Blockchain gets even more interesting
Continuing my series of posts on Blockchain I get to the second big use case for Blockchain and some more interesting companies. The first use case I discussed was Banking in, Blockchain - Beyond Bitcoin (Part 2).
Here I will share my vision for how Blockchain will shake up the Trade and Ecommerce scene.
Blockchain has such a bright future, Banking and Trade are not the only use cases.
In further posts I will also cover impact on the following:
- Insurance and Investments
- Social Media/Digital Media/Publishing
- Social/Public good
- Global Identity
Trade
How will Blockchain affect Trade?
Person to person trade usually involves; cash, card payments, cheques or bank transfers. We all know the issues with these forms of payment; counter-fit money, fraud, stolen credit cards details, slow transfer of funds.
In everyday life I am happy to use cash or card, I am familiar with the local shops, I trust the people I am dealing with but there are so many situations where I am out of my comfort zone. If I travel abroad for example there is a heightened risk that my card details may be stolen. Large value transactions such as selling a second hand car increases the risk of being given counter-fit notes or cancelled cheques.
Blockchain is part of the solution. Digital currencies that live on Blockchains such as; Bitcoin, Dash, Monero all provide protection from these common problems.
Soon next to "VISA accepted here", "Bitcoin/Monero/Dash accepted here" will be displayed at the same POS device in shops. It's already happening!, Ingenico Rolls Out Worldwide Bitcoin Payments.
What are the benefits for Person to Person Trade?
- Reduced Fees
- No Sharing of Identity (just like a cash transaction as opposed to credit card)
- Faster Transfers
- No additional cost for international transfers or transactions
- Elimination of counter-fit currency
- Multisig authorisation of payments
Mainstream Acceptance
Central banks are exploring using Blockchains and Digital Currencies as a part of the payment system. swedish-central-bank-considers-digital-national-currency-ekrona
This is important for adoption because if initiatives like this Central Bank initiative prove successful, it will increase the acceptance of digital currencies on Blockchains. Digital currencies will become more mainstream and will no longer be chiefly associated with Silk Road and Dark Web.
The benefits resulting for trade need little explanation; reduced fees, faster transfers, reduced fraud, reduced counterfit currencies, no sharing of identity but, there is one benefit which could be a game changer, the idea of Multi Signature wallets.
Multisig
In a previous post Blockchain – Beyond Bitcoin (Part 3) Banking, I discussed a use case for Multisig relating to savings.
For trade and commerce the big implication of Multisig is that escrow is possible without needing to trust 3rd parties. This is already implemented in an online market place called Openbazaar. You can make a payment here and trade, if there is a dispute a person arbitrates on the dispute before the payment is finalised. I will explain how this works below.
What is Multisig?
In the current financial system there are basically 2 types of payments
- Individual Transactions
In this case a single person is in control of an account, this could be a bank account or just a wallet in your pocket. That person has sole authority to decide that they want to make a transaction and spend their money. - Joint Accounts
Here more than one person has access to an account. Either person can spend the money as they wish. This is not really possible with a wallet in your pocket but is possible with credit cards and is commonly used.
- For Individual Transactions
A Standard Wallet or a 1 of 1 Wallet, i.e. you need 1 person to authorise the payment and there is only 1 person with control of the wallet.
- Joint accounts
This is a variation and is called a 1 of 2 Wallet. Here you need 1 person out of the 2 who have control of the wallet to authorise a payment.
Blockchain empowered Digital wallets offer many more features...
- 2 of 2 wallet Here you need both persons out of the 2 who have control of the wallet to authorise the payment.
An example of this is a type of joint savings account, where you set up a wallet and each month and save money for the holidays. The money can only be spent if your and your wife agree.
Blockchain is already great but we haven’t gotten to the real innovation yet...
What about a 2 of 3 wallet?
In this case you need 2 out of 3 signatures for the transfer to go ahead. For trade this is part of the Blockchain innovation which is just not possible with the existing financial system. Consider the following use cases:
Corporate Expense Accounts
In a workplace environment the 3 people could be you and 2 managers. If you have an expense account the funds only get paid if you sign it 1 out of 2 managers approve it. Suddenly endless paperwork, authorisations and audit go out the window.
Escrow
In this case a 2 of 3 wallet means you can set up a trade with a buyer, a seller and a third party arbitrator. Either the buyer and seller agree the sale has happened (2 signatures occur and transaction completed) or there is a dispute and the third party arbitrates and either signs the transaction or the transaction is refunded.
Ecommerce
The landscape for Ecommerce in 2016 is dominated by Amazon, Alibaba, Overstock with a multitude of small online retailers with their own websites and shopping cart systems.
In order to purchase an item in 2016 you need to make a payment and provide your details over the internet or phone, possibly to unknown untrusted third parties.
Blockchain can improve upon this without breaking a sweat!
How will Blockchain affect Ecommerce?
Blockchain has been designed for the internet. It provides a level of anonymity (some implementations more than others) and control (multisig escrow). It's a purpose built tool for recording value sent over the internet. It cannot be forged, copied or manipulated and has proved resilient to all types of cyber attacks during the last 8 years. In may ways it's a perfect tool for Ecommerce.
Payments
You no longer need to share your personal details (credit card numbers, ccv etc) or use Paypal or Visa to make payments over the internet. This means
- lower fees
- more control (no charge-backs)
- enhanced security (less stolen details and fraud).
This payment system can be implemented easily on any site. If there is a greater acceptance of digital currencies more and more sites will use this alternative for its obvious benefits.
Market Places
Openbazaar is the first decentralized market place which will offer an alternative to existing online markets such as Amazon and Alibaba. On this site you can offer a service or product at practically no cost. Anyone can become a retailer. The fact that you dont have to pay fees also allows lower value items and digital items and services to be sold.
OBs niche may be for services and digital items where no marketplace currently exits. It will be harder to break into the Amazon space unless digital currency becomes more mainstream however the platform and UX that is being developed is quite amazing. With next iteration, OB2, and the development of ancillary services and apps this market place could be very interesting. To browse the existing offerings see https://duosear.ch/, this is a search engine for OB.
Conclusion
Like Digital Banking, Blockchain use in Trade and Ecommerce will find its niche and supplement rather than replace the traditional system.
- It will grow in importance particularly in relation to online transactions where, underpinning Digital Currencies, the competitive advantage is security, speed and cost.
- New markets will develop. It will be possible to offer services and digital goods for sale at practically no cost.
- Like in Banking more people will be integrated into the global economy. Setting up a shop or making purchases are now possible for everyone with a smartphone.
- You no longer need to wait for funds to reach your account following a sale. The cash will be available immediately.
- Escrow is possible for online sales using professional arbitrators.
Thank you for reading this. I write on Steemit about Blockchain, Cryptocurrency, Science and lots of random topics.
Other Posts in this series
Blockchain – Beyond Bitcoin
Blockchain - Beyond Bitcoin (Part 2)
Blockchain – Beyond Bitcoin (Part 3) Banking
Blockchain – Beyond Bitcoin (Part 5) Investments and Insurance
Image Credits Many thanks to Stone Banana Bitcoin Series for allowing the use of the fantastic image “Revolutionary Evolution”, which chronicles the evolution of money. Other images have been sourced from https://pixabay.com.