The many advantages of Bitcoin over traditional cash gives it mass appeal. Since there is no way for third parties to identify, track or intercept transactions,
Furthermore, the absence of an intermediary institution or government involvement in Bitcoin transactions, it is harder to add sales tax to a transaction, increase transaction fees, and incur a cost from foreign purchases and wire transfers.
For retailers and POS companies, Bitcoin is a better alternative to credit card companies because they charge between three and five percent of each purchase simply to use the service. It costs even more to wire money from one country to another.
While Bitcoin makes an impact on a small scale among peer to peer transactions, there’s a place where Bitcoin’s blockchain technology could have a much larger impact: the business community.
The blockchain acts as a distributed ledger on which transactions between two parties are stored. Bitcoin miners are notified of the pending payment, and they bundle this data with other pending transactions.
This is how Bitcoin’s blockchain process works: a payment is processed with the use of your private key and the public key of the person receiving the payment. The keys are a combination of seemingly random numbers and letters.
A mathematical formula called a “hash” is applied to each transaction. The hash is a cryptographic fingerprint that makes a transaction verifiable.
The complete assimilation of Bitcoin brings us a step closer to the sophistication of the accounting profession. Day to day operations of accounting are manually intensive and require a variety of checks and balances to ensure the accuracy of financial transactions. For this reason, internal and external audits of a business are cumbersome and expensive.
Blockchain technology is the perfect source for auditable records. Any transaction stored on the blockchain cannot be mismanaged due to human error.
The blockchain has the ability to streamline operations spanning from content finance and production, business consumer services, insurance, and technology development and licensing.
In terms of contracts, multiple parties could be involved, leading to adverse payment processes, expenditure exaggerations, and ignored licensing terms.
A solution to these complications are smart contracts which are run by a computer program called Ethereum that automatically executes the terms of a contract without a third party.
The terms of a contract can be embedded into the program, and once the contractual obligations are met, the terms can be made actionable. Simplifying online payments and contractual obligations streamlines business operations.
A cash-on-delivery smart contract would allow a negotiation between two parties before the transaction process. After the shipment and receipt are verified, smart contracts automate fund transfers to vendors, improving the vendor’s cash flow and, as a result, decreasing the amount of back-office monitoring of the vendor’s accounts payable.
Businesses keep a record of each transaction via receipt and with invoices. Human error or unscrupulous practices sometimes get in the way of producing accurate accounts of transaction records. The advantage of blockchain technology is that it does not rely on trust and manual human effort.
The distributed ledger is openly available to both parties, recording all transactions between both parties which is distributed and sealed to a cryptographic ledger. Any alterations or falsifications of these records is nearly impossible.
Blockchain technology could also expedite and streamline procurement and supply chain management. There are a few companies that have created a peer-to-peer, decentralized network, based on Ethereum protocol. The protocol connects carriers, bankers, traders, and other parties on the shipping supply chain.
Decentralized and data storage technology allows paperless documentation and a single source of record keeping for all parties.
Big companies such as Walmart recently integrated blockchain tech to track the shipment of fresh produce. Every step of inventory management would be done more efficiently when a company tracks shipments with the integration of blockchain technology. Purchase orders, item receipts, bills, and payments are all embedded on a chain.
Article by Josh Nelson for Benzinga.com
