If you keep up with economic or financial news, you have most likely read or heard about the rapid rise of Bitcoin in the past year and the growth of cryptocurrency and blockchain technology along with it. You may be wondering if you should invest in Bitcoin or are curious why blockchain matters to small business, but if you’re like most people, all the jargon surrounding this technology is confusing and overwhelming.
Because blockchain has many benefits for small business, we want to explain the jargon and blockchain vocabulary and provide some clarity. Using blockchain technology may not be out of reach and may even benefit your company.
What is Blockchain?
Let’s get right to the heart of the matter: what is blockchain?
Blockchain is a digital register that records “smart contracts,” mainly in the form of transactions. Smart contracts are mathematical formulas or code that execute automatically when a pre-defined event happens. Each transaction is recorded on every one of the computers around the world that participate in the blockchain.
But why is it called blockchain? Each step of the contract or transaction is stored on its own secured block. Additional transactions or data coming from the original block are linked through secure code and stored on their own individual blocks. This forms a chronologically ordered chain of transactions that are transparent, but they are nearly impossible to tamper with or change because the identical data is stored on every single computer participating in the blockchain process.
Blockchain mining is part of the process of validating each individual transaction or smart contract. Every transaction or contract is logged on individual blocks in participating computers (called nodes) across the globe and can’t be changed without breaking through the mathematical coding attached to the block.
At its core, blockchain matters to small business is because it offers the ability to enforce the terms of a transaction while offering protection and security without having to involve a middleman or a third party.
Digging In to Real World Examples of Why Blockchain Matters to Small Business
We promised to break through the jargon and confusing blockchain terms, so let’s break down the process and look at some examples. This example from Fit Small Business breaks the blockchain process down into three steps:
- Generate the contract;
- Confirm the contract; and then
- Implement the terms of the contract.
Let’s look at using these three steps for a supply chain as an example of why blockchain matters to small business.
You own a grocery store and order a shipment of frozen turkeys. You make an order to your supplier, which generates the contract and creates a block of data. The supplier then confirms the contract and sets up a shipment to your grocery store, adding a second block of data. Once the shipment is confirmed, your payment is automatically issue, thus implementing the terms of your contract with your supplier.
To take it one step further, anyone involved in this transaction would have his or her own block of data. The shipping company’s data would form its own block, showing when it picked up the turkeys and when it delivered them. Thus, if you don’t get your turkeys, you can see exactly where the break down is, and the party responsible is unable to alter the data showing the point of the breakdown.
Why Blockchain Matters to Small Business to Keep Finances Safe
Getting paid through blockchain is accomplished using a proof-of-work system that requires having an equation available to unlock the encryption on a block. Once the digital payment is unlocked and issued, that transaction is shown to all parties in the blockchain ledger. This method of working out the encryption is often called mining.
The automation of transactions provided by blockchain mining for small businesses adds a layer of protection relatively cost-free. Data showing the completion of one step automatically triggers the next step in the transaction. With each step of the process recorded identically on virtual ledgers all around the world, cryptocurrency is virtually impossible to hack, dispute, or erase.
Blockchain Protects Small Businesses Through Self-Verification
Small businesses do not have the luxury of not getting paid on time or experiencing a payment default from customers. Nevertheless, 40 percent of small businesses report cash flow problems. Cash flow is yet another reason why blockchain matters to small business. The middleman is eliminated, and the transaction is both contracted and non-negotiable once it is set into motion. This can save time, eliminate disagreement over payment, and make receiving payment faster and automatic.
If you choose to begin doing business through cryptocurrency, you will find that blockchain mining for small businesses makes it easy to send and receive payments with confidence and security. Let ComTech Consulting, LLC show you why blockchain matters to small business. The expert team at ComTech works with businesses in the Tri-State area of West Virginia (WV), Ohio (OH), and Kentucky (KY) to help with all aspects of IT support and technology needs. Reach out to ComTech Consulting, LLC at (304) 720-8491 or by email at Sales@ComTechSBS.com to learn more!