The year 2008 transformed the way people viewed financial transactions due to the advent of Bitcoin. It was a perfectly functional currency without the need for a central authority bank and was, above all, backed by no commodity. The truly revolutionary concept of this currency was the way it tracked transactions. Every transaction which takes place would be stored in a single, unchangeable, continuous record which is completely open to the public. This record is termed as the blockchain. Blockchain has, in the past decade, disrupting every industry in the best possible way.
Talking about the e-commerce industry, in particular, blockchains are a perfect fit as they are designed to store transactional data. The concept of online selling has only become exemplary over the years due to the profound influence of technological innovations. The latest among these is blockchain technology, which is all set to revolutionize the nook and corner of every industry with its immense potential. From eliminating intermediaries to streamlining operations, blockchain has a lot to offer to the e-commerce sector.
Before analyzing the various use cases of blockchain for e-commerce, let us first understand the terms blockchain and e-commerce.
What Is Blockchain?
A blockchain can be explained as a decentralized digital record which stores a list of transactions in blocks over a peer-to-peer network. These blocks are linked by a cryptographic value. This allows verifying the authenticity of each data. As we know, cryptography refers to the study of techniques for secure communication. The blocks on a blockchain are linked with each other. The blocks on a blockchain are immutable, which means that they cannot be tampered with or modified once they are created. This way, a level of trust is created between the participants of a blockchain network.
What Is E-commerce?
It is the act of buying and selling goods or services on the World Wide Web. Money and data are transferred to execute these transactions. It is the sale of physical products on the online space and it can also refer to any commercial transaction which is facilitated through the internet. The first-ever e-commerce sale happened on 11 August 1994, when a man sold the CD of a music band to his friend through his website. Since then, e-commerce has evolved to greatly simplify the discovery of products through online retailers and marketplaces with the click of a button.
We will now analyze the top 10 solutions blockchain offers to e-commerce.
1. Faster Transactions
As pointed out by Monetha, a payment processing company operating on the Ethereum blockchain, the total fees of traditional payment processing systems which involve about 16 steps can range from 2% to 6%. Considering the numerous parties involved in a transaction, simplifying the transaction process can benefit both the customers and merchants.
As blockchain transactions occur on a single network, the need for intermediaries is eliminated. Transaction speeds are determined by the network speed and the speed at which new blocks are generated.
2. Enhanced Operational Efficiency
Blockchain, with its decentralized model, has the ability to streamline operations and drive efficiency into them. Intermediaries such as payment processing and logistics partners can be regulated through smart contracts. Visualization across supply chains can be greatly improved as it provides a series of recorded, uneditable data. Due to the decentralized database, stores can have complete ownership of their assets such as products, photos, descriptions, videos, reviews, digital storefronts, etc. Consumers can have access to complete information such as the origin, processing, and components of products.
3. Dependable Data Security
A centralized e-commerce store always remains vulnerable as it can easily fall prey to weak encryption. Even systems which are well-encrypted can get encrypted owing to the tricks used by modern hackers these days. In a blockchain system, it is impossible to hack from a single point of entry, thanks to its decentralized ecosystem. Having blockchain-based e-commerce will prevent hackers from breaking into networks and gaining access to sensitive consumer information and databases. This will also ensure that the business complies with data security regulations.
4. Trust And Transparency In Payments
A blockchain system brings in transparency in transactions. This fosters the trust of the buyers. Every transaction is stored in a shared ledger and it cannot be tampered with by anyone. The advantages it offers to an e-commerce system are high security, visibility, faster processing speeds, and traceability. Cryptocurrencies lower transaction costs for international e-commerce stores.
5. Optimized Supply Chain Management
It increases the overall efficiency of the supply chain. Based on the company size and type of the product, the supply chain may involve multiple intermediaries, span across continents, and involve a humongous number of payments and invoices. This makes it highly tedious for e-commerce and retail businesses to attain the required level of transparency for their supply chain processes.
Blockchain helps in better storage tracking of product data, thereby allowing any product to be traced throughout its lifecycle such as who made the product, where did it come from, where was it stored, who purchased the product, and who processed the order. Records on order, sales, purchase, inventory, and other information cannot be erased or changed if stored on a blockchain. Blockchain makes a supply chain more transparent, fraud-proof and integrated. This helps save considerable resources.
6. Integration With Business Processes
A blockchain does more than just processing online payments. It has the power to interface with both existing and new systems. From the standpoint of an e-commerce vendor, it means that he can create tie-ins between the online stores and a wide range of processes, partners, and internal and external systems. Blockchain provides a shared ledger which serves everyone such as the online store, external entities, and companies. A blockchain provides a vendor with a wealth of opportunities.
7. Verified Customer Reviews
Today, online reviews are both a curse and a blessing for e-retailers. Buyers turn to reviews before purchasing a product. Positive reviews will contribute to the sales of the product. But sometimes, a few dishonest sellers might publish fake reviews. Competitors might also generate negative reviews which will, in turn, affect the goodwill of their rivals. With a blockchain, product reviews can be verified. This modifies the logic behind creating and publishing reviews. This way, a robust foundation is laid for industry standards which results in a win-win for all the involved parties.
8. Personalized Product Offerings
Blockchain helps capture customer purchasing history. The full control of this information is given to buyers and they are given the privilege of sharing it with the merchants of their choice. With this information, companies will be able to provide customers with products and services which fulfill their preferences. Personalized offers and loyalty programs will help improve sales and enhance customer satisfaction.
9. Channel Expansion
Blockchains and cryptocurrencies have brought about a wave of decentralization to e-commerce by creating marketplaces where anyone can sell their products and services. Though the transaction volumes on these marketplaces may be pals when compared to the typical e-commerce volumes, these user interfaces help merchants target the cryptocurrency-savvy community and expand their retail channels.
10. Improved User Experience
An e-commerce system backed by a blockchain eliminates the need for multiple gateway logins while backing purchases with enhanced security. It eases customer concerns and provides visibility, which helps spread adoption.
Having seen the extensive benefits blockchain can offer to e-commerce, it becomes imperative for businesses to embrace it in order to achieve expansive growth. The blockchain serves as the ideal solution for any enterprise looking for a system to manage customer data in a reliable and transparent manner. Blockchain reduces the dependence on paper-based legacy systems. Blockchain is undoubtedly the most befitting technology partner for any e-commerce business.