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What is Blockchain and its Impact on the Future?

by | Jul 27, 2022 | Technology




Today the internet is omnipresent in our life. This technology enables people to convene, communicate and share information freely without any geographical constraints.

But the internet is not just useful for communication and information, it also brings a lot of ease to our life. It is also fair to say that our life is being controlled and dictated by the internet as it is hard to spend a day without being connected.

The internet has become a default in our life since people work, trade, entertain, communicate, find relationships, create wealth, transact, and search sense of self through it.

The way we consume and search for information has changed drastically. Everybody can have access to the internet and access the same information. This ubiquitous technology allows us to do almost everything and achieve amazing things, but it has some flaws.

Why do we need blockchain?

The internet is a network of computers that reproduces an infinite replication of data dispersed all over the world freely. Everything that travels across the internet is interchangeable copies of information, files, media, etc… all without that much security.

For instance, if I send you a file or message, you will receive a copy in your recipient because the original is still in my possession. But the problem is broader than that, since data can be easily duplicated and downloaded over the internet, everything on it is bogus.

Now people’s work and creations can easily be duplicated and shared, hence losing their authenticity and the creator can’t get paid. Why pay for something when you can get it on the internet for free.

Moreover, assets cannot be sent over the internet. If I try to send you an asset like USD 100 or an art, it won’t be a good idea to send a copy. Now, these are for online transactions, what about the physical world.

The world is driven by transactions, your expense is somebody’s income. For each transaction, there is a need for at least two parties. The fundamental pillar of transactions is trust.

One of the fundamental problems businesses faced is trust. If a company doesn’t know, like, or trust somebody they won’t do business with them. Trust is at the core of every business and it is needed to transact.

But not just in the business world, but everything we do is backed by trust. But it is extremely hard to trust nowadays, especially over the internet. The internet is allowing everybody to be whoever they want.

To manage trust in the economy, we have centralized intermediaries that stand in the trust gap. If you want to do business with someone, you don’t necessarily have to trust the other party, you can use banks, brokers, lawyers, governments, or corporations.

These intermediaries manage the relationship between you and your business partner. They give the confidence that the transaction will take place. We rely on these corporations because it’s the best but also the only solution we have.

The big issue is that we don’t really know who we’re dealing with or if we can fully trust these intermediaries. We rely on them or their employees standing in the middle to perform important central roles because it has always been like that.

Their role is to manage transactions, record keeping, and provide visibility through asset tracking. They perform important business functions like clearing, validating, and settling actions enabling each party to put money and asset on the table.

They do the exchange and we know that we will not lose our money because there are opportunities for recourse if something goes wrong in the transaction. However, the problem is that these central intermediaries record all transactions on their databases.

Everything is in a central ledger in their control. And these can still be changed, altered, tampered or even delete.  Central intermediaries standing in the middle can also be hacked, corrupted, or even failed.

And since most of the work is handled by employees in the background, processes can be slow and prompt human errors. A transaction can even take weeks to complete because you’re trying to account for every possibility.

There is arrangement, negotiation, conflict, legal work, and documentation to do as well. All these things slow down the process but also increase settlement time and costs. 

Intermediaries charge you for every transaction and there is also interest to be paid. In the end, the cost can be enormous. International proceedings are slow and costly. There are also currency exchanges to take into account.

What is worst is that important decisions that concern millions of people are taken behind closed doors by a few out-of-reach privileged people. And since everything is decided behind closed doors there is no transparency.

And also banking scandals and government corruption can surface months if not years after the facts. Now in times of crisis, you don’t really know which bank to trust because they can fail or go bankrupt.

What’s even worst is that there’s a large part of the population in the world who don’t even have access to basic banking services, therefore they’re not even part of the economy.

The critical issue is that the business world is getting more and more complex. Trust is getting more difficult to create, this is why lowering uncertainty through a digital trust platform may well be the answer. Hence, blockchain has the potential to close the trust gap.

What is blockchain?

Blockchain technology is a decentralized, distributed ledger that stores a registry of assets and transactions across a peer-to-peer network. It is a network of computers that decentralizes transactions.

Decentralized means that there is no central governance. The blockchain is run by code on a network of computers through collective participants. Ledger means a list of all the transactions and distributed means that everybody has a copy of the ledger.

By allowing direct peer-to-peer transactions in the network, it lowers the dependence on intermediaries like companies, banks, and governments. Blockchain’s digital ledgers combine powerful cryptography algorithms and decentralized computing power.

The record is time-stamped and secured with cryptography which gets locked and joined together. Once a record enters the ledger, it becomes immutable, unchangeable, and unforgeable. In 2022, there are more than 81 million blockchain wallet users in the world.

