Business owners should ditch PayPal and move to the blockchain

Business owners should ditch PayPal and move to the blockchain
Business owners should ditch PayPal and move to the blockchain

Do you think that in five years, every second transaction in e-commerce will be settled on the blockchain? No? Well, that’s what people thought about plastic credit cards versus cash a few decades ago when it came to brick-and-mortar stores.

There is no doubt that Web3 will drastically change the way e-commerce operates. Using cryptocurrency payments in e-commerce stores will become as common as accepting PayPal, Klarna, Visa or Mastercard. Stores that do not adapt their e-commerce platforms to accept cryptocurrencies will soon find themselves out of business.

How Web3 has changed the e-commerce landscape

Thanks to the converging forces of Web3 – blockchain, decentralized finance (DeFi), AI and machine learning – new smart algorithms can analyze and adapt to provide user-centric experiences. In addition, Web3 will be much more inclusive than previous versions of the web. The decentralized nature of Web3 creates the perfect platform for the fast and transparent flow of information that is not subject to censorship by a central authority.

In addition, Web3 eliminates intermediaries such as Facebook that take a portion of users’ cash (and personal data) when they buy something online. At the same time, all the details of our transactions are public – for better or for worse. Improving the security and convenience of online transactions will increase the volume of e-commerce transactions and encourage businesses to adopt crypto payments.

Related: Latin America is ready for crypto — Just integrate it with their payment systems

As more businesses move from Web2 to Web3, many merchants and consumers have started using crypto payment solutions.

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In Web2, most online payment platforms such as PayPal and Stripe charge transaction fees of around 4%. This of course makes it difficult for companies to stay competitive without raising prices. Not only are crypto payments frictionless, but they are also gaining traction as a payment method. With stablecoins today, people no longer have to worry about converting to fiat and the hassle of withdrawing money to their bank accounts.

The power of blockchain in old and new business models

Like Web2 e-commerce adoption, there is a long way to go before Web3 can offer the full range of benefits mentioned earlier. However, the introduction of smart contracts and Web3 platforms such as Hyperledger has drastically changed the landscape of value exchange. Hyperledger Fabric was developed by companies like IBM for specific business cases that optimize the supply chain. Access to the ledger using Fabric allows businesses to see the same immutable data, guaranteeing accountability and minimizing the chance of counterfeiting.

Consumers can follow the progress of their orders and trace each item back to its origin. At the same time, supply chain operators can monitor inventory levels and shipments, take appropriate action to resolve issues and detect fraud. This means that the consumer and the company can expect delivery at a specific time. All packages can be easily monitored via the blockchain explorer while protecting the customer’s privacy.

Additionally, with blockchain, a global whitelist of genuine or trusted customers and suppliers can be created and owned, which Unstoppable Domains does with its identity verification for Web3. Such a whitelist reduces false positives and helps detect actual fraud. Unlike traditional e-commerce payments, Web3 allows people to easily place orders by eliminating intermediaries and chargebacks.

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A new regulatory environment

The arrival of Web3 in e-commerce will change compliance requirements related to personal data, including the EU’s General Data Protection Regulation, and raise important issues such as identity authentication without revealing personal, sensitive information.

However, Web3 developers are already experimenting with the use of zero-knowledge proofs as the solution to prove to the other party that they are in possession of certain information (such as nationality or age over the limit) without revealing the details.

It is not necessarily up to the customers to decide how much personal data they should provide. That is only going to happen if companies adopt the relevant technology and regulators allow it. However, it cannot happen unless someone is willing to argue for it.

Related: PayPal enables the transfer of digital currencies to external wallets

With such great opportunities, more companies should consider jumping on the Web3 bandwagon. After all, they can raise their transparency, reputation and cost management in the e-commerce game to stay ahead while moving digital data safely and freely across borders. For that to happen, clear rules must be drawn up to support a wider use of blockchain technology in this area.

Businesses will also have an important role to play in the Web3 world: ensuring that they are equipped with the latest security solutions to prevent them from becoming the target of cybercriminals. Recent instances of cybercrime have seen hackers make off with funds as well as personal private information about customers, inevitably leading to damage to the reputation of the organization.

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Having the latest tools and systems would mean little without having an adequately staffed team of information security professionals to ensure that key system vulnerabilities are addressed in a timely manner and key controls are subject to testing on a regular basis. Adequate resources and attention will definitely need to be devoted by Web3 companies to address these areas of risk in the course of business.

Raymond Hsu is a co-founder and CEO of Capital, a cryptocurrency wealth management platform. Prior to co-founding Capital in 2020, Raymond worked for fintech and traditional banking institutions including Citibank, Standard Chartered, eBay and Airwallex.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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