Why small businesses should look to the blockchain
We're going to dive into why small and medium-sized enterprises (SMEs) should seriously consider hopping on the blockchain hype. Yes, we understand there is some confusion around it all (isn't it just Bitcoin I hear you ask) and it might take a bit of time, but the blockchain is reaching a point where it can be a game-changer for SMEs. By embracing the decentralised future of business, SMEs can tap into the power of blockchain to tackle their daily challenges and even take on the big guys.
Blockchain has been a hot topic for almost a decade now. This ever-growing technology is reaching a point where small businesses need to seriously consider implementing it into their business plans. A Gartner study predicts that blockchain's business value will be over $360 billion by 2026 and $3.1 trillion by 2030.
So what is blockchain, and why is it so important? We’ll forgive you if when you hear the word "blockchain," you think of cryptocurrency. However, blockchain has evolved significantly since its inception in 2008 as a transaction ledger for Bitcoin. At the core of every blockchain is Distributed Ledger Technology (DLT).
In short - blockchain is a distributed ledger technology that allows for secure, transparent, and tamper-proof transactions. This makes it ideal for a wide range of applications, including supply chain management, financial services, and healthcare.
Originally developed to support cryptocurrency exchanges, blockchain has now become one of the world's fastest-growing and most widely discussed technologies. Its potential to reshape our economy and society is comparable to the impact of the internet.
Given its numerous powerful benefits, businesses, both large and small, are eager to leverage this innovative technology to gain a competitive edge. But let's dig deeper: why should SMEs consider the blockchain and what are the misconceptions around it.
Blockchain business statistics:
- In 2021, approximately 29% of small to medium-sized businesses have utilised blockchain technology (Statista)
- 2.8% of the world are already using blockchain (Gartner)
- The business value-add of the technology is estimated to reach $176 billion by 2025 (Gartner)
- Blockchain has the potential to add $1.76 trillion to the economy by 2030 (PwC)
- It is predicted that the blockchain can enhance 40 million jobs by 2030 (PwC)
Small and medium-sized enterprises (SMEs) are the backbone of our economy, making up around 90% of all businesses and employing about 50% of the global workforce. In developing nations, SMEs operating within the formal sector contribute up to 40% of the national income and are responsible for creating 7 out of every 10 jobs. Their significance in driving economic growth cannot be overstated, especially when considering that the World Bank predicts we'll need to generate around 600 million new jobs by 2030 to accommodate the expanding global workforce.
Taking developing nations as an example the demand for SME finance stands at $8.9 trillion, while the current credit supply is $3.7 trillion. The reality is, many SMEs are facing significant challenges due to a lack of financing, as well as the impending impact of automation and skill shortages. It's a tough situation they find themselves in. But here's the exciting part: blockchain technology has the potential to be a game-changer. It offers SMEs a way to bridge that financing gap and tackle the obstacles posed by automation and skills shortages. With blockchain, SMEs can not only build and grow their businesses but also adapt to these challenges with greater ease. It's a powerful tool that empowers SMEs to thrive in an ever-evolving business landscape.
To that end, we’ve put together a few reasons as SMEs can benefit from the blockchain
- Introduces a fresh payment method:
You know how cryptocurrency is gaining a lot of popularity among Indian millennials? Well, once it becomes regulated in India, its popularity will skyrocket even more. If small and medium-sized enterprises (SMEs) start accepting crypto as a payment option, it will unlock new opportunities in various markets and allow them to reach a broader customer base. Plus, by embracing crypto, SMEs can directly interact with customers and avoid those pesky high transaction costs.
- Offers an innovative way to raise capital:
Here's the exciting part: blockchain technology also presents business owners with an alternative approach to raise capital through something called Initial Token Offerings (ITOs). These ITOs are tokens that can be freely exchanged. They act as a substitute for traditional banks, lenders, private equity firms, and even crowdfunding platforms. Think of them as a way to offer equity or a revenue share in your company.
- Reduces dependence on intermediaries:
Imagine how much time and effort SMEs spend on record-keeping and relying on third-party validations. The lack of transparency can slow down your business and make it difficult to respond to changes quickly. But with the immutability, transparency, and decentralized nature of blockchain, your business can grow faster and expand more smoothly.
- Optimizes supply chain operations:
When you have a blockchain network in place, you can easily track orders, payments, accounts, production, and much more. Everyone involved shares the same accurate information, providing you with confidence and peace of mind. Plus, almost anything valuable can be tracked and traded on a blockchain network, making processes more efficient and reducing risks and costs.
- Leverages the power of smart contracts:
Want to speed up transactions? Well, with blockchain, you can store self-executing contracts called smart contracts. They follow a set of rules and automatically execute transactions. Smart contracts offer an affordable and efficient way to make and receive payments, access investments, and even manage contracts with vendors, suppliers, and employees. It's like a reliable digital assistant for your business.
- Ensures secure and cost-effective data storage:
Combining blockchain technology with cloud storage can be a game-changer for SMEs. Blockchain ensures secure and decentralized data storage, while cloud storage offers a cost-effective solution for handling large amounts of data. By harnessing these technologies, SMEs can reduce costs, improve efficiency, enhance data security, and supercharge their supply chain management, customer service, and overall business processes. The result? Increased competitiveness and growth for your business.
Its understandable a few people will have some concerns around implementing the blockchain. Misconceptions about it have emerged due to a lack of information and awareness. We’ve tried our best to address a few common misunderstandings:
Firstly, it's essential to clarify that blockchain and Bitcoin are not synonymous. While Bitcoin was the first widely recognised application of blockchain technology, blockchain itself is a distributed digital ledger that extends beyond the realm of finance. Its potential applications are diverse and go beyond cryptocurrency.
Another misconception is the notion that blockchain is costly. In reality, implementing blockchain can actually benefit small and medium-sized enterprises (SMEs) by reducing overhead expenses. This technology offers advantages such as reduced transaction costs and fewer merchant processing fees. Additionally, automation of accounting services through blockchain can significantly decrease reliance on external services and lower costs.
Moreover, there is a misconception that all data stored on the blockchain is public. While transaction records are visible on a public blockchain, the identities of the participants are anonymised through blockchain addresses. These addresses appear as strings of characters, ensuring privacy. On the other hand, in a private or permissioned blockchain, access is restricted and managed by an administrator, similar to an internal system.
Furthermore, there is a misconception that blockchain data cannot be trusted. In fact, blockchain is built on the principles of trust and transparency. The information stored in a blockchain is immutable and chronologically ordered, making it one of the most reliable forms of a database.
Lastly, it is important to note that blockchain technology is not limited to online-only or digital-first businesses. Nowadays, businesses of all types and sizes are adopting blockchain technology. Even brick-and-mortar establishments like restaurants, gyms, nail salons, bakeries, and manufacturers are considering blockchain as a new form of payment to handle transactions. The potential benefits of blockchain extend to various industries, enabling them to streamline their processes and enhance customer experiences.
The journey of adopting blockchain technology may not happen overnight. It will require patience and perseverance, and there might be obstacles along the way. However, we are currently at a crucial turning point for blockchain. For those who are open to embracing decentralisation as the future of business, it holds the potential to address numerous fundamental challenges faced by SMEs on a daily basis. Moreover, it can even level the playing field, allowing small businesses to compete with larger enterprises on a more equal footing.
Think of blockchain as less of a disruptive force and more of a foundational technology, similar to the infrastructure that facilitated the widespread adoption of the internet. It has the power to reshape the business landscape by providing a solid base on which innovative solutions can be built. So, while the process of blockchain adoption may be gradual, the rewards and transformative potential it offers for SMEs are well worth the journey.