The coronavirus pandemic has hit restaurants, retailers and millions of other small businesses hard. Now, a blockchain startup is attempting to mitigate the economic impact of COVID-19 for companies who have been forced to close their doors.
Enterprise blockchain developer tool-maker Tatum’s nonprofit Save Your Business project has been launched with partners including Microsoft, and it is designed to deliver much-needed cashflow to firms that saw their income practically dry up overnight.
The blockchain-based project gives consumers the opportunity to purchase vouchers for meals out, haircuts, and trips to the zoo. The vouchers can be redeemed once things are back to normal, giving small businesses crucial revenue in the meantime.
For Tatum CEO Jiri Kobelka, Save Your Business illustrates how quickly projects can come to fruition. “Today, it takes between one and two years to develop a blockchain app in an enterprise. With the Tatum platform, it’s a matter of days,” CEO Jiri Kobelka said.
Corona cash crunch
The damage caused by the coronavirus is hard to overstate. Of 4,000 food outlets polled by the U.S. National Restaurant Association, 11% predicted that they will close permanently in the coming 30 days. If these figures were extrapolated across the country, this means upward of 110,000 could end up vanishing forever. It’s even worse in the U.K., where one in four anticipate they’ll never reopen.
As well-meaning as Kobelka’s project is, that underscores one of the initiative’s biggest flaws. Consumers could end up buying a voucher for a meal that they’ll never be able to have. To make matters worse, millions of people are going to be watching every cent right now, meaning that purchasing a voucher for something they might be able to enjoy in the future simply isn’t an option right now.
That said, it can work. When New York’s gentrifying Red Hook, Brooklyn neighborhood was flooded by Hurricane Sandy in 2012, husband-and-wife team Ralph Gorham and Susan Povich rebuilt their Red Hook Lobster Pound in part by pre-selling gift certificates. However, it was a beloved enough neighborhood institution that a crowd of neighbors showed up to help when they began cleaning out the wreckage. And, plenty of other businesses did not reopen, and buying gift certificates was often viewed as a donation as much as an investment, according to locals. One that did not pay off in more than a few cases.
There’s also criticism of gift cards and vouchers in general. According to the Mercator Advisory Group, it’s estimated that 3% of dollars given to retailers and restaurants in advance never get used. Given that this market was worth $98.6 billion in the U.S. last year, this means $2.95 billion may never be reclaimed. Which is not so good for already cash-strapped consumers.
Nonetheless, it is heartening to see that blockchain and crypto businesses are stepping up during this time of economic upheaval. Crypto-friendly Square was recently approved as a lender in the U.S. government’s emergency lending program, with its founder Jack Dorsey announcing plans to give more than a quarter of his fortune to a new fund fighting the COVID-19 pandemic.