The flashy “crypto-millionaire” has become a stock figure in the popular imagination, and many people still believe blockchain has little to offer anyone outside of Silicon Valley. But the reality is that blockchain, the technology underlying Bitcoin and other crypto transactions, has many advantages to offer consumers.
One of the most significant and attention-grabbing utilities it has is its ability to save consumers money. Here are two ways blockchain is creating savings for ordinary people:
From the Factory to the Store: Streamlining Logistics
Most shoppers probably don’t think about behind-the-scenes logistics much. But logistics are indeed the backbone of the global economy. Virtually every item consumers acquire has made a freight journey via truck, plane, train, or ship, and those transportation costs are built into the product’s retail price. For example, the USDA recently estimated that about 3.6 cents out of every dollar the typical U.S. consumer spends on food goes towards covering transportation costs. Anything that makes the logistics industry more cost-efficient passes savings on to the consumer.
A trucker shortage in the U.S. freight industry has driven up costs for retailers and manufacturers, and by extension, prices faced by consumers. A recent Reuters piece on the challenges of increased transport costs revealed that two of the ten anonymous executives interviewed had decided to raise retail prices in response to increased shipping costs, and a third was in discussion with retailers to do so.
The logistics industry, like many complex and large systems, suffers from inefficiencies that drive transportation costs (and times) up. A product making its way from manufacturer to customer passes through several hands. An ecosystem of manufacturers, shippers, carriers, distributors, and retailers must handle complex exchanges that involve multi-party legal contracts and financial agreements. Efficient supply chain management traditionally requires reams of paperwork, intensive coordination, and constant communication.
Blockchain, a growing number of supply chain experts argue, could be the perfect tool for efficient logistics management. Its decentralized transaction ledger provides a universally accessible and immutable record, ideal for memorializing both physical goods handoffs and related financial transactions. Shared blockchain ledgers reduce the delay and costs associated with reconciliation errors between different stakeholders’ recordkeeping systems.
Smart contracts in blockchain protocols such as Ethereum can automate steps in the supply chain in response to blockchain transactions, triggering automatic payments once goods change hands, for example. By reducing delay and communication errors and automating transactions, blockchain can reduce the costs of operating an efficient logistics system. Those savings get passed on to the consumer in the form of lower prices.
Several companies are working to apply blockchain in the logistics industry, including tech and retail giants such as Walmart and IBM. Fr8 Network, a blockchain-enabled global logistics startup, is launching a protocol and corresponding decentralized applications (dApps) that use dedicated tokens to establish a shared “source of truth” for logistics, helping supply chain managers efficiently track and manage financial settlements, transfers of goods between stakeholders, and other elements of freight management. Because Fr8 Network users can rely on a shared source of truth and automated smart contract steps, they can spend far less on administrative and technology costs, reducing transportation expenses for the entire supply chain.
Changing Market Dynamics Through Tokenization
The problem with discount programs and coupons is that they often don’t save the customer that much money. They may seize on temporary inefficiencies (e.g., overstock of a product) or misleading terms to create the illusion of genuine savings. But as highly disruptive companies such as Uber have demonstrated, the only way to permanently change costs faced by consumers is to alter fundamental market dynamics. Just as the rise of smartphones let Uber offer a cheaper product, Blockchain is providing a new technological platform for market alteration.
One good example of this is the real estate industry. Selling a home in the U.S. can be expensive, in part because agent fees are far higher here than in other countries. Someone selling a $200,000 home might wind up paying as much as 6%, or $12,000, in fees. The market dominance of the National Association of Realtors (NAR) is a contributing factor to high prices. Realtors who eschew membership and charge lower fees may struggle to close enough deals or attract enough customers to make ends meet while competing with NAR members.
Startup Deedcoin uses a blockchain token called Deedcoin to create an alternative market system. Deedcoin token holders working with Deedcoin agents can pay as little as 1% of their home’s value in cash agent fees, paying the rest in Deedcoin and obtaining significant savings. A special protocol ensures that even when Deedcoins command high prices on open coin exchanges, home buyers and sellers will always experience savings when using them.
Deedcoin agents make less cash up-front, but they still come out on top due to increased customer flow, little competition with other Deedcoin agents (as Deedcoin doesn’t partner with more than needed to serve the market), an edge over agents who can’t offer blockchain savings, and the option to resell the Deedcoin portion of their fee. This market dynamic is different–but thanks to blockchain it’s feasible and attractive to both consumers and agents.
Is blockchain for crypto-millionaires only? Not at all: it’s helping ordinary retail consumers and homebuyers save money. Its decentralized ledgers and automation capabilities reduce administrative expenses, increase transparency and security, and help generate trust in new kinds of cost-saving market structures. As blockchain adoption continues to evolve, expect to see more and more platforms focused on providing consumer savings.
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