You consider yourself a brilliant software developer with at least a basic understanding of economics. You combine your knowledge of computer code with your passion for international trade to create an alternative monetary system that you call cryptocurrency. After releasing your crypto to the world, you wait for it to be adopted en masse. Then you wait, and you wait a bit longer, and you keep on waiting.
That is essentially the story of Bitcoin. What was intended to be a worldwide alternative monetary system still hasn't caught on like it should have. Sure, there are plenty of investors willing to trade Bitcoin as though it were a traditional security, but neither small-time merchants nor big-box retailers are jumping on the cryptocurrency bandwagon in large numbers.
This is not to say that cryptocurrency and blockchain do not have potential in the retail environment. Actually, it is quite the opposite. There is plenty of potential just waiting to be exploited. Two ongoing projects - one in Russia and the other in France - provide more than sufficient proof. Keep reading to learn more about these projects.
Faster payments in Russia
One of the early promises of Bitcoin's blockchain was the capability of facilitating faster payments between parties. Traditional bank payments utilizing fiat are not the fastest in the world. Even when computer networks acknowledge payments in a matter of minutes, it generally takes days before settlement occurs. And that's only if payments occur electronically. Non-electronic payments take even longer.
Payment speed is an ongoing problem in the retail sector. It is especially problematic for the retailers themselves, as they often have dozens of vendors to pay at any one time. Those vendors have extensive client lists of their own from whom they receive payments. And then they have to make payments to their suppliers too.
The end result is a slew of payments flying in virtually every direction. When payments take days or weeks to settle, it can be difficult to keep track of cash flow and effectively manage both receivables and payables. But what if blockchain could make those payments nearly instantaneous? That would not only speed up the system, it would also make the system a lot easier to manage.
Building a trade finance platform
Recognizing the challenge facing retail giants in Russia, a blockchain startup known as Factorin set about building a trade finance platform based on the Ethereum blockchain. Ethereum was chosen because its blockchain is not limited only to financial transactions. It can be used for virtually any application that makes use of smart contracts and tracking.
Factorin began working with a couple of Russian Banks, some settlement companies, and a number of retail partners to create a system that allows payments across the wholesale network using digital tokens. The system is now ready for launch in Russia's grocery sector. One of the biggest names in groceries, Dixy, recently rolled it out.
The system connects the participating banks and settlement providers on a private network. Retailers and their suppliers can also connect to that network if they want to take advantage of faster digital payments. In doing so, they have access to payments that settle within one business day instead of the standard two weeks required by Russia's traditional banking networks.
All tests passed
Factorin's system works on a set of 20 nodes that populate the network. Two of those nodes reside on participant servers; three more are in the process of being established. The nodes have been hard at work processing some 12,000 test transactions since December. According to Factorin, all of the initial tests of the system have passed.
Dixy represents the first large retail organization to get on board with the system. Factorin hopes they will not be the last. If Dixy and its suppliers have good things to say about the system six months down the road, it's a pretty safe bet that Factorin won't have any trouble recruiting other large retailers.
Boosting sales in France
The second retail project worth knowing about comes out of France and its well-known retail giant, Carrefour. The multinational hypermarket chain originally embarked on a blockchain project designed to provide real-time information on 20 different farm-fresh products ranging from eggs to milk and oranges.
Company officials say that the project has been so successful that they plan to expand it to more than 100 products. Carrefour insists that use of the technology is partly responsible for recent sales increases.
Tracking from farm to supermarket
Carrefour utilizes an IBM blockchain system to track meat, dairy products, and fruit as it makes its way from the farm to the supermarket. Each of the tracked products sold at their supermarkets has a label that includes a QR code that customers can scan with their smartphones. Scanning reveals the history of that particular product based on its blockchain tracking.
How does this help? It allows customers to know exactly where products come from and how fresh they are. It also allows Carrefour to back up its fresh food claims with hard data. This creates what Carrefour calls the 'halo effect' for farm-fresh food.
The halo effect is described as one of giving customers confidence in the products they buy. Because they can see tracking information for themselves, they can trust the product they are purchasing off-the-shelf. This builds additional trust in the Carrefour brand as a whole.
Equipping with more information
In addition to seeing a product's history at a glance, the blockchain system also equips consumers with additional information. For example, some products come with tips suggesting how to prepare and use them. A consumer buying a particular farm product for the first time may know nothing about it. But scanning the QR code with a phone solves the problem by explaining exactly how the food is best prepared.
Carrefour's customers have apparently expressed interest in more information pertaining to farm-fresh products. They want reassurance that what they are buying is truly what is being advertised. Carrefour says their customers are particularly interested in more information about organic products and baby food.
The blockchain system has apparently been particularly successful in China. There, consumers have been scanning QR codes for years. They are extremely comfortable with that idea. Elsewhere, the system is doing well in Italy and France too. Shoppers are finding the information so helpful that they are no longer mindlessly picking up items and moving on. They are spending minutes at a time scanning QR codes and absorbing the information.
A lot like the Internet
These two projects clearly show the potential of blockchain for the retail sector. One project facilitates faster payments between retailers and their suppliers, the other shows how sales can be boosted through the judicious use of a blockchain tracking system. Both show that blockchain has a place at the retail table.
The question many are asking in light of these kinds of projects is why adoption is taking so long. The answer is as simple as something we now take for granted: the internet. Blockchain development and adoption is a lot like the internet in many ways. If you are old enough to remember when the internet was brand-new, it should make complete sense to you.
A gradual process
Way back then, the internet was nothing more than a secure network project owned and operated by the U.S. military. What used to be known as ARPANET didn't even have a place in the American consciousness until the 1970s. It wasn't until the 1980s that ARPANET went public.
Throughout the early and mid '80s the new internet was largely the domain of government operations and educational institutions. It was only when AOL emerged that the internet began to act as a public network for general consumption. AOL gave rise to online bulletin boards, e-mail, and personal websites.
Today the internet is indispensable to just about every aspect of human activity. We use the internet to keep up on the news, connect with family members and friends, consume various forms of media, buy and sell things, and on and on. But the internet of today was not born overnight. It became what it now is through a gradual process of development and adoption.
Likewise, cryptocurrency and blockchain have a long way to go before their full potential is realized. Yes, it is great that you can play casino online with Bitcoin or Ethereum. But that wasn't always possible. Furthermore, what can be done with cryptocurrency today is not limited to online gambling. Things continue to expand.
The point of all of this is to say that cryptocurrency and blockchain do have a place in retail. Adoption may not be happening as quickly as some people in the crypto community would like it to, but it is occurring, nonetheless. The projects in Russia and France are proof of that.
The likelihood that global retail will someday be dominated by cryptocurrencies and blockchain is quite high. It is just a matter of patiently waiting for the technology to be developed. We are getting there, slowly but surely.