10 Ways blockchains can benefit merchants
By Michael Ovchinnikov - May 11th, 13:57
Blockchains can benefit merchants here's how:
1. Lower transaction fees because of direct transactions
Satoshi Nakamoto introduced Bitcoin in 2008 as a way to send funds peer-to-peer, without having to use a central bank or a currency issued by a government. The idea behind Bitcoin was that anybody in the world would be able to transact directly with anybody else in the world, without having to pay any fees other than a small fee to miners on the Bitcoin network. This worked until the network started becoming really popular in 2016 and 2017 when there have been periods with the fee skyrocketing up to $30 and even more. This being said, many other cryptocurrencies, such as IOTA, have solved the issue of transaction fees, which means that using a blockchain-based cryptocurrency you can significantly lower your transaction fees.
2. Verification of identity
One of the issues with e-commerce websites is the issue of fake reviews. For example, Amazon has drastically changed its review system and allowed communications between brands and buyers because of abuses of the review system. One of the benefits of blockchain technology is that a blockchain network could allow complete tracking of history starting with a certain event. For example, a merchant could add a record to a blockchain network when a user buys something from the merchant. If the user wants to leave a comment, he or she will need to reference the record about the purchase. This way, a merchant could completely solve the issue of fake reviews. One of the benefits of a blockchain network is that blockchain networks can be fully transparent. For example, you can see all the transactions that have occurred on the Bitcoin blockchain since 2009 by visiting https://blockchain.info/In the same way, a blockchain-based decentralised e-commerce marketplace could have records about transactions that have occurred on the marketplace.
3. Management of the supply chain
Just like the records for transactions could exist on a blockchain, records about manufacturers and sellers shipping goods could also exist on a blockchain. On the Bitcoin network, it is possible to see all the transactions in close-to-real time. The network creates blocks on the Bitcoin blockchain every 10 minutes. The blocks contain transactions that are occurring on the network at the moment.
With shipping, this would mean that ports and cargo transporters could be updating a blockchain network with information about the latest location of cargo and users would be able to see the location in almost real time. Such a blockchain network for cargo shipping could have a special status for cargo that did not have its status updated on time. This would mean shipping with complete transparency and information about where a shipment is located at any given time.
4. Management of loyalty programs via smart contracts
Bitcoin was the first cryptocurrency to gain a large number of users and to this day it stays the largest cryptocurrency by market capitalization. Bitcoin is a blockchain network designed to process financial transactions. Many other blockchain networks have much more functionality than just financial. For example, the Ethereum network doesn’t only have a blockchain that processes transactions, but it also has Ethereum Virtual Machine or EVM, which can run smart contract. A smart contract is a contract that runs on a blockchain network. With smart contracts, it is possible for e-commerce sellers to create loyalty programs and contracts with buyers that will run directly on a blockchain network.
5. Verification of authenticity of products
A blockchain network could also serve as a verification tool. A blockchain network is tamper-proof by design, which means that if someone tries to change information in a block of a blockchain network, the network will reject the block or the chain of the blockchain that contains the block. For example, with Bitcoin, it is impossible to change even one digit in one transaction that has occurred on the network since its inception in 2009.
Because of this, it is also possible to place on a blockchain network data about legitimate products. A manufacturer of high-end clothing could assign a unique number to each piece of clothing and then put the numbers on the blockchain. Then, the manufacturer could include a special card with data that would allow buyers to verify that the products are indeed legitimate. The Massachusetts Institute of Technology created an app that works in a similar way and allows employers to check the diplomas of MIT graduates on a blockchain network.
6. Protection of property
On a large e-commerce website such as Amazon, products sell not only because of the products themselves but also because of the descriptions, photos, reviews, instructions and so on. These descriptions and materials are a lot of work for the sellers, yet once they become a part of an e-commerce platform, they become property of the platform. On a blockchain network, all of these materials would stay property of the sellers because the transactions and selling occur directly between businesses and customers.
7. Independence from Merchant Platforms
When sellers use large third-party platforms such as Amazon, eBay, or Alibaba, they often have to deal with a lot of restrictions. For example, they may only be allowed to contact the buyers of their products once and do so only directly through the platform, which severely restricts what a company can do to build a relationship with the customers. Because communication on a blockchain network between consumers and brands would be direct, e-commerce merchants would have true independence from merchant platforms.
8. Launch of Initial Coin Offerings (ICO)
A company can use a blockchain network to run an initial coin offering. Initial coin offerings are similar to initial public offerings in that during an ICO a company collects money because it wants to accomplish certain business goals. The difference between an ICO and IPO is that during an IPO investors buy shares in a company and ICO does not offer any shares. It offers tokens on the platform. An ICO could be a great way for an e-commerce business to collect money for a variety of goals, from creation of its own blockchain network to manufacturing of new products.
9. Higher discounts and better incentives for consumers
Because e-commerce on a blockchain network would be independent from third parties that change sellers a lot of fees, the sellers would be making more money in profits and would be able to pass these profits directly to the customers. They would also be in charge of what incentives to offer, which would allow for better offers and incentives.
10. Ownership of important business data
Often, merchants do not have access to the important data about the pages that describe and sell their products, such as bounce rates, time on page, conversion from visitors to buyers and so on. Selling on a blockchain network would mean that sellers would have true independence, including access and control of all their data.
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