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Blockchain in Ecommerce

There are already different Blockchain networks that are offering a variety of services but primarily centered on financial services industry. There are a few in areas of crowd sourcing, patient records, music industry and contract management. This blog is an attempt to show how Blockchain can be used in Ecommerce and be a viable model for the Ecommerce marketplace.

The word Blockchain has come into being after the world heard the term 'Bitcoin'. Blockchain is the technology behind Bitcoin. Blockchain is a distributed ledger of transactions where nodes (computers on a network) store all transactions and it is practically impossible to falsify transactions that are already distributed across all the nodes. We will not go into the underlying technology of Blockchain but the underlying principle of Blockchain is secure pseudo-anonymous transactions without an intermediary.

The ecommerce marketplace is where individuals can register and buy products directly from the product sellers. The buyer, seller and marketplace are on Blockchain network. The Ecommerce marketplace vendor gets paid for the 'Proof of Work' it does in generating a block.

Below is an illustration of a scenario where a buyer buys product from seller and makes payment.


Rounded Rectangle: Block NRounded Rectangle: Block N+TxRounded Rectangle: Block N+ Tx+Ty


Since the Blockchain by definition is not owned by anybody the seller does not have to pay any fees to the Ecommerce marketplace vendor. The Ecommerce marketplace vendor need not charge any periodic subscription fees from the seller but can charge fees from seller for generating a block. Of course it is entirely possible that another node on the Blockchain can also generate a block and get compensated for its 'Proof of Work'. So the Ecommerce marketplace vendor has to ensure a powerful node that can mine currency.

Block N will have transactions- Buyer placed order with seller for product and Seller received order from buyer for product. So the seller cannot dispute at a later date that the buyer ordered another product and similarly the buyer cannot dispute later regarding his choice of product.

Block N+Tx will have transactions - Buyer transferred amount to seller for product and Seller received amount for product from buyer. So the seller cannot dispute at a later date that amount was not paid.

Block N+Tx+Ty will have transactions - Seller has shipped product to buyer and buyer has received product from Seller. The buyer cannot dispute that product was not received and seller cannot dispute that product has been shipped without actually shipping it as a prior block N+Tx has transaction of payment received.

The Blockchain above is tracking 3 transactions in a chronological sequence. However the transactions can be captured at a more granular level such as buyer logging into Ecommerce marketplace, buyer choosing products, buyer checking out; etc. Since only the transactions are stored in a Blockchain creating blocks using transactions at such a granular level ensures that security of transaction is preserved. For instance a bad node on the network will not be able to change the address of a buyer as the bad node will not have the private key of the buyer and will not have sufficient computing power to change the order of transactions within blocks in a Blockchain.

How does the above model of operation of an Ecommerce marketplace enhance the experience of the 3 entities?      

  1. The Buyer is ensured a genuine product received for the amount paid. The monetary leg of the transaction is secure. The buyer pays the seller in cyrptocurrency. The buyer can be issued discount vouchers that solely belong to it and no other node in the network can lay claim to the voucher. The buyer can directly exchange vouchers with another buyer. Buyers can transfer loyalty points to other buyers. All this can be done instantly without the need for the Ecommerce vendor to verify. This enhances the experience of the buyer as the transaction on the Ecommerce marketplace are fast, safe and convenient.

  2. The Seller is ensured about receipt of money for the product delivered. It does not have to pay the marketplace vendor a fixed commission for every sale of product. Based on the node that generates a block the cyrptocurrency/loyalty points can be paid by the seller to the node. This way the seller can ensure more clientele by paying in loyalty points to the nodes.

  3. The Ecommerce marketplace charges the seller for product listing on the website and mines cyrptocurrency by creating a block and 'Proof of Work'. The Ecommerce vendor does not have to build a secure IT infrastructure to safeguard buyer and seller data. Nor does the Ecommerce marketplace have to tie up with a payment services provider and share commission for every transaction. The Ecommerce marketplace vendor can give genuine discounts by sharing the reduction in cost of operations with the buyer.

The aforementioned idea of an Ecommerce marketplace on Blockchain can serve as a framework for an actually workable model. Though the nitty-gritties have to be worked out during an actual implementation it can be visualized that this model serves the cause of all the stakeholders of an Ecommerce marketplace by ensuring secure transactions, low cost of participation and compensation based on level of participation.

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