Small & medium enterprises (SMEs) are a key growth driver. They account for almost 90% of all global businesses and create over 50% of the jobs worldwide. In certain emerging economies, they contribute nearly 40% of the GDP.
Yet, SMEs face steep barriers since giant corporations use their influence and capital power to set the rules in legacy systems. From sub-optimal capital or credit access to disproportionate costs, SMEs have to deal with a long list of disadvantages.
The times are changing, though, as enterprises increasingly adopt blockchain, cryptocurrency, and other emerging technologies. These innovation-led domains empower SMEs with lower costs, greater access, and overall, brings the benefits of non-intermediated, decentralized systems.
Notably, blockchain and related tech benefit the bigger and smaller enterprises equally, thus leveling the field for holistic growth. And Gartner predicts they’ll generate over $3.1 trillion in business value by 2030. That’s a tremendous opportunity for SMEs.
Tackling Centralization Across Industries
Financial enterprises are currently among the biggest blockchain adopters. It’s mostly a two-way relationship, centered around blockchain-powered alternatives to traditional services like lending, borrowing, etc. The parabolic rise of decentralized finance (DeFi) is solid evidence for the finance-blockchain synergy.
Having said that, blockchain’s use cases expand way beyond just decentralized lending-borrowing or trade financing. It unlocks tools to tackle core problems resulting from the excessive centralization common in traditional business or organizational models. These include unequal access, high costs, ineffective resource use, and operational silos.
Besides practical disadvantages, over-centralization also increases the risks of censorship, manipulation, and privacy or security breaches, given the singularly identifiable points of failure. This again raises other long-term concerns which merit separate, extensive discussions. What matters, here, is that blockchain unlocks viable means to build robust, cost-effective, community-oriented, decentralized alternatives to the legacy business infrastructure.
Enabling fundamental solutions is thus the reason why blockchain appeals to almost every industry, not just finance. Hacken’s in-depth research on enterprise blockchain adoption provides a good overview of how an expansive range of public and private entities leverage the technology in so many ways.
Banque de France, for example, is using blockchain to streamline financial netting, boost the liquidity and speed of digital asset transactions, and automate letter of guarantee processing. The National Center for Health Statistics at CDC is also exploring the tech’s use in improving public health. Marsh McLennan is using distributed blockchain-based ledgers for proofs of insurance. There are so many other names on this list, including Microsoft, IBM, and Natixis.
Blockchain’s Case for SMEs: Myths & Facts
Since blockchain technology is still in its early stage of development and market research, there’s much misconception about whether it’s good for businesses, especially the smaller ones. Thus a myth vs. fact approach to outlining how blockchain benefits SMEs gives the context and clarity decision-makers need.
People believe blockchains are too expensive and unaffordable for smaller enterprises. Given the regular spike in gas or transaction fees on platforms like Ethereum, this fear is somewhat justified. But it’s not so from a broader perspective. SMEs can rather enjoy lower overhead charges and merchant processing fees using non-intermediated, blockchain-based payment methods: cryptocurrencies, stablecoins, etc.
Moreover, emerging ‘Layer-2’ solutions and ‘Smart L2’ projects, like Metis, have found ways to improve blockchain’s scalability shortcomings—i.e., the root of high gas fees during peak network traffic—while retaining security and stability. Through core innovations like, say, Hybrid Rollups, these platforms help SMEs leverage decentralized, non-intermediated processes in a secure, private, and most importantly, cost-effective manner.
Another common misunderstanding is that all blockchain data is public and thus unsuitable for handling sensitive enterprise-grade information. However, blockchains aren’t necessarily public. There are ‘private’ and ‘permissioned’ blockchains—IBM Blockchain, R3 Corda, etc.—designed specifically for enterprises. And besides using specialized blockchains, enterprises can protect sensitive data with privacy-oriented solutions like Aztec or Aleo.
Taking blockchain privacy a step further, platforms like Polygon Zero, Metis, or Miden let enterprises use cutting-edge ‘Zero-Knowledge Proofs’ to validate transactions without revealing the actual content. This significantly bolsters the privacy of globally distributed public blockchains, enhances their scalability, and opens new avenues for enterprise adoption.
The Ease of Migrating On-Chain
Even four-five years ago, taking existing businesses on-chain was an uphill task—something most SMEs couldn’t afford to undertake. But it’s not so anymore, since rich user experiences and seamlessness have become a top priority for innovators.
Most of the new-age projects mentioned above offer easy onboarding for enterprises. Some even feature plug-and-play systems. And as the overall blockchain tech stack matures completely within the next ‘two to ten years’ per Avivah Litan, VP Analyst at Gartner, hassle-free solutions will become the norm for this industry.
Thanks to ongoing developments across blockchain ecosystems, this is arguably the best time for SMEs to adopt futuristic solutions for optimal performance and profitability. The best thing about emerging tech like blockchain is that the norms for their use are still in the making, which means smaller entities can get their interests heard from the get-go. And while it’s unlikely that blockchain ecosystems will ever become corporation-dominated like legacy domains, early adopters can reap special benefits.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.
