The world is driven by transactions. Every second million of transactions and every day billions are made. And with these transactions, money changes hands. Nobody can deny the importance of currency in the financial or economic world.
In today’s world, there is a need for some digital way to store data. Until now, transactions were centralized and controlled by an entity or person trusted by all individuals, most frequently by the state. But, now the next generation of connectivity and computing, holds vast promise for business, society and everybody individually.
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Problem with the actual system
For the past decades, the internet has allowed people to transfer things very easily. However, when you send an email, a message, a media file, a PowerPoint file or something else. You are not sending the original, but you are sending a copy.
And when it comes to assets like money, stocks, bonds, intellectual property, music, art, vote and other assets, sending a copy is a bad idea. Imagine if you send someone 100 dollars, it is really important that you don’t still have the money.
This is why we rely on intermediaries or middlemen like banks and governments. And these institutions establish trust in the economy. And these intermediaries perform transaction logic of every business of all kinds, from authentication and identification of people to clearing, settling and record keeping.
But the problem with these institutions is that they are centralized which means they can be hacked and even corrupt. They exclude billions of people from the global economy, for example, people who don’t have enough money or a bank account.
And Transactions are pretty slow, as it can take days or weeks for money and asset to move through the banking system across a city and country. And usually, along with our data, they take a percentage of the money when doing the transaction.
The blockchain
So what if there were some kind of global distributed ledger running on millions of computers and available to everybody. And where every kind of asset could be stored, moved, transacted, exchanged and managed without intermediaries.
Back in 2008, the financial industry crashed, a man named Satoshi Nakamoto came up with a way where people can do transactions of assets without the need for a trusted middleman.
Hence the blockchain, which is a decentralized distributed public ledger that allows assets to be transferred with a high level of security and transparency. The advantages that distributed public ledger can bring to the world are immense.
Assets are stored digitally in distributed ledgers across the world, using the highest level of cryptography. And when a transaction is conducted, it is posted globally, across millions and millions of computers around the world.
Benefits
The benefits of blockchain are many and they are often closely tied to its core features.
Transparency
For instance, transparency is an important issue in our world. Blockchain addresses this issue by making transactions transparent and decentralized. By decentralizing, a chain of transactions can be traced more easily and without any third-party intervention.
By removing third parties and letting all parties view a single, immutable ledger, distributed ledgers make trades more transparent. Hence, with blockchain technology, the financial system can be more transparent and risks can be controlled more efficiently.
Improve efficiency
Because blockchain treats users as nodes in a network, peer-to-peer transactions are possible, removing the need for banks to provide credit guarantees. Because of this, the credit risk of the system is reduced and the efficiency of fund management improves. Decentralized transactions are faster and more automated, allowing companies to complete operations more quickly and efficiently.
Traceability
Furthermore, transactions on a decentralized network are highly traceable, allowing for a complete audit trail of transactions. It also simplifies property management by distributing all information over the entire network. This way blockchain eliminates the need for centralized data management systems.
Establish trust
Additionally, blockchain networks are more secure, which means the risks of hacker attacks are reduced and as it is a distributed ledger, the data can’t be corrupt or altered. Hence, this improves trust between entities. In the world of cryptocurrencies and other e-payments and where information and data are dispersed across various locations trust is an important component.
Eliminate corruption
Where there is money, corruption is a real issue. Distributed ledger technology facilitates automatic payment. Assets are recorded on the ledger each time they are transferred. If the asset is as expected and valid it can be transferred. If the asset is tampered, the blockchain will not transfer it.
That way, fraud and theft can be avoided. And it’s not only safer but also cheaper. So, it’s clear that blockchain technology is the way of the future.
Blockchain in action
For businesses, blockchain can improve supply chain traceability. It can track products back to their origins. Its unique identifiers and traceable serial numbers will help manufacturers and retailers track and trace their products. It will also make them more responsive to problems.
By enabling transparency and traceability of supply chain data, the technology will encourage sustainable production and consumption. Blockchain-enabled systems assume that companies are responsible for their supply chains and will take steps to improve their performance.
Using trusted data, companies can identify hotspots in their supply chains and ask their suppliers to reduce their impacts. By making transparency a requirement for purchasing, companies can ensure that their suppliers comply with their obligations.
Additionally, distributed ledger technology can even incentivize companies to reduce their environmental and social impact by requiring them to pay a premium for the sustainability of their products. As the technology gains popularity, it will likely have an impact on retail businesses.
With an end-to-end supply chain solution and secure stock management, Blockchain provides businesses with a new means of payment, secure contracts.
The management of supply chains would be simplified and accelerated through a combination of mechanisms involving contract execution, record-keeping, tracking, payment collection and restocking.
In the clothing industry, for instance, some companies are assigning each garment a unique digital token, which allows consumers to see into the whole supply chain, from the sourcing of materials to the distribution operation, thus helping stop the use of child labor or the use of some prohibited material.
However, this radical change won’t happen overnight. Blockchain will likely pass through several phases before fully reshaping the world economy. But it has the potential of becoming the system of record for all internet transactions.
In other words, it could become what is called a foundational technology, creating a new technological infrastructure for our economic and social systems.
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