The Role of Blockchain in E-Commerce: Beyond Cryptocurrencies
Everyone knows blockchain and cryptocurrencies by now, but what is a digital economy? How does it impact the world and global population? 'Digital Economy' was founded by Don Tapscott in 1995. The term digital economy means an economy that is focused on digital technologies, including communication networks, digital payment, big data, artificial intelligence, and mainly, e-commerce.
When a country focuses on a digital economy, the growth becomes attainable and even impressive. According to Forrester, the global digital economy will increase by $16.5 trillion and encompass 17% of global GDP by 2028. Therefore, it’s apparent why the world is utilizing technologies of all kinds, and especially in business. While there are impressive features and amazing opportunities due to technology, we shouldn’t overlook the privacy and safety concerns that come with it.
However, when discussing the digital economy and its impact on several sectors, one particular sector takes the front stage — e-commerce and its dependency on blockchain beyond cryptocurrency.
Why e-Commerce?
While it’s true that the digital economy is driven by many other industries, e-commerce alone captures a large share. The USA and China are the players in the global digital economy, and among them, china has over 39% shares of online retail sales in 2024, but it’s expected to increase up to 41% by 2028.
That said, cryptocurrencies were initially shaping the world of e-commerce by offering reliable and feasible payment methods. Cryptocurrencies, such as Bitcoin and Ethereum were replaced in terms of regular transaction modules to combat the challenges of high transaction fees, restrictions with international transactions, high fraudulent activities, limited market reach, high dependency on banks, and limited payment options.
Indeed, cryptocurrencies are not entirely in the final stage, but they have been a transformative tool for e-commerce to upscale globally.
E-Commerce and Blockchain Integration
In the early stages of blockchain, they were associated with cryptocurrencies, but fast forward to now, a lot have changed. While e-commerce still benefits from cryptocurrencies, there are many advanced features that blockchain integration offers to e-commerce. Hence why the role of blockchain has become much more important in e-commerce and they are transforming the landscape of e-commerce.
Benefits of Blockchain for E-commerce
Bitcoin and cryptocurrencies stemmed from the same branch, but blockchain is now prominent and is considering cryptocurrencies as a subset of it. It also solves two major issues in the digital world which are lack of transparency and security.
While most industries doubted and assumed the hype of blockchain would die soon, it has proven everyone wrong until now. Several industries are making use of blockchain technology and are celebrating the security and transparency it provides.
Although these two challenges are predominantly handled through blockchain technology, there are many other benefits e-commerce utilizes:
High-End Security
Fraud is a prominent challenge in eCommerce and the data proves it further. According to the data by Statista, losses due to fraud have accounted for US$20 billion in 2021, while a year before it has been comparatively low, which has increased the need for enhanced security systems.
One of the best solutions to solve the security issue has been cryptocurrency payments but it's impractical to believe that customers globally would replace cryptocurrencies for cash or bank transfers.
However, luckily blockchain has come into the picture as an obvious option to provide enhanced security for eCommerce, helping them save themselves from fraud. A secure blockchain would reduce the likelihood of data breaches. As blockchains are decentralized, it is not possible to corrupt the entire system with just one move.
Furthermore, by utilizing blockchain technology e-commerce can use safe storage for customers’ data.
Transparency
As we mentioned above, lack of transparency is another major issue in e-commerce. As details and relevant data related to transactions are stored in a public ledger, people experience transparency unlike before. This makes them confident to engage with e-commerce platforms.
As the data is stored in a public ledger and is across multiple nodes, the safety is higher than in a centralized system. Due to this high-end feature, transactions are secured and protected using a cryptographic algorithm.
Every transaction is in the blockchain allowing all parties to see the overall picture. This reduces the chances of fraudulent activities. Using blockchain technology, e-commerce can utilize safer payments and transparency regarding goods and service tracking systems.
No Intermediary Services
High transaction fees were another concern that caused a drastic impact on e-commerce, but thankfully due to blockchain technology, there is no requirement for intermediary services. But that’s not all, blockchain allows peer-to-peer payment methods, which means there are no banks or payment processors in the middle, consuming part of the payment as ‘bank charges.’
What does this do? It lowers the costs, allowing businesses to enjoy more revenue. Through this, e-commerce businesses can experience the joy of lower transaction fees, they otherwise have to pay for PayPal, Payoneer, credit card companies, and more.
Furthermore, blockchain technology facilitates global reach. It reduces the gap between international and local business industries, by implementing a globally accessible payment system. It has made international e-commerce accessible and seamless.
Smart Contracts
This is another efficient tool for businesses that are always on the lookout for time-saving, efficient methods to utilize. These self-executing smart contracts will complete the contracting procedures by entering relevant terms entered into codes. These kinds of high-end features can be implemented in e-commerce due to blockchain technology.
If the companies have already coded terms, then they can easily automate payments if the mentioned conditions are met. This will not only save time and manpower but also make the whole process smoother. Customer refunds and contracts between vendors also can be implemented using smart contracts in blockchain.
Supply Chain Management
Another extremely beneficial and interesting feature of blockchain is better supply chain management that enhances the overall business process. Companies have the opportunity to trace the products from the initial step of sales to delivery, as it increases customer trust. When customer trust increases, eventually it enhances the business’s reliability and recognition.
Enhanced supply chain management done through blockchain technology can fight counterfeit products, which is another serious concern among businesses. Both cost and time consumption during shipping can be drastically reduced through efficient supply chain management and smart contracts.
Conclusion
While cryptocurrencies supported e-commerce businesses to take a step further, blockchain technology has solved most of the pressing issues in the e-commerce world. It also has impacted the digital economy to a greater extent, that it’s highly unlikely for the business world to undo blockchain technology.
