Blockchain technology is currently famous for its association with cryptocurrency exchanges. In reality, the technology has tremendous potential to revolutionize the small business sector. Small businesses are the backbone of many countries in the world including the developing ones. They account for roughly 90% of all businesses and 50% of jobs as per the WEF article. Let’s look at how blockchain technology may strengthen small businesses in different ways.
Blockchain for small businesses can solve or reduce the challenges faced by them. The World Bank’s Enterprise Survey identifies lack of financial access as a major challenge. The World Economic Forum (WEF) states that SME demand for finance in developing countries is $8.9 trillion. The credit supply presently is $3.7 trillion. This financial deficit is a reality for many small business enterprises. However, with the help of blockchain technology, SMEs can resolve these challenges easily. It can also grow and build businesses.
Small businesses often find it difficult to reach global markets owing to trading restrictions. Sometimes, they may not have enough financial resources to explore beyond their territories. Blockchain for small businesses can change this reality in many cases. This is because blockchain technology has the potential to facilitate global trade and widen the customer base. National boundaries do not matter much for blockchain technology.
Blockchain technology can facilitate safety and transparency in transactions. This is because each financial transaction in the blockchain is traceable. This feature can enhance the confidence level of many small businesses because they know that their transactions are recorded on a ledger. Moreover, those ledgers in the blockchain are both accessible and immutable.
Small businesses usually have low-profit margins. Therefore, efficiency can make a huge difference in their profits. Many small businesses spend substantial amounts on data storage. In this regard, blockchain technology can be very useful. It combines blockchain technology with cloud storage. This can be highly cost-effective for storing large amounts of data. Therefore, small businesses can reduce operational costs and gain more data security by incorporating blockchain technology. Increased competitiveness is significant for business growth.
Blockchain technology can offer innovative solutions to raise capital for small businesses. The technology can raise capital with the help of Initial Token Offerings (ITOs). These can be exchanged without any extra cost. Crowdfunding platforms, traditional banks, private equity firms, and lenders are the main funding sources for SMEs. However, blockchain technology can act as a reliable substitute for these financial sources.
Supply chain operations are important for many SMEs. Therefore, if SMEs incorporate blockchain technology then they can easily track payments, production, accounts, and much more. Blockchain shares the exact information and offers business owners both peace of mind and confidence. The tracking feature of blockchain technology can make the process more efficient and minimize both costs and risks.
Intermediaries play a crucial role in running small businesses. However, it also leads to more costs and slows down operational efficiency. Blockchain allows better record-keeping and third-party validations. It may help businesses to reduce dependence on intermediaries. Therefore, businesses can grow faster and expand with the help of blockchain.
Blockchain in small businesses can provide access to smart contracts. It can store self-executing contracts. These help in following a set of rules and executing transactions. Most smart contracts are efficient and affordable. Receiving and sending payments, and managing contracts with employees, suppliers, and vendors can become much easier with smart contracts. For small businesses, these are a dependable business assistant.
A PwC report predicts that blockchain technology can increase 40 million jobs by 2030. Moreover, it has the potential to add $1.76 trillion to the global economy by 2030. Approximately, 29% of businesses have utilized blockchain technology by the end of 2021. However, only 2.8% of the world is using blockchain. In short, blockchain technology still has a long way to go.
Also Read – Benefits of Blockchain in Government and the Public Sector
Small businesses will benefit a lot from blockchain technology. It will help business owners to increase efficiency, and productivity and reduce costs. Furthermore, small businesses can gain from blockchain technology by streamlining their processes. Additionally, the risk factor may be reduced considerably too. The biggest advantage perhaps is that blockchain technology may offer a level playing field to small businesses to compete with the larger ones. Decentralization is another advantage that can address many fundamental issues affecting the SMEs.
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