Cryptocurrency is the term used for all forms of electronic currency including Bitcoin.
Cryptocurrency may make sense as an investment and as a form of currency for your business. But, it is Not Regulated and Not Under the Supervision of any Central Bank.
Many large banks have already adopted blockchain technology because of the added security it offers. A Deloitte survey[2] found that blockchain technology is being adopted “across industries, including consumer products, manufacturing, technology, media, and telecommunications.”
If you are not familiar with blockchain technology, you are not alone. Most small businesses are not acquainted with the concept and are unprepared for this new technology.
What is Blockchain Technology?
While many people associate or even confuse blockchain technology with Bitcoin, blockchain is not a form of digital currency. Blockchain technology is a method for storing and authenticating data using a distributed ledger system. In effect, data is stored in a digital chain in blocks (fixed structures) or in hashes (algorithm functions).
A “block” contains the time of its creation and a reference number and is added to the database once a consensus is reached confirming the validity of the transaction. Users can review prior blocks in the chain allowing them to verify assets and data in all of the blocks which are recorded in chronological order using cryptographic methods.
Blockchain Working for Business
By using a decentralized system maintained by network users to transfer money and data, blockchain technology eliminates the need for an intermediary such as a banking institution. A Chicago business lawyer understands how blockchain technology may be able to take your Chicago small business to the next level with significant financial savings. Just for the top nine Wall Street investment banks estimates project there will be 8 billion in annual cost savings[3] and 4 billion of released capital through the use of blockchain technology. With the possibility of these extraordinary savings, it is no wonder that worldwide industries including healthcare, financial services energy and more are already exploring and expanding blockchain technology services:
- Overstock.com: Overstock.com[4] is a true innovator when it comes to the use of blockchain technology, accepting Bitcoin digital on their website in addition to the issuance of stock through blockchain technology.
- Blockchain and Financial Institutions: In November of 2016, Forbes[5] reported that financial institutions were expressing an interest in a universal banking system and were prepared to invest fifty nine million dollars in blockchain technology.
- U.S. Postal Service: Governmental services including the United States Postal Service[6] are examining usages for blockchain technology to reduce costs and improve services.
Small Business Advantages to Blockchain Technology
The list of benefits to small business from accessing blockchain technology is continually growing as more companies become better education regarding this revolutionary technology. A Chicago business lawyer can review your business model and suggest ways that blockchain can bring advantages to your company and increase your bottom line including:
- Lower Costs: Blockchain reduces operating costs.
- Speed: Both money and data are transferred faster with blockchain technology.
- Digital Contracts: Blockchain allows for the automatic execution of smart or digital contracts, which are embedded in computer code and used by many Chicago area businesses on their websites.
- Verification: Technology based on blockchain allows for the verification of payments between businesses and between your small business and your customers.
- Security: It is difficult, although not impossible, for users to alter the data in a block creating a secure system for storing, tracking and trading both assets and information.
- Innovation: Because there are few regulations regarding blockchain technology, a small business owner can innovate new business models without the restrictions that regulations impose.
Blockchain Concerns
There are security concerns with any digital or online system and blockchain technology is no exception. One well published example of a security breach involving blockchain includes the theft of 72 million in bitcoins[7] in August of 2016. Other blockchain concerns include:
- Jurisdictional Issues: One of the benefits of blockchain technology is the global application that allows for fast and accurate transactions. Unfortunately, when more than one state or country is involved in a transaction, issues concerning jurisdiction arise when claims are made based on a breach of contract or fraud. This is further complicated when international laws come into play.
- Lack of Transparency: Another concern involves the apparent lack of transparency or accountability when using blockchain technology. Network users can elect not to provide any identifying information and to use a pseudonym to remain completely anonymous. It is unclear in these early stages if the lack of transparency will create insurmountable obstacles.
Illinois Blockchain Initiative
The State of Illinois is proving to be a leader in the area of blockchain technology, launching the first ever governmental collaboration known as the Illinois Blockchain Initiative which seeks to propose policy regulations and governmental uses for the technology. The Illinois Blockchain Initiative[8], is formed by companies as well as the Cook County Recorder of Deeds, Department of Commerce and Economic Opportunity, Department of Insurance, Illinois Department of Finance and Professional Regulation and the Illinois Department of Innovation and Technology. On December 1, 2016, the Illinois Department of Finance and Professional Regulation announced the release of their proposed Digital Currency Regulatory Guidance while the Department of Innovation and Technology released a Blockchain and Distributed Ledge Request for Information.
These steps confirm the state’s willingness to embrace blockchain technology and to welcome blockchain companies. The Land of Lincoln has also announced the creation of a blockchain business liaison[9] role within the Illinois Department of Commerce.
Types of Cryptocurrencies
There are many forms of cryptocurrencies as discussed in Geo’s Biz Blog with Bitcoin amongst the most popular.
If you are interested in trading in Bitcoin you can get a trading guide at Commodity.com, which may be useful. It includes a fully up-to-date list where readers can see where bitcoin is legal and regulated. The guide is continually updated, comprehensive and looks great on mobile devices. You can learn more here.
Contact a Chicago Business Lawyer
If you are a Chicagoland Business Owner the surrounding areas and you are not familiar with blockchain technology, it is important to contact a Chicago business lawyer to discuss the advantages that blockchain technology can bring to your company. With the state taking a leadership role in using and welcoming blockchain technology, you need the skilled Chicago business lawyers at Bellas & Wachowski Attorneys at Law to keep track of this cutting-edge technology and the ways that it can benefit your Chicago small business. Call our Chicago lawyers today for a consultation. Contact Chicago Business Lawyer George Bellas directly at 847.823.9032, george@bellas-wachowski.com or use our online contact form.
References
[2] Deloitte survey
[3] Business Insider
[5] Blockchain and financial institutions
[6] United States Postal Service
[7] Theft of 72 million in bitcoins
