As we discuss the deeper level of blockchain technology, there are several solutions competing to become the industry standard. Not all blockchains are doing the same thing, but they all have some of the same issues like scalability and interactivity. But we can also say that blockchains have common characteristics that everyone thinks are the foundation of any blockchain. (aka “distributed ledger technology” (DLT), or a shared database stored on many devices simultaneously):
1. A distributed ledger stores information and transfers in electronic “blocks”, each block has a specific ID, and these IDs cannot be changed, nor can subsequent blocks be changed – or basically is not possible. This feature of the blockchain brings the biggest advantage: immutability. If hackers want to change data on the blockchain, they need to make changes on most nodes.
2. The entire ledger is available to all users, resulting in complete transparency.
3. Because each block is unique and impossible to tamper with, we can create digital assets on a non-replicable blockchain. These assets are called tokens. The shared and immutable nature of the blockchain prevents the double-spending problem, which means that the same digital asset can be used as two separate payments.
4. Tokens, as unique information carriers, can also represent any form of value or assets, and can be safely and easily traded on the Internet.
5. Each user on the blockchain has a unique 30-character alphanumeric address. Transfers occur between blockchain addresses. This feature brings another benefit to the user: anonymity or disguised identity. This is different from ordinary anonymity and brings better control and protection of personal data. Everyone can use the network because everything is an address and transfers can be made without personal information on the blockchain.
6. Recent developments, such as the Ethereum network, have added another functional layer to the blockchain: smart contracts. These small programs allow contracts to run without human intervention completely or partially, taking certain actions as long as certain conditions are met, and registering these actions on the blockchain. So interactions between nodes can also be automated.
The most basic advantages of blockchain can also be summarized as immutability (permanence or irreversibility), transparency, prevention of double-spending of payments, secure transfer and storage of value, anonymity and, for the use of smart contracts, Complete automatic interaction between nodes.
Blockchain technology opens up new frontiers of e-commerce
These properties of blockchain bring many benefits, especially for the value chain of e-commerce with great potential. If not systematized, the main areas where we believe blockchain can revolutionize include logistics, platform operations, identity authentication, and data protection and customer support.
Let’s start the discussion with logistics. Transparency and immutability are an excellent combination for any supply chain. Right now, the biggest risk in any supply chain-related operation is the “bullwhip effect,” where changes in demand can have a huge impact on the supply chain, making it very expensive to move and store any kind of physical asset. This bullwhip effect is due to the lack of transparency between siloed databases. Blockchain solves this problem from the beginning, because everyone can check the inventory situation in the supply chain at any time. In fact, these features are already used by many companies. This leads to greater efficiency and, when applied to e-commerce, increases inventory and fulfillment possibilities.
AMT.LAND E-commerce platform operation
The second aspect that blockchain can bring to the e-commerce value chain is the operational level. The main component of every e-commerce enterprise is the transaction transfer platform. How does blockchain improve electronic trading platforms? Basically, it’s about trust and efficiency. Blockchain is called the “trust machine”. Like we mentioned before, e-commerce is based on trust, so here it fits perfectly! But how does this work? Immutable, transparent and its payment mechanism through the blockchain.
The transparency and immutability of any blockchain record brings trust to e-commerce without intermediaries. So far, trusted transfers currently require third-party witnesses (in the case of marketplaces), or certificates (in the case of individual stores). Both of these should ensure that the salesperson is trustworthy and that transfers are being made.
But blockchain changes that, you just have to check the network and the transfer records to see if the store is trustworthy. And you can easily build on these basic network functions to further automate the escrow system to ensure client funds remain safe.
Smart contracts can therefore bring great efficiency improvements to many manual or costly operations. For example, arbitration disputes can be partially automated, or even outsourced, with ongoing cost savings for e-commerce platform operators (note that complaints and returns account for a significant portion of e-commerce costs).
This can also be applied to payments. Blockchain can allow secure and reliable transfer of value over an electronic network, preventing double-spending, and without incurring intermediary fees (although there will be minimal costs in hardware and energy consumption to those maintaining the network). Because of this, blockchain brings new cheaper and more efficient payment systems, reducing the costs incurred by payment intermediaries such as Paypal or Visa. This is perhaps the fully tested feature of the blockchain, since the blockchain itself started with Bitcoin payments.
Ultimately, because some routine operations, such as ordering, payment, and buyer-seller interactions, are done via the blockchain, e-commerce businesses don’t need to run huge, complex and expensive servers. Distributed computing inherently carries this cost, which is usually imposed on the seller.
Electronic Identity and Customer Support
The third element that blockchain can disrupt e-commerce is electronic identity. Customer privacy is a very hot topic these days. Now for data control and a spam-free digital experience (check out the development of ad blocking plugins to experience this trend). This problem can be solved by the anonymity of blockchain addresses. Every user will have personal data showing what they need and they will always have control over personal information.
And, we can build other features based on this: customer support and loyalty. Because each customer has a unique address, and transfer records are transparent and indelible, it’s easy to create more effective and trustworthy customer support services, including promotions, dispute management, and customer loyalty programs. Because of the anonymity provided by the blockchain, we do not need to publish or store customer information.
The functionality and value of all these blocks allows people to trace goods, transfer verification can be automated, costs are lower, customer rights are easier to maintain and personal data can always be in the hands of individuals. The end result is a more convenient and trustworthy experience that will be of great interest to everyone.