eBusiness Weekly
Kudzai M. Mubaiwa
Many a business person would by now have heard about cryptocurrency and more likely Bitcoin. Naturally, there are different thoughts around it, with some early adopters professing enthusiasm, others completely rejecting it and yet more in the middle that have adopted a wait and see attitude.
Whatever your present persuasion, the critical thing is to think around the technology behind Bitcoin and other alternative currencies, known as Blockchain.
Authors Don and Alex Tapscott define the blockchain as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
The distributed ledger of records are arranged in data batches called blocks. They use cryptographic validation to link to themselves, each block references and identifies the previous block by a hashing function to form an unbroken chain.
The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralised version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
Put simply, Blockchain is a lot like a shared document where many people have the opportunity to edit it and everyone can see who made what edit and on what date and time. This functionality sounds quite simple yet it is extremely profound. Blockchain allows multiple parties to transfer and store information in a space that is secur, permanent and easily accessible. Many small business owners are unaware what it can do for them and think it is only for big companies. Here are some benefits the Blockchain can bring to small business in Zimbabwe.
Most businesses will likely first interact with Blockchain through simple payments, if they opt to receive their dues in cryptocurrency such as Bitcoin, or pay their own vendors and suppliers in this way.
Many already see it as a more efficient transactional process with lower costs and default indisputable record of payment. I am aware of a few companies that already receive Bitcoin, and am still smarting from the poor decision I made last year to pay for design services with what was then the equivalent of $17 which is now triple the value.
It is not shocking at all to find company documents indicating their bank account number for transfers like Zipit, their Ecocash mobile money biller code and their Bitcoin QR code.
This will be the entry level interaction of most small business with Blockchain, and an important step for those looking to export goods and services as they can have an alternative way to receive international payments.
The game changer is the recent acquisition of a Bitcoin ATM by a local startup Golix, technically there is now a way to be paid in USD cash in Zimbabwe.
Blockchain can bring the benefit of improved cash flow. Payments are often a long and tedious process involving a lot of paperwork, signatories and authorizations, and the bureaucracy is tiring for both those processing and the recipients.
The average business owner will testify that dealing with large companies is a nightmare, you want the business so you tolerate when securing an order takes forever, then getting a proper contract in place takes a few more months, the work is done and you invoice them, and getting paid is nothing short of a miracle if done under 30 days. In attempting to stop fraudulent activity, transactions are made sour by tedious administrative processes.
The Blockchain can treat this and reduce the time spent on paperwork and administrative tasks, and thus improve the cash flow of small business through the use of smart contracts.
Smart contracts allow for automatic and instant payment of invoices once a given transaction has been processed.
There is no need to wait for numerous authorisation layers to be completed after the issuance of the invoice; all parties can instantly see with smart contracts the details needed to have the work signed off.
As soon as all the requirements have been completed, this transaction block will close, and the payment is automatically made without having to coerce, bribe, beg or threaten anyone. Amazing what technology can do to solve such an important problem for small companies that can be derailed by a delay in one major payment.
Blockchain can bring the benefit of more efficient supply chain. Delays with shipments affect business, through strained relations and additional overhead. The distributed ledger makes everything transparent. Immutable records can be used to ensure that all standards have been met, such as health and safety standards.
Blockchain makes the tracking journey and provenance easy, in the global world it may take several inputs from different locations to create one product, raw materials from one source, metal from another and finishing from yet another until it gets to the buyer — all of this in real time. A real life example could be tea that is grown in Zimbabwe, packaged in Finland and sold in the United Kingdom.
The Blockchain would enable verification of social or sustainability issues like land ownership by the tea farmer. It could also confirm the environmental issues around the packaging wood source.
All the players in the chain will have access and the same records, and can much easily be able to secure funding on the back of a verifiable cycle with all participants above board, with certainty that there is no malpractice and fraud is unlikely.
The future is that physical flow of goods will be linked to information and financial flows when combined with artificial intelligence. Logistics are made easier.
The best thing, however, to emerge from Blockchain for small business will be the potential to raise capital by issuing new tokens that the market takes up at some initial value and the value can potentially appreciate.
This is practically hacking the plans for an SME stock exchange where smaller businesses can attract investment. There would be no need to let go of creative control, but companies can get working capital to allow growth. The new tokens are a fiat currency linked to an underlying cryptocurrency.
Already, two local start-ups have come to the market with such offerings. Indeed Blockchain is a fresh technology that can potentially solve a few more small business issues, and have many use cases locally, but our infrastructure is yet to fully support it.
We will in the next instalment delve into the preconditions necessary for its uptake, with some learnings from how mobile money progressed in Zimbabwe.
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