What’s the Word on the Block(chain)?
Have you heard the news? Bitcoin and blockchain are the latest innovations to break into our modern market -- and they’re here to stay. Bit-what, you say? If you’re still not sure exactly what bitcoin or blockchain is and why they’re important -- don’t worry. We’re here to break down the basics of cryptocurrency and give a little insight on how this revolutionary new form of currency could possibly affect businesses.
Breaking Down the Basics
Let’s start with cryptocurrency. According to Nasdaq.com, cryptocurrency is defined as digital currencies that are secured using cryptography (which is the process of writing or solving codes). Essentially, it’s a currency generated by a computer algorithm and can be accessed by mining codes. Bitcoin is considered a cryptocurrency, and blockchain is where all these digital transactions are housed.
Next up is bitcoin. Bitcoin is the term used to describe the digital currency that can be mined; it also describes the actual distribution network that maintains the ledger of balances of being used. Think of it like blood cells and blood; they are one in the same, but blood cells are the actual entities being utilized by the body. A key component to remember regarding bitcoin is that it is decentralized meaning the system works without a single bank or administration.
Finally, blockchain. The blockchain is a chain of “blocks” which contain records of digital transactions. Once a new block is completed, it gets added to the chain and thus creating a blockchain. Since these blocks are encrypted, the user must solve a complicated math problem in order to add a transaction to the block and extend the blockchain. The user is then rewarded with cryptocurrency for solving the problem. This is also referred to as “mining”.
How Cryptocurrency Can Affect Your Business
While cryptocurrency can be confusing at first, it’s important to understand its impact on the economy in order to keep your business competitive. At the time of this writing, the bitcoin currency is already considered to be valued at $127+ billion US dollars. Whether you run a small business or a large corporation, cryptocurrency may be coming your way and it's best to be prepared to understand how it can help your business.
A New Form of Payment
It’s important to consider if your company needs to adapt to this new currency exchange, and how you will provide the service for your clientele.
Contracts Through the Blockchain
Blockchain is introducing a new way to do business with “smart contracts”. So, how does one do business on the blockchain exactly? When two parties agree to terms, then cryptocurrency can exchanged. The contract is then recorded and stored on the blockchain. What’s interesting about smart contracts on the blockchain is that once they’re recorded, they can’t be changed. Since cryptocurrency is decentralized, this protects both parties, especially merchants, from being cheated in the currency exchange process.
Creating contracts through the blockchain is a far cry from the traditional paper contracts that businesses use, but as cryptocurrency becomes more and more accepted, using the blockchain might become the norm. Would you consider doing business on the blockchain?
Fast (and Final) Transactions
Since cryptocurrency transactions happen almost in real time, the actual coins can be deposited into your wallet in 10 minutes or less. Talk about a fast transaction time! What’s more, cryptocurrency transactions are final. The finality of these transactions gives more control to the merchant and removes certain risks of credit card charge backs that might erode your revenue margins.
With lightning fast exchanges and locked-in transactions, this will disrupt how we do business. Depending on your industry, your business might benefit from a commerce set up like this. Would you do business under this circumstances?
We’re just scratching the surface when it comes to defining these complex, but fascinating, new concepts in digital currency and ways that they can affect your business. If you’d like a more comprehensive explanation on cryptocurrency and the innovations beyond bitcoin and the blockchain, we encourage you to check out some of these resources below.
What Is A Cryptocurrency? (Nasdaq.com)