The blockchain ledger records each transaction in a public registry. It verifies transactions by redundant systems. Once a transaction is verified, it is recorded on a public digital ledger. Every record is added one after another and has a unique key.

What is more important is that the record is distributed on every computer that uses that network. So each participant has a copy of the whole ledger.

And if someone wants to hack the information in the ledger, it will have to break through every computer in the network simultaneously which is to some extent impossible.

And since everybody in the network has access to the ledger, this increases transparency and decentralized trust. With blockchain, you don’t need to trust anyone when it comes to record keeping. It is estimated that blockchain can boost global GDP by USD 1.76 trillion by 2030.

Benefits of blockchain

Distributed ledger technology began as the underlying technology behind cryptocurrency but now it is becoming a generalized technology. There are already multiple applications of blockchain. Due to its multiple benefits, worldwide spending on blockchain solutions is expected to reach USD 11.7 billion in 2022.

A major advantage of blockchain is that it does not store information in a single location. Instead, it is replicated across a network of computers, each updating the ledger to reflect new blocks.

This distributed network makes it difficult for someone to tamper with the information. If there was only one copy of a blockchain, it would be compromised. This feature makes it a great option for banks and other financial institutions.

With a distributed ledger, data can be stored on multiple machines. The decentralized nature of the network enables peer-to-peer networking, removing the need for a centralized server. Users can easily share data and remain anonymous on the blockchain network.

The cryptographic hash ensures that data cannot be altered or changed. In addition, blockchain technology can increase the efficiency of financial services, as well as make our lives more convenient and prosperous.

It can transform the trade finance process and help build more trust among trade parties globally. By removing the middleman, this decentralized technology offers more efficient services without the need for a bank.

A major benefit of blockchain technology is its decentralized nature. This means that there is no central authority and no one can alter data on the ledger. Each block is copied and spread over a network of computers. This makes it difficult for hackers to alter the data in one copy.

If someone wants to alter a piece of information, they will have to break into all the computers in the network to change the data in each ledger. This makes blockchain the perfect tool for ensuring security and safety in multiple industries. It is estimated that the technology will create USD 3.1 trillion in business value by 2030.

When data is controlled by one single entity, it would be very vulnerable to tampering. What’s worst is that if everything were controlled by a centralized entity, the user in the network would be at its mercy.

Blockchain goes even further by allowing fast and efficient transaction flows. Since everything is run by computer code, once finalize transaction can’t be interrupted.

And transactions can take place anytime and anywhere. Because banks and other financial institutions are limited to their business hours and often operate only five days a week, proceeding takes time.

A simple check may take up to three days to clear, while transactions on the blockchain can be completed almost immediately. This is a massive advantage for businesses, which will save on processing fees and cut out dependency on third parties.

Besides eliminating intermediaries, blockchain is also more efficient and provides instant transfers at a reduced cost. It also facilitates international trade and remittance services.

Now, we all know that the process of document handling and data management along with other bureaucratic and administrative tasks are tedious, costly, time-consuming, and sometimes inefficient. It is estimated that blockchain can reduce financial service infrastructure costs by between USD 15 billion and USD 20 billion per year by 2022.

With blockchain, everything can be automated through smart contracts. Instead of going through a complex and time-consuming verification process, the blockchain makes it easier to trace and verify data. Smart contracts can be used to process requests and verify identities.

A decentralized platform that uses blockchain technology provides a framework for the creation of smart contracts. These contracts can be written and programmed to execute terms and conditions automatically.

Smart contracts can be used in all sorts of industries. This technology is making transaction processes much more efficient and flexible than they were previously.

Once each party agrees on the terms of a contract, transactions are completed only when terms are met. The contract is self-executed and there is no need for a law firm to regularly verify the terms.

In addition, to enabling self-executing contracts. Smart contracts could also automate processes that are currently manual. Blockchain technology can also help corporates establish better governance standards. It will allow new business models.

But blockchain is not just about speed and efficiency. It also reduces bureaucracy and fraud within organizations. This democratic movement encourages people in institutions to adopt ethical practices. According to a survey, 86% of respondents believe blockchain can create a more touchless business process.

The blockchain market size was valued at USD 5.7 billion in 2021. The market is expected to surpass USD 1.59 trillion by 2030. This represents a CAGR of 87.1% from 2022 to 2030, Meaning that this technology will have a big impact on the future.

Future of blockchain

Just like the Internet, blockchain might change everything. However, the internet is controlled by a few big tech companies. They control our data and they decide what is best for us.

Tech companies’ algorithms are designed to hook us to their platforms to show us what they want us to see. The internet is built on the logic of stand-alone computers where data is stored centrally and it is processed through centralized servers.

