Blockchain makes it possible to establish peer-to-peer consensus without centralized platforms – will the big e-commerce players be affected?
According to CoinTelegraph, China has the largest number of blockchain patents in the world, beating out the US and Japan. Despite blockchain disrupting virtually every industry in China, the path to regulating this new technology has been full of unforeseen turns. After unveiling a set of regulations to ban cryptocurrency in February, China has since moved to secure government control of blockchain projects, including the development of a government-controlled cryptocurrency.
Regional governments including Xiongan, Shenzhen, and Fujian have created investment funds to support the proliferation of blockchain technology. JD.com launched a blockchain accelerator in February and started tracking beef imports using blockchain technology. In March, Alibaba’s luxury platform Tmall announced that it would adopt blockchain technology into its cross-border e-commerce supply chain through its logistics arm, Cainiao.
Blockchain technology can record transactions between two parties efficiently, securely, and permanently.
Blockchain is a technology that’s well-suited for ensuring authenticity and integrity of supply chains, product origin, and food safety – here’s why. A blockchain is a continuously growing list of records linked and secured using cryptography. Each block contains a record of the previous block and a timestamp of transaction data. Its design makes it inherently resistant to modification of the data that comprises it. Furthermore, it can record transactions between two parties efficiently, securely, and permanently.
Blockchain has disrupted numerous industries, and e-commerce is no exception. It holds the potential to decentralize the control of e-commerce that’s held by the giants, such as Alibaba, JD.com, Amazon, and eBay. E-commerce relies on these platforms to establish security and trust through payment systems, logistics, and contracts between buyers and sellers. But blockchain technology has the potential to achieve consensus-based trust without these platforms, ensuring the quality of products and the payment for goods on a peer-to-peer basis.
E-commerce platforms will have to justify steep seller’s fees with value-added services
A recent report released by Accenture outlines the consequences of blockchain technology and e-commerce. First, because blockchain empowers consumers, manufacturers and vendors will need to improve customer experience by providing increased customer insight. Second, businesses that act as middlemen are at the risk of becoming obsolete. Companies must show how they add value to e-commerce transactions to protect against C2C dominant modes of transaction. They can do this by using blockchain technology to ensure the legitimacy of product reviews, paying content creators for the contributions they make to ad revenues, and allowing users to make payments directly to digital wallets, cutting out intermediary fees.
A new e-commerce platform called ECoinmerce is starting a blockchain-powered marketplace and platform. For retailers, ECoinmerce will charge less than .1% for selling goods, and retailers will have complete ownership of digital assets such as digital storefronts, product photos, and reviews. Similar to the model used by Chinese startup Pinduoduo, users on ECoinmerce will be able to buy as groups for higher discounts, auction goods on a peer-to-peer basis, and leverage social commerce through incentivized friend referrals, sharing, and social media posts. Additional e-commerce platforms powered by blockchain include Omnitude and eMarketChain.
Cross-border e-commerce can leverage blockchain to ensure product authenticity
Whether these new platforms will completely upend e-commerce remains to be seen. In the meantime, traditional e-commerce platforms can leverage blockchain technology to maintain their appeal for retailers, buyers, and SMEs. One of the biggest advantages blockchain technology holds for cross-border e-commerce goods that originate in China is the ability to ensure product authenticity. Blockchain technology can compile and track every movement and piece of information related to a specific item as it travels through the supply chain, validating each point of the journey from sourcing to manufacturing, to retailer, to consumer. That’s because once information is submitted to the blockchain, it can’t be altered or deleted.
The Hangzhou government is already deep into research on integrating blockchain technology into various sectors. The city announced a US$1.6 billion blockchain fund and industrial park earlier this month. Hangzhou is home to Alibaba, but specific plans on using the new blockchain fund for e-commerce have yet to be announced. Nonetheless, Alibaba has made strides with using blockchain technology to prevent food fraud. It’s said that if this program is successful, it could lead to wider adoption across supply chains for its global markets.
China has made a strategic move to fund blockchain technology with government money, fighting against market disruptors that may threaten top e-commerce players and their role in global trade. That said, there are plenty of e-commerce blockchain startups that could revolutionize the sector worldwide – it’s a question of how well they can market themselves to SMEs, buyers, and sellers that have already accepted Alibaba, Amazon, Wish and Shopify as household names.