With the recent initial public offering of cryptocurrency trading company Coinbase, blockchain technology took a giant step forward in public awareness. While blockchain technology has been on the rise for more than a decade, 2021 has perhaps become the year where every business, no matter what size, needs to start paying attention.
Small businesses and startups, even those not involved in the technology space, would be wise to start learning about and considering some blockchain technologies and services. Here are five essential things small businesses need to know about blockchain technologies.
Accepting Bitcoin and cryptocurrency payments
The most important and applicable way most small businesses will likely interact with blockchain-based technologies is through accepting Bitcoin and other cryptocurrency payments. Large companies such as AT&T, Microsoft, Overstock and Tesla have all begun to accept Bitcoin and other digital currencies. As such, small businesses may want to follow suit as adoption increases.
Several notable companies allow just about any business to accept cryptocurrency assets. These include:
- BitPay: BitPay has become one of the fastest-growing payment processors for crypto-assets and only takes a 1% processing fee.
- Coinbase Commerce: While Coinbase is best known as a cryptocurrency exchange, it also offers a robust product for businesses as well.
- CoinPayments: As one of the longest-running cryptocurrency processing companies, CoinPayments has accumulated many customers worldwide and offers a processing fee of just 0.5%.
- PayPal: Payments giant PayPal recently announced it would allow millions of merchants using its services to accept Bitcoin.
All of these services are a good start for small businesses who want to begin accepting cryptocurrencies. As demand grows for cryptocurrencies, other prominent payment processors may also add Bitcoin, Ether and other popular currencies as standard options.
One additional way small businesses and startups may want to engage with blockchain technologies is through raising money.
Creating non-fungible tokens (NFTs)
Another popular way small businesses may begin interacting with blockchain-based technology is through the creation, sale and purchase of non-fungible tokens (NFTs). The world of NFTs caught fire early in 2021, with a digital artist named Beeple selling an NFT of his artwork for $69 million at auction. But NFTs can be more than just digital artwork, and businesses may want to pursue creating their own NFTs for sale.
NFTs are unique pieces of code that don’t have a traditional value associated with them. They are secured by blockchain technology similar to Bitcoin and Ether, but each NFT asset is singular and can’t be replicated. Like a unique painting, NFTs are worth whatever someone believes their value to be.
The most likely way a business would interact with the NFT craze is by creating (or “minting”) and then selling them. Companies and creators to date have developed many types of media or artifacts and sold them as NFTs, including digital artwork, digital music, video clips, virtual real estate, and digital pets.
One of the most clever examples of NFTs that show how these tokens could work in the future is a recent NFT offering by the rock band Kings of Leon. The band released its latest album as an NFT and earned more than $2 million from the sales. A significant portion of the sales came from the band also selling six “golden ticket” NFTs that offered “the owner four front-row seats to one show of every Kings of Leon headline tour for life.”
Showing how products are sourced
Blockchain technology, in its most basic form, serves as a distributed digital ledger. With each ledger serving as a permanent record of sorts, some businesses have embraced this as a way to show how products are sourced. Customers can trust that where the product comes from is authentic because blockchain technology tracks the goods.
For example, accessories brand Covalent uses verifiable sourcing technology based on blockchain to trace the origins of its products and prove environmental benefits to potential customers. The company — which manufactures eyewear, handbags, wallets and other products — prints a 12-digit blockchain number on each product that consumers can use to track how each item was produced and its carbon footprint.
“It gives us the ability to communicate our environmental footprint in a way that no other technology really could,” Mark Herrema, CEO of Newlight Technologies, told CO—. “If you are looking at two different T-shirts, we think it would be important for you to know that one of them used 70 gallons of water to make it, and the other one used 700 gallons of water. Maybe it doesn't change which one you choose, but at least it gives you the opportunity to make that choice.”
Raising money in new ways
One additional way small businesses and startups may want to engage with blockchain technologies is through raising money. Instead of seeking traditional fundraising through bank loans, crowdfunding websites or venture capital, some companies may wish to pursue an Initial Token Offering (ITO) or Initial Coin Offering (ICO).
In an ITO, a company creates its own blockchain-based token and sells tokens to customers who want to own a part of the company or the new asset created by the business. While there are only a handful of hugely successful examples of ITOs and ICOs, companies worldwide continue to experiment with them. Notably, the Securities and Exchange Commission has written helpful explainers about ICOs, noting that they can sometimes lead to fraud. So be sure to do your research before pursuing this as an option.
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