We are living in a highly digitalized world where data and privacy breaches are a big problem. While blockchain technology was initially used for cryptocurrencies like Bitcoin and Ethereum, it has quickly evolved into one of the best instruments for transparency and safety in all imaginable industries. Thanks to blockchain’s decentralization and cryptography, businesses can boost customer trust and build strong and long-lasting bonds.
With its help, waiting for phone calls on disrupted transactions or missed deliveries is in the past. Everything is recorded in the system and customers can access information at any time which improves positive user experience. In this article, we will enumerate 5 other reasons why businesses should start using blockchain technology today!
What is blockchain technology?
Let us start with a definition. Don’t worry, there won’t be abstruse sentences here! Blockchain technology is a database mechanism that ensures data sharing within a network. This technology keeps information in separate blocks that are linked together. The data follows a logical and chronological order because it is impossible to change or delete the chain without approval from the network.
This database has proprietary mechanisms against unauthorized entries and offers a shared view of the processes. Consequently, blockchain technology remains unchangeable and is used in multiple industries where transparency and the absence of violations are crucial. For example, financial transactions, order tracking, accounting, and so on. The main three features of blockchain are:
- Decentralization. All decisions regarding information are made throughout the network, not in a centralized entity like a person, group, company, or government. Participants can’t exceed authority or modify information without someone else’s consent. This boosts trust and adds transparency to all the processes.
- Consensus. Blockchain technology has clear rules regarding transaction recording. You can do it only if most of the network participants agree.
- Immutability. Once the data is recorded and shared within the chain, no one can alter or delete it. If the record contains a mistake, a user adds another record to reverse the previous one and both of them are seen to the network.
As a business owner, you have probably faced traditional databases in the past and witnessed their imperfections. For example, the payments are delayed or customers claim that they haven’t received the package. The dispute begins and may cost you lots of time and money.
To avoid all these problems, you can use blockchain technology which has a decentralized and irreversible nature. Both the seller and the buyer have a separate ledger and all activities like transactions or delivery need to be approved by all parties in order to be fulfilled. No misunderstandings, frauds, or intermediary intervention.
How to build consumer trust using blockchain
Now, that you know what blockchain is and how important it is for your business, let us dive deeper into the subject and discuss 5 ways how businesses can utilize this technology to their advantage:
- Better security and data protection;
- Smart contracts;
- Fast and immutable transactions;
- Management of customer data;
- Transparency of supply chains.
Improved security and privacy
The first and probably the most known advantage of this technology is its top-notch security. Traditional databases and systems managed by individuals or governments have a long record of malware, data breaches, and hacker attacks. Just think of it: a single mistake can harm the entire system and you might lose tons of valuable data and, consequently, your customer’s trust.
This never happens with blockchain technology. Thanks to its decentralized nature, the information is shared across several nodes and it becomes near-to-impossible to access sensitive data and alter it.
Moreover, this technology is based on cryptography algorithms which were initially used in Ancient Egypt to make texts unreadable. Nowadays, blockchain uses asymmetric-key algorithms and SHA-256 hashing to keep the information protected and secure. All members of the database use private or public keys to control the data and ensure its privacy.
At least once, you have probably read about smart contracts and thought that the concept is too difficult to master. Let us assure you that it is more than simple! A smart contract is nothing more than a program stored on a blockchain that is executed with the indicated conditions when they are met. Smart contracts are commonly used for different types of agreements without a need to engage third parties.
They follow a ‘if…then’ statement which is written in the blockchain code and is executed when these conditions are met. For example, releasing money to another account, registering properly, sending a ticket, and so on. When the transaction is finalized, the blockchain is updated and the process can’t be reversed. All parties with permission can see the result which also adds transparency to the process.
A great feature of smart contracts is that they can include as many conditions as needed. To establish them, participants should agree on the rules, add exceptions, and come up with a framework for possible disputes. Then, a smart contract is developed by a software engineer. Companies can also use online builders or templates if the smart contract doesn’t have many conditions.
As you understand, the biggest advantage of this technology is that all parties engaged in a smart contract meet their promises and no one risks their funds or sensitive information because they are released only when all the conditions are met.
Fast and irreversible transactions
We believe that transparency is the foundation of consumer trust and long-lasting partnerships. That is exactly what blockchain is made for – its participants can manage transactions without expecting approvals from central authorities. All changes should be agreed upon by nodes of the chain which eliminates the risks of any harmful or fraudulent actions.
Irreversible transactions also contribute to consumer trust because once it is recorded in the block, it remains permanent and no one can change it. This feature is crucial for manufacturers of high-demanding goods where originality is important.
If your company works tightly with finances, we recommend paying attention to Decentralized Finance or DeFi, a new but promising blockchain application. It aims to improve traditional financial systems and eliminate the need for intermediaries. DeFi is based on permissionless blocks and allows borrowing, trading, and lending funds bypassing centralized institutions and governments.
Users engage directly with the blockchain which reduces the risks of violations or fraud. Some even call DeFi and new democratic system which ensures that financial services are accessible to any person in the world.
Customer data management
The fourth reason to use blockchain technology to build consumer trust involves customer data. Nowadays, everything centers around information and every day businesses collect and process huge amounts of information which may lead to mistakes or misuse. But don’t worry because blockchain has a ready solution for how customers and businesses can control data without fear of losing it.
Instead of keeping sensitive information on centralized servers, customers or companies store it on the blockchain. When they need access to a certain piece of data, they ask for permission and the user grants or rejects it through cryptographic keys that we have discussed above. Thus, the information remains encrypted and data owners know that no one will access it without their permission. Is there a better way to create a trusting relationship between you and your customers? We doubt it!
Transparency of supply chains
Another important feature of blockchain technology that can build consumer trust is the management of supply chains. With a traditional approach, this process takes lots of time and nerves and includes lots of mediators which reduces transparency and efficiency. Luckily, blockchain can fix the situation and make supply chain management transparent and automized.
When combining the Internet of Things and blockchain, businesses can track their goods at every stage of the process in real-time. This eliminated a rather common problem – counterfeit products. Businesses assign each product with a unique code and customers can use it to verify the originality of the purchase. This is especially crucial for high-demanding industries like medicine and pharmaceuticals where originality and quality are the highest priority.
Thanks to blockchain technology, you and your customers can be sure that the products meet the highest industry standards and are packed and delivered on time. As you understand, this is a great way to build consumer trust and establish yourself as an authentic and responsible brand.
Blockchain technology – your investment into consumer trust
Blockchain technology has huge potential and is expected to grow at 85.9% CAGR by 2030. It is able to build consumer trust thanks to improved transparency, security, and efficiency. Smart contracts, transparent supply chains, and management of customer data provide consumers with confidence and ensure their eagerness for further cooperation.
As blockchain technology evolves, it changes the way enterprises do business. They create more transparent systems, apply ethical practices, and place relationships first. We hope that our article persuades you that blockchain technology has many advantages for your business and you will test it without any delays. Good luck!