Pros and Cons of Blockchain-Based E-Commerce
Some refer blockchain as the “engine of the global economy” whereas others say we can’t see further than the hype. With the global e-commerce market poised to reach $135 billion by 2023, the adoption of blockchain is a possible direction which holds many positive changes for both users as online merchants.
Blockchain Benefits In E-Commerce
See, no matter how you turn it around, e-commerce will be influenced by the trending technology blockchain is right now. Let’s take a look at the advantages blockchain technology offers.
Of course, security is one of the main benefits. Every transaction is registered into an immutable ledger that tracks the balances of each user. Once a transaction has been sent and confirmed, you can be 100% sure this transaction is final.
Nowadays, loads of online merchants have problems with Visa and PayPal transactions. Users can open a dispute whenever something is incorrect with the received goods or service. This so-called ‘empowering’ system enforces webshops to spend time and money into this, sometimes slow, dispute process.
ModulTrade offers a hassle-free way of interacting with each other via a smart contract that is created for every transaction. This eliminates the possibility of a dispute as it acts as an escrow between buyer and seller.
Integration With Business Processes
Blockchain allows to easily integrate with existing business processes. For example, hooks exist for tracking the status of an Ethereum transaction in real-time. These hooks can be incorporated in existing webshops to easily track payments.
Also, ModulTrade provides real-time updates when trading on the platform using hooks to the created trading smart contracts. We even took this concept a step further as we have successfully integrated real-time tracking for your delivery via DHL.
Cost Reduction & Efficiency
Supply chain tracking can be more easily managed as an online store can check the status of each good and its stock. As fraud is eliminated during the supply chain process using blockchain technology, costs regarding disputes and inferior products delivery are reduced along the way.
Also, using blockchain technology, the time till checkout can be reduced. All information about the buyer is present which allows the user to checkout with only 3 clicks on the ModulTrade Marketplace using the native token, no need for a bank account.
In short, blockchain allows a business to carry out its core tasks more efficient and reduce costs and time.
When trading online, trust is key. Self-sovereign identity is an upcoming application of blockchain technology that can assist webshops with their KYC compliance and user verification.
On the other side, it helps buyers to verify a person they are trading with and make sure they can trust this person.
Blockchain Challenges For Ecommerce
“If you ask an executive of an institution for three reasons why his or her institution hasn’t adopted cryptocurrencies yet, at least one of the reasons would be high price volatility.”
The high price volatility is a big problem for companies as it means high risk. Therefore, stable coins have gained a lot of popularity as they are backed by a stable asset that prevents the coin from volatility but allows it to maintain its cryptocurrency properties.
ModulTrade understands this need and has adopted the Augmint stable token in the ModulTrade wallet that allows companies to safely move money and start transacting without having the risk of high volatility. Augmint provides A-EUR which targets a 1:1 exchange rate with Euro. This allows users to easily and securely accept and send A-EUR in their MT Wallet for free!
Achieving Decentralized Trust
As we believe that decentralized trust is one of the most important aspects of a decentralized marketplace, let’s dive deeper into this issue.
How can you trade with someone who could, in principle, be completely anonymous?
When we look at centralized marketplaces, we can find a combination of star-based rating systems and the ability to censor users based on heuristic mechanisms. For a centralized marketplace, it is easy to censor a user that misbehaves or behaves suspiciously. However, star-based ratings don’t have much value for decentralized marketplaces, even when you have the limitation of only allowing ratings whenever someone buys a product. Users can simply buy and sell their own product and cycle money between crypto accounts they own. So, we need to come up with a better approach.
ModulTrade: Reputation System
ModulTrade, for example, uses a reputation system that tracks reviews on-chain to increase trust and filter out dishonest and bad players, leaving a pool of honest and righteous traders.
Whenever a product has arrived at its destination, the buyer will receive as well an invitation to provide feedback about the product and seller which will be incorporated into the seller’s reputation value. Using this method, a user can not buy and sell its own products to boost his reputation as they have to ship the product and the delivery address must be different than his verified living address.
OpenBazaar: Trust Is Risk
OpenBazaar proposes the idea of trust circles where money is used to objectify trust. If you are A, and you trust B, but B trust C, you are implicitly trusting C as well. However, the approach is not ideal for smaller/niche marketplaces and is specific to only one marketplace.
Ink Protocol: Reputation Layer
Ink Protocol acts as a reputation which you can apply to any marketplace and any transaction. they use self-sovereign reputation in order to take away the monopolistic power from marketplaces which have the ability to modify your reputation, censor, or filter your feedback.
The big advantage of using Ink Protocol is that you can take your reputation with you to any marketplace that implements the protocol. For example, you have a very strong account on eBay where you have been selling for years but you decide to switch to a new marketplace… Suddenly, you have to start all over again and build up trust in this new marketplace. This prevents the user from freely choosing the platform that fits best to its needs. With Ink Protocol, a user can take his full reputation identity with him.
Transferable reputation layer for any marketplace.
Decentralized Marketplaces Are Inevitable
As Josh Fraser says, “out history middlemen have suffered a common fate. Markets like to be efficient and middlemen get replaced with more efficient alternatives, whether that is travel agents being replaced by Kayak and Expedia or expensive financial advisors being replaced by Wealthfront.”
The blockchain gives us a chance to cut out those rent-seeking middlemen, with revolutionary new business models that allow fees to go to ~zero. ModulTrade does the same by adopting smart contract technology to cut out middleman platforms and improve efficiency. Via ModulTrade’s escrow technology, trust and safety are greatly improved which is the number one issue when dealing online with an anonymous person.
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