Blockchain: what is it and what does it really mean for Micro business?

What is blockchain?

Blockchain is a public electric ledger that is built around a peer to peer network that can be openly shared between users to create an unchangeable record of transactions. Each transaction is time stamped and linked to the previous transaction. Each transaction that is added becomes another block in the chain. Once a new block is entered, it can never be erased, which makes all the transitions verifiable and auditable. The security and chronological order of the blockchain are enforced with technology called cryptography.

How does blockchain work?

With transactions of bitcoin on the blockchain network, the bitcoin wallet keeps a piece of data unknown, which is called a private key or seed. This key is used to sign off transactions and provide proof that the transaction came from the owner’s wallet. The key also prevents anyone from altering the transaction once it has been issued. The transactions are broadcast to the network and are confirmed through a process called mining.

Mining is the process used to confirm pending transactions. Mining adds transactions to the blockchain in chronological order, protects the neutrality of the system, and allows other computers to confirm the state of the system. When adding more blocks to the chain, strict rules ensure that the block fits, and this will be verified by the network. These rules prevent the previous blockchain from being modified. By mining a blockchain using a network of computers, no group or individual can control what is included in the blockchain or replace any part of the blockchain.

Advantages

Transparency

Faster transaction with lower costs

New business model and value chain

Disadvantages

High cost for small business

Large energy consumption

Cultural adoption

Blockchain uses

The uses for blockchain seem almost unlimited. Although this technology is still relatively new, there are already areas that it is being used in. The most common use right now is payment systems. Blockchain provides a secure way to transfer money, even internationally. Automating the processes of transferring money internationally will reduce the number of 3rd parties involved, which will make the transactions more efficient and could result in a decreased cost of transaction.

Blockchain’s real time tracking capabilities have also helped the supply chain management sector. Blockchain provides a new way to organize, track, and put data to use. This has opened up new options for companies transporting goods. Blockchain entries can be used to allocate new goods to shipping containers, as well as mark events for a supply chain.

Being so secure, blockchain can be used for record management because it reduces duplicates and fraudulent entries. It also removes the risk of single point failure and provides end to end encryption and privacy.

What does it mean for micro business?

Smart contracts are an economical option to help micro businesses. The services micro businesses can use vary from paying employees or bills to settling interest fees and creating insurance policies. Smart contracts can also help micro businesses ensure they have consistent cash flow by being paid on time. Micro businesses can deliver services and know that funds are available when they should be. Security and privacy is another value-added benefit of blockchain in micro businesses. With layers of cryptography, micro businesses’ transactions are protected from being duplicated or fraudulent behavior.