Over the past couple of years, we’ve witnessed an unprecedented rush into digitalization and onto the virtual commerce stage. Although trends were already moving in this direction, a sudden pandemic and social distancing mandates pushed this digital migration into hyper-speed, and just a few years later, we’ve witnessed a huge boom in e-commerce and rapidly shifting branding and consumer expectations. Along with this digitalization, we witnessed the explosion of technical terms into household discourse. Famously and namely: the blockchain.
Everybody has heard of the blockchain at this point, but when looking under the hood, it can seem much more complicated than anticipated. Fortunately for everybody, however, this complexity is precisely what drives the blockchain as a secure and successful tool that businesses can use in various capacities. Let’s take a closer look at what the blockchain is, where it comes from, and how brands might find it useful.
What is the Blockchain?
In an exceedingly simplified yet accurate word, the blockchain is a ledger. Some nice visuals might help fully digest the concept, but at its core, blockchain is ledger that is “consensually shared, replicated, and synchronized.” Consider a group of friends that go out to dinner together regularly, and who can never seem to split the check evenly—someone is always loaning somebody else a few bucks. They could try to work it out every night, or they can simply keep track of the transactions moving forward on some ledger that they all keep tabs on. At the end of each month, let’s say, they settle the differences.
To make this more robust, consider that some nights only part of this group goes out. This means that, at first glance, not everybody will have the same ledger at the end of the month. Many implementations of the blockchain solve this problem by accepting that the ledger with the most calculations is accepted as the correct one. Adding a few more security details, this system becomes a robust and secure ledger of transactions that is both direct (no middleman involved) and decentralized.
The cryptographic details of blockchain make the ledger “incredibly difficult” to alter or falsify—computationally infeasible is a more precise term. This is what makes the blockchain a great technology to employ with currency. Namely, of course, cryptocurrency.
A Brief History
Although the name is present everywhere where crypto is mentioned and, indeed, most modern crypto depends on the blockchain, this technology is not specific to virtual currency. The concept originates in 1991 through the research of Stuart Haber and W. Scott Stornetta. The vision was not a form of cryptocurrency, but rather a more secure method for timestamping documents. As most security protocols go, timestamps can be incredibly important for corroborating certain details, but timestamps can only mean so much if they can be altered. Developing a theoretically unalterable and public ledger of modifications would solve this problem.
It wasn’t until 2008 that this concept made its now famous entrance into the currency market by way of Satoshi Nakamoto and Bitcoin. Interestingly, it is unknown if Nakamoto is one person or a group of people, but it is unquestionably Nakamoto’s conceptualization of Bitcoin that brought the blockchain into cryptocurrency and, subsequently, into many other real-world applications.
Now, there are thousands of different cryptocurrencies on the market that users can choose from. Large international banks like Santander use the blockchain to optimize services, blockchain transparency has become instrumental in supply chain records, and the blockchain is being employed in the healthcare sector to exchange patient data between hospitals, labs, pharmacies, and physicians.
Applications in Business
As it goes with important innovations such as this one, there is no short or extensive list of useful applications in any context—including business. Focusing on a few more tangible benefits, however, we can talk about cost optimization and consumer preferences.
Especially when it comes to crypto, what’s so much better about taking virtual coins than just taking credit? For one, it costs less. With financial institutions acting as intermediaries, there is always a fee involved in the transactions. Since crypto like Bitcoin is decentralized, transactions happen on a one-to-one basis, which makes intermediary fees practically negligible. Importantly, however, this does not mean that transactions are free in general, just that the bank isn’t taking a slice.
Another benefit is that crypto transactions are fast. When we pay with a card, the value transfer might feel immediate, but in reality, those transactions can take hours or days to clear. With crypto, that transfer is practically instant, which can make the world of difference for small brands trying to live up to lightning-fast shipping expectations, for example.
When it comes to consumer preferences, more and more people are becoming comfortable and even excited about paying in crypto, and accepting crypto is simply one more opportunity to finalize a sale. Especially online, one of the main reasons shoppers abandon their carts is that their preferred payment option isn’t accepted. As consumer adoption grows for crypto, simply accepting crypto as payment can do wonders for diminishing cart abandonment while simultaneously making transactions cheaper and faster. Sounds like a win for everybody, right?
Of course, crypto transactions aren’t the only way the blockchain can be used in business. We already mentioned transparency as a main characteristic of the technology, a trait that is becoming more and more important for businesses to adopt. What are some ways the blockchain could be useful for your business?
Living Pono is dedicated to communicating business management concepts with Hawaiian values. Founded by Kevin May, an established and successful leader and mentor, Living Pono is your destination to learn about how to live your life righteously and how that can have positive effects in your career. If you have any questions, please leave a comment below or contact us here. Also, join our mailing list below, so you can be alerted when a new article is released.
Finally, consider following the Living Pono Podcast to listen to episodes about living righteously, business management concepts, and interviews with business leaders.