When two computers communicate or share information, every time a copy of the data is created and sent to the other computer. And every time that happens, we lose control and ownership of our information.

With blockchain, we are moving away from a world of data monarchy to a world of data democracy. Trust is achieved by cryptography, collaboration, and code. Distributed ledger creates a network where peers come together to collaborate in an exciting new way.

Decentralized database is creating the internet of value where anything from money, stocks, intellectual property, assets, art, music, or even votes can be managed, stored, and transacted securely and privately.

In short, blockchain cuts out the middleman that manages the data and decentralizes trust. It also allows faster, more secure, and more transparent use of information and shows how information is being used. The technology is even considered to be the next evolution of the internet called web 3.0.

With blockchain technology, everything is run by codes, mathematical instructions, and smart contracts. For instance, let’s say you are leasing an apartment, you and your tenant can agree on the terms and build a decentralized smart contract.

So as a landlord you don’t have to trust the tenant or worry that you will be paid every month. And the tenant also doesn’t need to trust you. If the tenant doesn’t respect the terms, the digital contract will take necessary action like changing the access code of the apartment to deny entry to the renter.

Blockchain will be a huge benefit for the corporate world. Because when a company carried out its operation on the internet, its data is sent over the internet thus the organization loses control over it.

And because the data is managed on someone else server and the owner cannot see what is happening with the information. With a distributed ledger, all computers in the network have the same level of information and all data is transparent.

With blockchain, privacy is guaranteed through the use of cryptography. And since everything is transparent in the network, if there is an issue, it will raise attending immediately. This way problems can be avoided or solved at the beginning before they become a major one.

Decentralized technology will also eliminate the risk of fraud. Since everything is transparent, actors can know if everybody is abiding by general ethical and moral laws while also following the rules and terms of the smart contracts.

The blockchain protocol assumes that everyone is potentially corrupt and to ensure network security it incentivizes network actors with a network token. This way the it makes sure all computers in the network are performing and behaving correctly.

Every time a network actor validates transactions according to predefined rules and keeps the network safe, they get rewarded with a network token in terms of cryptocurrency.

The open-source protocol defines how network actors are incentivized and disincentivized. To make sure that network actors who do not know and trust each other behave according to predefined rules.

This way, we have transparency while maintaining the privacy of all actors with minimal risks. Blockchain also has the potential to create an entirely new financial system called the decentralized financed (DeFi).

Today it is extremely easy to set up an online business but difficult to receive a loan from traditional banking systems. With DeFi, you can reach people that are interested in your project and ready to lend you money to start it.

And if you have some money apart you can lend it in return for interest. DeFi is a financial system that operates on smart contracts. It creates a fair, permissionless, and transparent way for people to access financial services.

There are more than 1.7 billion people around the world who don’t have access to banking facilities and thus are excluded from the global economy. But even if these people can’t access a bank, they have a mobile phone.

With decentralized finance services, these people can easily access financial services that operate on computer codes and smart contracts. Services such as payments, lending, borrowing, and trading are made more efficient, fair, and open.

The world has different countries, cultures, and languages and is subject to different regulations where everything is centralized and governed by a handful of people. Blockchain creates a global economy where everyone can participate in the network.

It is estimated that 2.8% of the world’s population is already using blockchain. This technology is set to create a more global economy. What is more powerful is that there are a lot of talented people around the world, but opportunities are not distributed evenly. Thus, they don’t have the chance to express themselves.

With blockchain, if you have talent, skills, or knowledge, you can easily contribute to the global economy where the world will benefit from you and you benefit from the world. All that you need is a mobile phone, digital wallet, assets, and an internet connection.

Blockchain provides a governance tool and a way of organizing society. It allows us to change the way we organize society and the way we process and manage data. It also creates a new type of company called decentralized autonomous organization (DAO).

Just like DeFi, a DAO is an organization that is run entirely on smart contracts. A group of people that share the same goals can collaborate and set the rule of a smart contract to create a decentralized autonomous organization.

Once the rule is set everything will run automatically within the organization. Once a term is met in the smart contract, it executes the necessary action. Moreover, all operations are settled immediately without geographical constrain with low barriers.

Blockchain also protects the authenticity and counterfeit of assets over the internet through non-fungible tokens (NFTs). The work and creation of artists and creators can be easily duplicated over the internet.

But if they convert their work to an NFT on the blockchain, its authenticity is protected and cannot be duplicated. Through non-fungible tokens, the creator can prove the ownership of an asset and easily get paid.

Blockchain is paving the way to a completely new way of governing society without any centralized institution. Anyone from anywhere around the world can participate in the network without the permission of a centralized entity. In the future, we won’t be transacting anymore since everything will be directed by software creating a safe and secure flow.