As a business owner, why should you care about blockchain for small businesses, cryptocurrency, and token offerings? For those who haven’t heard the terms and aren’t familiar with the space, search “Blockchain” or watch FinancialPoise.com webinars dedicated to the topic.
The world is changing. Are you keeping pace? Distributed ledger — the technology of blockchain — has great potential, just like the Internet, the cloud, and machine learning. Blockchain for small businesses can significantly change the way business owners execute each aspect of their business. Blockchain will revolutionize how businesses interact with stakeholders.
Business owners and professionals have to grasp the difference between blockchain, cryptocurrencies like Bitcoin, and tokenization. Of course, there are enough places on the Internet to get a primer on those topics, but here’s the simplest form:
Once you understand the differences, it becomes essential to understand how to benefit from the small business uses of Bitcoin. Banks and Wall Street are already finding numerous uses for the technology. They have banded together to create private inter-bank chains. Platforms like Ripple were built for the banking industry and have seen significant adoption to date. Additionally, when dealing with an international trade business, you can use smart contract functionality rather than letters of credit or multi-bank escrow accounts. Ethereum editors built the smart contract code, creating transactions that require no trust between parties, but still ensure transaction security.
For example, if you run a small grocery store, you can use blockchain for small business to ensure, without having to trust the sender, that the food received is from the correct place and processed at a given time.
This works because no central authority owns or controls the underlying information. In our grocery store example, the ledger is shared between the farmer, the distributor, the wholesaler, and the store owner. When a piece of information is hashed onto the chain, it must be verified and cannot thereafter be changed. Customers can share this information and no longer need to trust the store’s word that the produce is fresh. The customers independently verify freshness.
Additionally, all business owners have a series of accounts payable and receivable that generally crossover many times. With the future of distributed ledger, these businesses can share a single payment system. The payment system prevents any entity from changing the data, so invoices get cleared across businesses. Books are updated automatically and provide a limited time to settle those invoices.
Take the following example:
Rather than everyone taking days to receive, clear, settle, and reprocess those transactions, “A” pays “E” $5 and pays “F” $20. Everyone’s books update to reflect the flow of funds to settle every invoice in the chain. No one has to place their trust in players beyond a series of verifications from miners/users.
Opportunities for using blockchain technology are significant. Blockchain technology can even ward off hackers and cyberattacks because it is decentralized and has no point of attack. At the end of the day, blockchain gives small and medium businesses a consistent, affordable way to simplify and secure all areas of money exchange while building a unique credit history.
[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure and each includes a comprehensive customer PowerPoint about the topic):
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This is an updated version of an article originally published on May 15, 2018, and has been most recently edited by Courtney Smith]
©2022. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
Jordan is a co-founder and board member of OpenFinance and CFX Markets, an online trading platform for non-public investments that is transforming how people view and hold alternative asset positions. CFX Markets is venture-backed with offices in Chicago, New York and California. As an early innovator in the crowdfunding space, Jordan assisted on the rule…
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