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Blockchain: Disruptor or Disappointment?
Blockchain has made waves over the past decade, and now it’s becoming a hot topic once again. But is it worth the hype? We break down its pros, cons and how retailers can use it.
For the past few years, Bitcoin and Ethereum were the words on everybody’s lips: ‘What is it? Should my business invest? How long will this phase last?’ Then, in 2018, the bubble seemed to burst.
However, in 2019, the brains behind cryptocurrency are slowly making a comeback. So, what’s the hype behind cryptocurrency this time? Is it worth retailers getting involved in blockchain, or will the bubble burst once again?
Blockchain: A Break Down
As blockchain is complicated technology, this breakdown will be as simplified as possible. In Layman’s terms, blockchain is a form of currency, distributed across a database existing on multiple computers at the same time. As it grows, it adds new recordings, or ‘blocks’, which contain a timestamp and a link to the previous block, forming a chain.
A centralised bank or any particular body do not manage this chain. Instead, everyone involved in the network gets a copy of the entire database. The old blocks are forever preserved as newer blocks are added, making it irreversible. This makes it impossible to manipulate the cryptocurrency with false documents, transactions or any other information.
The Pros of Blockchain:
Payment Solutions: Of course, blockchain is an essential factor in the future of online purchases. Many retailers accept Bitcoin as an option for payment and are integrating other blockchain payment options. An American startup, Flexa, has created an app called ‘Spendn’, allowing consumers to pay for products with Bitcoin, Ethereum, Bitcoin cash and the Gemini dollar. Some of the stores that currently accept this payment include Starbucks, Whole Foods and Nordstrom. “The Flexa team has decades of payments experience, and at this point, we believe that the best way for global commerce to become more efficient and accessible is by bringing cryptocurrency to the masses,” said a Flexa spokesperson.
Transparency: Blockchain is famous for being transparent in the supply chain. As ethical consumerism takes over the retail industry, it’s apparent that other businesses are getting involved. This form of transaction is completely secure and paperless, offering extra security for consumers and companies alike.
Loyalty Programs: Blockchain can help boost customer loyalty. Despite its rocky beginnings, cryptocurrencies offer reliable, accurate and instant data integrity. Brands can use blockchain technology for customer loyalty programs, increasing customer engagement. Businesses can apply this to customer loyalty programs that are data-reliant. Blockchain technology ensures that the data is captured at every stage of the customer’s interaction, improving qualitative analytics and customer modelling.
LVMH’s White Label Blockchain
Many businesses have taken the initiative behind cryptocurrency and run with it, creating branded forms of blockchain. The French fashion house, LVMH, has announced the launch of its own blockchain. LVMH, who owns Louis Vuitton, Dior and 60 other luxury labels, will use this blockchain to track its luxury goods to help prove the authenticity of the high-priced items. Its current code-name is ‘AURA’, and have hired a team who are collaborating with the Ethereum design studio, and is expected to go live in May or June 2019.
A source from LVMH said: “To begin with AURA will provide proof of authenticity of luxury items and trace their origins from raw materials to point of sale and beyond to used-goods markets. The next phase of the platform will explore protection of creative intellectual property, exclusive offers and events for each brands’ customers, as well as anti-ad fraud.”
The Cons of Blockchain:
No Solid Value Behind the Currency: While there are plenty of benefits of blockchain, there remain some cons that will trickle through. With the transparency of cryptocurrency comes the likelihood of users taking advantage and skirting the law. There is also no real value behind the currency so it can be difficult to accommodate taxes to the amount given.
No Central Bank Control: Without central bank control, no central force can step in and help correct the markets. This can differ between coins, but the overall factor remains relevant. There is also no way to recover coins that have been lost, and there is no safety net behind it, so there’s an instant risk when companies get involved in the cryptocurrency.
No Real Flexibility: Due to its non-inflationary nature, the currency does not hold the same flexibility that mainstream and centralised currencies do. If something goes wrong in a transaction, such as stolen coins or a mismanaged transaction, there is no way to rectify or recover the payment. As blockchain is software based, there is always the risk of hackers or bugs infecting the software. Moreover, cryptocurrencies have some theoretical issues and vulnerabilities. There have not been any cases of this occurring, but it’s worth noting as a safety precaution.
So, what’s the future of cryptocurrencies and blockchain? Only time will tell, but as more businesses get involved in the breakthrough software, the higher the likelihood of it becoming a normal part of consumer’s buying habits.
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