Cryptocurrency and blockchain are today's top buzzwords. But do they matter for business?
Cryptocurrency. Blockchain. ICO.
A few short years ago, these buzzwords meant nothing to the ordinary internet user. Only tech geeks, early adopters of Bitcoin and proponents of blockchain-powered digital democracy wielded the terms freely; others considered "crypto stuff" to be a nerdy fad. Yet everything has changed in 2017.
In March, the price of Bitcoin started to swell, reaching an all-time high of nearly $20,000 in December. It generated a strong uptrend for Ethereum, Ripple, Litecoin, NEM, Dash and lesser-known players. Early adopters of cryptocurrencies doubled or even tripled their initial investments.
Encouraged by those figures, some business owners zoomed in on the crypto world, with all of its tokens, ICOs, blockchains, hashes and cryptographic keys. They soon figured out that cryptocurrencies not only have the potential to disrupt entire industries, but can also be a rich source of investment capital for their companies.
In this article, I am going to identify four major motives for small companies and startups to begin using cryptocurrencies and implement blockchain technology into their business models.
1. Fast and secure transactions
Today's international bank-to-bank transfers are fairly complex, often taking up to seven business days to complete. Small businesses and startups that cherish KPIs more than anything cannot wait that long. Here's where blockchain with its laser-fast cryptocurrency transfers can help.
Any blockchain is a distributed ledger that stores a data set across tens of thousands of nodes (PCs connected to the network) all over the world. This means two things:
- Blockchain commands an immense computational power that allows users to transfer cryptocurrency in just a few seconds.
- There is no central entity to confirm and manage transactions. Thus, nobody can hack the network to maliciously manipulate ledgers in their favor.
Near-instant, transparent and incorruptible transactions on the blockchain are also cost-efficient. This can potentially give startups a much-needed edge over established players who rely on time-proven but slow and expensive payment transfer systems and financial institutions.
2. Transparent and resilient management on the blockchain
The blockchain, which is the cornerstone of some cryptocurrencies, allows startups to massively reduce frictional costs in transaction systems, but this is hardly its major advantage. Cryptocurrencies are digital assets, which basically means that they are data, not currency in the conventional sense.
Existing business networks are inefficient, expensive and vulnerable to data breaches. A secure, transparent and resilient blockchain technology that is impenetrable to any third-party interference can solve the problem of data breaches through the use of smart contracts.
As computer-generated protocols, smart contracts function as immutable, self-authenticating, legally binding digital agreements between contracting parties – be they buyers and sellers or employers and employees. The self-executing nature of smart contracts allows parties to streamline and digitize the administration of business management processes by doing the following:
- Accelerate transactions and reduce their cost
- Eliminate multiple business management mistakes thanks to automation
- Shorten business cycles and increase their efficiency
- Reduce the risk of fraud and mismanagement
- Increase trust between contracting parties
Blockchain can become a key business management tool. Incorporating security, transparency and resilience by design, it allows company owners to focus on strategy and not get bogged down with routine tasks.
3. No need for intermediaries
Cryptocurrencies reduce the need for intermediaries like banks, money-transfer systems, and law and real estate firms. The blockchain technology of cryptocurrencies holds the potential to decrown governments by giving citizens control over voting.
Small businesses can enjoy the benefits of cutting out middlemen – higher operation speed, fewer mistakes, and massive reduction in product and service costs – thanks to blockchain-powered strong smart contracts. Strong smart contracts ensure performance without recourse to the courts. Once executed, smart contracts cannot be revoked or modified. Reduced to simple if-then statements, they eliminate ambiguity and basically render trial in court useless.
The moment small businesses start using strong smart contracts, they save their hard-earned dollars by cutting fees to banks and lawyers. It is no wonder so many companies strive to bring blockchain to the small business world.
4. Huge investment opportunities
While there are many practical uses of cryptocurrencies, it does not take a lot of thought to realize that they can be at least partially used to preserve and increase the financial holdings of individuals and companies.
Just think about it: If you purchased one BTC in 2010 when its price did not exceed one U.S. dollar, you would have around $20,000 today. If you had bought 100 ETH, you would have $2 million in your coffers.
Though most countries do not recognize cryptocurrencies as financial and investment instruments, the regulatory and legal cryptocurrency landscape is rapidly changing. Japan, China, Russia and other countries are making substantial inroads to legalize cryptocurrencies. Thus, it makes sense to purchase crypto now to receive huge investment rewards later.
Cryptocurrencies are quickly gaining momentum and have the potential to be the next big thing. Barclays, IBM, Cisco, Bosch and BNY have already started to adopt the technology. Your business doesn't have to be a corporation to begin using cryptocurrency. You can still take advantage of this opportunity before it is too late.