Blockchain technology is quickly garnering a user base with its foray into the business world.
This innovative technology, primarily used in cryptocurrencies, is emerging as an extremely useful tool for small businesses working with data sets or conducting large transactions.
Whereas some businesses are still warming up to the idea of blockchain, many are still unaware of the technological marvel and its adaptability into their business environments.
The technology is deemed as expensive to businesses with little flexibility in the offline setup.
However, it should be emphasised that these assumptions are false as a blockchain is quite accessible and easy to integrate even in businesses that are not primarily digital.
Blockchain can be a promising tool for SMEs (small and medium enterprises) who can equip themselves with this technology to develop an efficient method to streamline the business.
Blockchain enables businesses to solve problems and create an optimal business environment.
It is therefore crucial to understand how small businesses can harness the benefit of blockchain technology while integrating it into their continuous business operations.
Here are a few ways in which SMEs can benefit from the booming blockchain technology.
Reduces transaction costs
Due to market imperfections or imperfect information about the market, small businesses end up incurring huge costs, which can pose a major challenge for them.
The easy-to-access blockchain technology can aid such businesses in reducing transaction costs. Blockchain technology minimises the role of intermediaries and third parties.
Meanwhile, this technology limits the additional efforts required for maintaining transaction records and history, thereby decreasing the overall costs associated with them.
With the extra cost savings, businesses are able to make more room in their balance sheets for adopting more effective practices like licensing and monetisation of content.
Therefore, with short-term expenditure on the integration of blockchain technology into their businesses, SMEs can enjoy lower costs and increased savings over a lifetime.
Ensures transparency in transactions
The high flexibility in data offered by blockchain technology is an additional advantage that small and medium businesses can reap from its successful adoption and implementation.
Blockchain technology provides accurate and real-time information about the business’ transactions, thus providing users with the best possible grounds to form their decision.
At each leg of the transaction, businesses obtain a higher level of transparency and visibility.
This transparency facilitates making informed choices among a pool of sellers as a streamlined supply chain places them in good stead to access a range of financing solutions.
In turn, this process can reduce costs, improve cash flow, and reduce the time necessary for conducting research that is otherwise spent in achieving the same targets.
Blockchain records are better to reflect the authenticity of participants in a transaction.
As businesses move away from heaps of paperwork towards technologically advanced tools, blockchain’s innovative technology is fundamental in helping to boost efficiency in the company’s existing operations while deviating away from constant manual bookkeeping.
Improves capital raising
Blockchain technology facilitates businesses to raise capital through Initial Token Offerings (ITO), which strikes a resemblance to the existing equity-based financing technique.
ITOs provide a stake in a company in exchange for funding to be used as capital. They can be traded on an exchange and investors can buy into the offering and receive new tokens.
This reduces the dependency of SMBs on banks and large financial institutions as it opens a large pool of investors to SMEs, who might offer greater financial freedom to businesses.
The token enhance investors’ user experience with the company with added perks. It is an appealing alternative method for investors to earn a stake in a company of their choice.
Brings smart contracts into the business arena
Smart contracts have gained mass recognition in the world of cryptocurrency trading.
These are self-verifying contracts that are automatically enforced and can not be manipulated. These contracts provide greater security while logging transactions in a digital environment.
The technology benefits from a lack of human intermediary to process a smart contract not only making the transactions faster but also reduces the undeniable risk of human error.
Crypto traders employ smart contracts and Ethereum is the first platform to introduce them.
Enables better marketing
Blockchain is more than just as a way of streamlining operations and saving on costs. They incentivise investing into a business as well as making the products more attractive.
One such popular marketing method used in the world of cryptocurrency trading is the bounty campaign, where company-issued tokens can be used to purchase company goods.
Anyone can join the campaign and access cryptocurrencies through this unique method.
Some uncertainty is still attached to the algorithmic accuracy of blockchain technology. The technology is only as robust as the underlying coding and the mechanism to enforce it.
Blockchain technology can invite disputes that might shake the foundations of businesses.
Whereas blockchain technology may not be air-tight, it continues to offer some exciting advantages that surpass existing modes of operation traditionally used by businesses.