While the blockchain technology reached us far back in 1991, when Stuart Haber and W. Scott Stornetta first started working on a cryptographically secured chain of blocks, this seemed to be a pure fiction then. Today, this is the reality we live in as blockchain has been changing every realm of our lives.
Payment processing is the area the new technology is expected to influence the most. Do you remember how the introduction of the Internet affected mass media? Factually, in much the same way that the Internet has become the first information storage medium, blockchain is becoming the primary digital standard for the horizontal currency exchange between the interested parties. It is expected to revolutionize such spheres as banking, eCommerce, cybersecurity, and others. Let’s have an insight into this technology, and consider the opportunities it creates for online retailers.
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The blockchain is often compared to an iceberg, and cryptocurrency is just the tip of it. While it’s not that easy to understand when you dig deep into, the basic idea is quite easy. The blockchain is a database, collection of records that gets validated not by a central authority but by a wide community that maintains it. Watch the video below to get the full picture.
Blockchain & eCommerce
According to Statista, eCommerce sales in the US are expected to increase by almost 30% in 2020. While the market is growing, some problems that are related to eCommerce platforms (Amazon, EBay, and Alibaba) start to emerge:
· retailers have to pay a revenue share (per sale and/or total sales), which ranges from 10 to 50% from the product price.
· merchants’ communication with the customer is limited, which reduces the chances to build brand awareness, and loyalty. For example, Amazon uses their customer support team, and limits communication with the customers just to one follow up email to ask for a product review or feedback.
· retailers are forced to increase prices to cover their extra expenses. Shoppers, in turn, have to spend more.
That’s where blockchain comes to rescue. It allows for decentralized marketplaces with transaction charges close to zero, lower prices for shoppers, better conditions for online merchants, and more.
5 Benefits of Cryptocurrency Integration in eCommerce
This is probably one of the major advantages of the blockchain technology for eCommerce. Today, business transactions go through a complicated network of suppliers, credit cards, banks, and payment systems. The blockchain has nothing to do with the 3rd party agents. This allows for using cheap, fast, and safe single-rank transactions. For example, merchants have to cover PayPal fees, which range from 2.9% to 3.5% per transaction. In contrast, WAVES transaction fees currently amount to 0,01 cent. Quite a deal, right? These are ordinary expenses. Some of them can reach up to 7% for one single online order. The fact that even more merchants start searching for ways to get rid of this unnecessary expenses is natural. Today, this can be reached either by sharing extra fees with the customers or by going for the alternative banking services. Blockchain is one of them.
So, if you are in a highly competitive market, and use price dumping to stand out from the crowd, surcharges minimization that blockchain ensures will become a significant advantage.
Normally, a great number of the interested parties that are involved in an eCommerce transaction make the whole process overcomplicated and time-consuming. The numerous bureaucratic steps slow it down. As a merchant, you probably know how long it can take to receive payment? Up to 3 business days is usual practice. The decentralized approach allows leaving the agents aside and processing eCommerce payments immediately. The processing time takes up to a couple of seconds, or even less sometimes.
The beauty of blockchain is its transparency, which is guaranteed by the system of distributed ledgers. Data become accessible, what allows tracking every bit of info. Transparency is appealing to eCommerce. As a rule, markets and brands keep data for themselves and even charge for it. Blockchain solves the problem, which further allows running analytics freely and for free.
The technology guarantees trust and transparency as every action gets registered. So, eCommerce with the blockchain technology applied allows understanding who the customers deal with right away.
The airtight and decentralized nature of blockchain technology allows for online trade security. The possibility of fraudulent transactions gets eliminated as data don’t get to be modified. That’s what makes users’ wallets securely protected. Besides standard password settings, users are assigned a specific number of random code words called SEED. There can be from 9 to 21 of them, as far as I know. This is a backup phrase that is used to create public and private keys, as well as the address for transactions in the future.
Here’s what the SEED guessing may look like. (I just love the answer of one of Quora users):
This effectively means that any transaction within the blockchain cannot be revoked, canceled, or modified unless the receivers themselves decide to do that. Why is irreversibility beneficial? Let’s consider the following example. A merchant receives an order, it gets paid and shipped. In a short while, the seller receives a notice from the bank requesting a chargeback. It turns out that the credit card the order was paid for was stolen. Are you familiar with the situation? Chargebacks have been top-of-mind for every online business, as card-not-present (CNP) losses are expected to reach $7.2 billion by 2020, according to CNP report.
While there’s not much time has passed since the blockchain’s first implementation, we’re are currently on the verge of this technology adoption. With all the advantages it offers comes the fear of the new. Do you remember how the things were with the Internet? So, time will show.