You may have heard that blockchain is “trustless technology.” Don’t misunderstand. The term doesn’t mean that blockchain can’t be trusted. Instead, it reminds users that they don’t need to put their trust in any of the other people who use it — and it’s designed so that people with malicious intent can’t hack it. After years of fraud and data breaches, the time may have come for blockchain in retail.
How Blockchain Works
Blockchain technology uses “blocks” or collections of data that are linked together. Blocks can include dollar amounts of purchases, dates, times, or any other pertinent transaction information. The blockchain also contains information on who is making the transaction, although users can verify their identities through private keys that act as their digital signatures, so their actual personal information is not recorded.
Blockchains are distributed ledgers that share and sync data across multiple computers. Because blockchains are decentralized — without all the data kept in one, central location — they can’t be changed from just one computer. It would take a tremendous amount of computing power and effort to access enough nodes of a blockchain all at the same time to hack a blockchain.
Furthermore, once a blockchain transaction is complete, it’s virtually impossible to change it. Verified transactions are grouped and encrypted into blocks, that hackers would have an infinitesimal chance of reverse engineering back to the original information.
Blockchain can, therefore, securely and certainly verify that a transaction took place and provide indisputable approval to release funds and transfer ownership.
More than Bitcoin
Blockchain is best known as the technology behind Bitcoin and other cryptocurrencies, but the possibilities for blockchain applications in retail beyond payments are numerous. Some potential use cases include:
- Supply chain visibility: A disconnect can exist between different parts of a supply chain, wreaking havoc on delivery schedules. Blockchain technology can allow all parties in the supply chain to communicate and access real-time information on shipments. The visibility provided by a blockchain solution could also reduce the time and costs associated with a product recall.
- Smart contracts: Blockchain provides indisputable proof that a party did — or did not — deliver on their promises. Disputes can be settled instantly and payments adjusted, if warranted.
- Traceability: A growing number of consumers are demanding products that are ethically sourced. Blockchain can provide transparency from farm or raw material to the consumer, supporting the merchant’s commitment to social and environmental responsibility.
- Stopping counterfeit products: Suppliers and retailers can track items and, using historical data, ensure that counterfeits aren’t introduced to their inventory.
- Minimizing fraud: Retailers could use digital tokens on a blockchain to minimize coupon fraud, accurately track gift card balances, and manage loyalty rewards.
- Protecting customers’ personal data: Blockchain enables customers to keep their identity private and inaccessible by cybercriminals. It may help businesses comply with the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act.
- Warranties: Warranties managed via blockchain technology allow consumers to see which products are covered and the services that are included, as well as effective dates for the warranty.
Advantages of Using Blockchain in Retail
Retailers may find that blockchain technology can help them overcome challenges that stand in the way of growth. For example, with blockchain comes standardization — all parties involved will enter and view data the same way, which can make communication and tracking more efficient. Blockchain’s decentralized nature also provides easy scalability. It may also automate some processes which retailers are currently performing manually — and at an increasing cost for labor.
Moreover, this trustless technology can build trust. All of the users know there won’t be fraud, tampering, or other malicious activity on the blockchain, and that it’s safe from hackers. It removes the stress of oversight now necessary to ensure all transactions are verified and accurate.
Is it time to consider whether your clients could benefit from blockchain solutions?