BLOCKCHAIN AND SMART CONTRACTS IN ECOMMERCE
The rapid change of technology forces business trends to adapt. In recent years, the e-commerce industry is leading the trend, many companies are entering this field. However, e-commerce also has many downsides. Many of its difficulties are about security, payment methods and many more. This is when the blockchain technology steps in to solve the problems.
What is blockchain?
Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. (IBM). In a blockchain, data is collected in groups called blocks that each contain sets of data. Blocks have specific storage capacities, and when filled, they are closed and connected to the previous block to create the data chain known as the blockchain.
What are smart contracts?
Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. (IBM). They can automatically execute the terms of agreement between the buyers and sellers without third party involvement, time loss and costs.
Find more about THE POSSIBLE APPLICATIONS OF SMART CONTRACTS IN DAILY LIFE
Blockchain in eCommerce
In 2021, eCommerce sales totaled $871 billion (CBRE Research). It is believed that the future of eCommerce is very promising. As the new technologies are developing, there are also new ways to purchase and sell products/ services. Blockchain technology offers a more secure and effective way to execute transactions, which has the potential to revolutionize the whole e-commerce industry. Blockchain can be used to build a decentralized database that contains data of products and clients. Customers would be able to view product details like its origin and suppliers, thus reducing the risk of fraud.
In the context of the current e-commerce market, consumers and business owners usually have to deal with difficulties in managing products, monitoring supplies and centralized databases. In eCommerce, blockchain can improve data transparency, allowing business owners to track and monitor the products and suppliers in the complex supply chain. The fact that this technology works on a peer-to-peer basis makes it secure. Instead of having a third party that includes all of the information about every other block and manages the blocks, blockchain allows everyone to join and anyone who joins receives all of the information about every other block.
Besides that, blockchain also enables smart contracts, reducing the hassles related to collection and enforcement under traditional transaction structures. Only when the conditions are met are the automatic transactions triggered.
Benefits of blockchain in eCommerce
Enhancing security
Transaction and data issues are the biggest concern for e-commerce brands. According to PriceWaterhouseCoopers Annual Global Economic Fraud and Crime Survey 2020, 47% of companies have experienced credit card fraud in the last 24 months with a total loss of $42 billion. Blockchain allows identity authentication by multiple trusted parties and at the same time provides the highest level of security for customer databases and CRM systems.
Cost savings
One of the outstanding advantages of blockchain is that it allows retailers to combine services such as payment processing, inventory management, product description, etc., thereby saving costs for purchases and maintaining separate administration systems. In addition, cryptocurrencies can be sent directly from one user to another instantly, without going through the banking system. This reduces fees charged to banks for processing and redemption of funds, or fees that credit card companies charge based on payments.
Improving business process
Blockchain has the ability to store information beyond transactions, typically smart contracts, which can automate tasks based on preset rules and if-then statements, like payments, automated accounting for inventory management.
Blockchain can also store electronic records such as customer receipts and warranty information. Thereby, making claims and warranty claims easier, not to mention saving on a huge amount of paper filings.
Easier to build referrals and giveaways programs
Blockchain allows brands to easily issue reward points for redemption or discounts on business and partner websites. In addition, businesses can also pay content creators or influencers, kols, with tokens (digital assets issued by blockchain projects), which can then be converted to currencies that they want.
Read more about E-commerce Loyalty Program
Reaching more global consumers
For customers living in developing countries, using reliable banking systems is difficult. Thus, blockchain and crypto allow them to bypass the middleman like banks to reach more e-commerce retailers. And most importantly, blockchain allows future-minded businesses to penetrate emerging markets.
Although the technology is quite new, the main reason why the idea of bringing blockchain into an e-commerce system is so popular is because they benefit both the seller and the consumer.
Industry experts agree that while the potential of blockchain technology is huge, it is still in the development and testing stages. In the future, blockchain is likely to become an integral part of the financial and e-commerce ecosystem.
