra staff to maintain and troubleshoot your blockchain services. It will be up to the service provider to handle these aspects. Services available using this model will range from data storage to record-keeping and smart contracts, although, as touched upon already, the full scope of blockchain's potential is, as yet, still unknown.
If you are still sceptical about the benefits of blockchain for your business, then consider what its enablers are saying: the value of BaaS provision is expected to grow to $24.9bn by 2027 according to Fortune, and SMEs are expected to play a huge role in that growth.
Therefore, you would be wise to keep an eye on blockchain developments, and consider the ways in which it can grow, develop and streamline your organisation in the years to come. Much has been made of emerging technologies in the business world, but few have the potential to disrupt and reinvent the world in the same way as blockchain. Ensure that you are on the right end of the change, as it will inevitably come.
What are your thoughts on the implementation of blockchain in small business operations? Will it revolutionise the way you do business? Or will the effects be minimal? Let us know in the comment section below!
Additional content provided by Sion Phillpott.