Providing greater security: Blockchain and ecommerce
One of the main concerns that both online retailers and customers have relates to the security and probity of any transaction in which they participate. A key part of this pertains to the accuracy of the data and information provided, to ensuring that it is recorded properly, and to being confident (in particular for retailers) that the information cannot be modified without authorisation at a later date. Blockchain is the name given to a type of technology that is now increasingly being used to provide this greater security. One of the most popular types of blockchain products is Bitcoin.
What is Blockchain?
Blockchain is the name that is given to a type of distributed database that is used to manage continuously growing lists of records, known as blocks. Each block has a date/time stamp and is linked to previous blocks. Thus the blockchain is inherently resistant to modification of data, as to modify one part of the data will modify all the subsequent data. This provides an excellent level of information assurance. By design, blockchains work excellently over distributed systems. This makes them ideal for organisations operating over multiple locations, and for instance, for transaction management and processing.
Further developments in the blockchain architecture have enabled even greater benefits to emerge. An article in The Economist described one example of the implementation of the more advanced second-generation programmable blockchain as coming with “a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”
The advantages for online merchants
For online merchants, one of the major advantages of using a blockchain relates to the verification of transactions and the ability to subsequently audit transactions in an inexpensive manner. The workflow that is part of the fundamental design in blockchains means that, for instance, financial transactions that are authorised via a blockchain system cannot be invalid. One of the major benefits that this has is that it removes the possibility of ‘double spending’, the problem where the same digital token or transaction is spent twice or more. For online retailers, this has represented a considerable issue given the implications to cost and overall profitability.
This further means that for any merchants, ensuring the validity of transactions becomes considerably quicker and less costly. It cuts down on the efforts required for audit and can provide the merchant with greater certainty about their current financial or trading status.
Using blockchain also provides merchants with greater benefits regarding the security of the data. As blockchain data is held in encrypted form with public-key cryptography, it is generally held to be incorruptible. Data is not held in one centralised location, thus problems relating to back-ups, equipment failure or record loss simply do not exist.
How to use blockchains
One of the simplest ways to take advantage of the benefits that using blockchain-based systems offer is through utilising bitcoin. Bitcoin wallets can be created for any individual or company, and operate on different platforms (such as iOS, Android, web-based). These wallets allow users to securely manage, send and receive transactions – in effect these by-pass a bank, eliminating transaction charges and payment delays.
With the advantages in terms of security, speed and ease of use, utilising blockchain systems is something that online merchants could consider doing to offer their customers greater confidence and certainty. It has the benefit of demonstrating clearly that the merchant is showing awareness of customer’s concerns and providing a greater range of secure options than other competitors.