“Blockchain” is not a new word; it was first coined in the year 2008 but its compelling effect starts resonating a decade later, across all business verticals. According to a leading technological firm; private investments into blockchain companies have risen to a new high and pulled more than $4.5 billion in the current financial year itself.
A blockchain is an uninterruptedly growing list of financial records called blocks, which are linked and secured using advanced cryptography. It is digitized, decentralized, public ledger of all crypto currency transactions. It enables all stakeholders to keep track of digital currency transactions without the need of central recordkeeping repository with the added advantage of advanced security.
Reasons behind the Blockchain Popularity
Financial Transactions becomes much cheaper: Any type of trade requires exchanging assets between two or more parties, and unless the trade follows the bartering system, there is always at least one central third party that is brokering the deal, providing trust into the trade and seeking their own compensation for the role that they undertake. Blockchain alters this exchange platform by bringing stakeholders together in a trusted network without a third party and by recording each financial transaction sequentially and securely. It eliminates the need of intermediaries required in any financial transactions. The benefit of that consultancy amount goes directly into the customer’s pocket. Thus, it makes financial transaction much cheaper as compare to the traditional transaction where a customer has to pay some operational fees for the economic transaction.
According to the World Bank, money transfer worth over $430 billion was sent in 2015 in the US alone. Now, just imagine the magnitude of money transfers happen across the globe every financial year. With blockchain technology, huge customer amount will get saved with the elimination of intermediaries.
Eliminates the Problem of Double Spending: In the digital transaction area, Double Spending is a well-known problem. It has created havoc in the past and thus being one of reasons; many people chose not to trust digital financial transactions at all. But blockchain technology has eliminates the risk of it with the help of intensive number-crunching and complex algorithms that take up a great deal of computing power. Many known hackers tries to exploit spending same currency twice but failed miserably since it is difficult to duplicate or falsify the block chain because of the immense amount of computing power that would be required to do so.
Enhanced Data Security & Redundancy: Block chain uses distributed ledgers to carry out its operations. Distributed ledgers enable any financial transactions or contracts to be maintained in a decentralized form across different location using advanced cryptography. This creates multiple copies of the highly secure identical data across multiple nodes in the block chain network. These facets makes block chain database much more immune from the cyber-attacks, manmade and natural disaster as compare to centralized databases which is being use by majority of enterprises as of now.
Payment becomes much Faster: Cross border payment is on the rise since the globalization gains momentum. Clearing a cross border payment; has always had a tedious and time consuming task for many financial institutions.
According to a leading research firm, the average time to complete a cross-border transaction needs three to five business days, which comprises the final mile transfer via a native payment network, such as Automated Clearing House. But with blockchain technology it is possible to clear cross border payment in real time, this facet of blockchain making it more attractive among financial giants.
Recent Business developments in Blockchain Technology
- Global tech giant, IBM has collaborated with a Silicon Valley Stellar.org and regional services firm KlickEx Group, for making global payments much efficient and faster using Blockchain.
- Technology major Intel has partnered with a startup firm Ledger to provide innovative solutions for digital currency and Blockchain; in order to cater their growing client base.
- The Monetary Authority of Singapore (MAS) and the Hong Kong Monetary Authority has signed a memorandum on a blockchain-based solution for trade finance.
Applications beyond Financial Services
However, blockchain technology is made by keeping financial services in mind, but its application can be used in wider array of sectors. Commodity, Data Management, Energy, Gaming & Gambling, Organizational governance, IoT, Job market, Market forecasting, Media and Content distribution, Real estate, Social networks, Supply and chain management and many more.
Due the impactful facets it brings into the financial transactions, Blockchain is now faster gaining the recognition across globe. Many notable economist and entrepreneurs believe that Blockchain is the next revolution in the the financial sector. Larry Summers, former chief economist of the world bank had said in an event that “I’m reasonably confident … that the blockchain will change a great deal of financial practice and exchange,” and adding further to his comment he said “40 years from now, blockchain and all that followed from it will figure more prominently in that story than will bitcoin.”