The concept of eCommerce has not only been around for decades but also evolved over time due to the influence of technological improvements to become one of the most lucrative sectors of the 21st century. The latest of these improvements is the application of blockchain technology for eCommerce which opens a whole new world of opportunities for the online shopping industry. Elimination of middlemen, streamlining of operations, and reducing complexity at all levels are only some of them. Blockchain technology is the foundation of using cryptocurrency for online shopping, which is changing the way transactions are being made.
What is blockchain technology for eCommerce?
Ecommerce stores generally have a large volume of customer, inventory, and transaction data. In order to produce effective results, all this data needs to be stored and managed in a proper way. This is where the application of blockchain technology can help. Blockchain technology - here specifically for eCommerce but also for other various kinds of applications - combines transactions in the form of blocks which are linked subsequently to form a chain. As the entire transaction history in form of such blocks is saved on different servers, it makes those transactions secure and reliable.
How do you verify a blockchain transaction?
Transactions which are processed on a blockchain have their specific procedure of verification. A complete history of all previous transactions on the blockchain is stored in many different nodes. For each new transaction, a node performs multiple checks to make sure it is genuine. It first checks if the signature is valid. If it finds that the signature is not valid, the transaction is rejected. The authenticity can not be forged as every node performs the transaction validation process. Furthermore, a transaction which was processed in a previous block cannot be modified at a later time since this would invalidate all of the subsequent blocks.
What are the biggest challenges of eCommerce?
In order to better understand the potential of using blockchain technology for eCommerce applications, we need to understand the challenges that this specific industry is facing. As the eCommerce sector is very complex, we will mention some of the key challenges that online sellers need to overcome on a daily basis, as well as in the long run:
- Competitive market - eCommerce is a highly competitive market with many sellers offering similar products and services. There are new businesses joining the trend, as well as those that are transitioning from the brick-and-mortar model to this one. This is why businesses need to adopt new models and technologies rapidly in order to stay competitive.
- Many fees decrease profit - The traditional business model has many middlemen involved that take a significant share of the earnings in the selling process. For example, there are transaction processing fees collected by the payment processor as well as by the eCommerce platform operator for every payment which are lowering the revenue as a result. To make up for these cuts, sellers need to increase the prices of their products but in a manner that they stay competitive.
- Data protection - Protection of customers’ data is critical for building trust among consumers as they need to know that their personal and financial details are completely safe. The implementation of the General Data Protection Regulation (GDPR) has made data security the main concern for online enterprises. This means that sellers now have to invest a lot of money into data encryption in order to prevent any possible hacker attack.
- Managing different operations - eCommerce selling involves many different operations such as supply chain, logistics, payments, etc. Managing all these operations can be a difficult and complicated task. Among others, they need to make sure that the inventory is replenished at the right time, streamline the shipping and delivery functions, and look after customer relationships.
- Dependence on platform operators - Vendors are dependents of the platform's operator when conducting business and hosting offers on it. The platform has got the ability to refuse the listing of offers or hide them from potential buyers. This way, the platform has an advantage over the registered vendors and can compete with them easily.
It is quite apparent that, with all these challenges, there has been a need for new technology capable of handling them all. The application of blockchain technology for eCommerce has shown to be exactly what is needed. Being decentralized, it provides a secure backbone that can support this domain and address the diverse challenges it faces.
Better operational efficiency
The decentralized model of blockchain technology is capable of streamlining operations and driving efficiency. It uses smart contracts to regulate intermediaries like logistics or payment processing partners. It can be integrated into various management systems streamlining the overall workflow.
Blockchain technology can provide a series of unalterable recorded data as well as the information of origin, components, and processing of products. Furthermore, a blockchain-based database is decentralized, which means that stores have complete ownership over their digital assets such as digital storefronts, product photos and videos, and reviews.
Transparency in transactions
Blockchain technology for eCommerce brings transparency in transactions that build trust with buyers since every transaction is being recorded in a shared ledger and can not be modified. Blockchain provides security, visibility, faster processing speed, and traceability throughout the system. It also makes for lower transaction costs for international eCommerce stores. However, some blockchains are oriented more towards privacy. In case of such blockchains, the transaction history itself as well as further data possibly included in transactions is stored encrypted and can only be encrypted and therefore made visible by the respective private key owner.
Cost-effective payment solution
After Bitcoin being the very first cryptocurrency powered by blockchain technology, various other cryptocurrencies have been developed with different properties and functionalities resulting in corresponding advantages but also disadvantages. Today, cryptocurrencies are being used more and more as an alternative to traditional fiat currencies. This shift is being made due to the fact that they are relatively easy to implement and that they operate in a decentralized system. Ecommerce store owners can use cryptocurrencies to drive cost-effective digital payment solutions. Since cryptocurrency transactions eliminate middlemen, there are no processing fees collected by a centralized third party. This technology serves cost-effectiveness for both buyers and sellers. Lower fees result in better rates for sellers which ultimately leads to lower prices for buyers.
When comparing the use of cryptocurrency for an eCommerce application to the classic implementation of a credit card payment processing system there is a major key difference: When using the service of a credit card payment processor, the customer relies on a centralized third party to firstly process their transaction and secondly handle their transaction data in a diligent way. When using a cryptocurrency based on blockchain technology for such a transaction, the transaction data is either pseudonymous (public ledger like Bitcoin) or anonymous and private (obfuscated public ledger like Safex), and transactions are processed in a decentralized manner by various miners. However, in case of using the blockchain-based method of cryptocurrency the users are responsible for diligently managing their assets since no third party can block or revert a faulty transaction which might have been occurred as a result of a mistake or data breach on the owner system's side.
Looking to the future
With numerous benefits to adopting blockchain technology for eCommerce, the expansion of crypto-commerce does have a bright future. From adding transparency to all of a business' transactions to safely managing customers’ data and lowering fees and costs, the application of blockchain technology opens a world of possibilities for eCommerce store owners. However, to utilize the most of this technology, it is important to choose the right partner. Safex is your best blockchain-based solution for eCommerce.
Safex describes itself as The Blockchain Engine for eCommerce helping to create unstoppable web stores. The Safex blockchain is a privacy-oriented blockchain on which transactions are obfuscated and address balances hidden by default. In addition, descriptive data for an offer like a product or service can be included into a transaction as well. This additional data can be decided to be visible for everyone or to be encrypted and therefore only visible for certain users as well.
The Safex TWM Wallet is an app which makes the Safex blockchain easily accessible for people who want to join the Safex Market ecosystem of buyers and sellers of various kinds of goods and services. Offers can be easily hosted and made visible in the application. A rating system for offers and a messaging system ensures reliable and verifiable interaction between buyers and sellers. However, it is also possible to embed the relevant eCommerce functionalities of the Safex blockchain in your own web store as well. Contact us and expand your business on a decentralized platform where you can leverage the power of blockchain to open a world of opportunities.