With the creation of Bitcoin in 2009, the world was also introduced to blockchain technology which was the basis on which Bitcoin was built. Since then, blockchain technology is widely touted to be a game-changer in the world of finance as it facilitates completely secure, decentralized transactions and data storage which is crucial to digitized finance. Most software development companies are on the hunt for talent well-versed in blockchain, and many banks and FinTech companies are researching ways to incorporate the many benefits of blockchain in their processes and offer value-added services to their customers.
Even though blockchain is currently the most trending buzzword in the world of FinTech, what exactly is it, what does it do and what can we expect from it in the future?
What is Blockchain
Simply put, a blockchain is a decentralized database, which means that data is stored simultaneously across hundreds or thousands of computers around the world which are not connected to one central terminal. Meticulous records of the data and any changes made are kept, each one known as a block that has a timestamp and a link to the previous block. Users can only make changes to certain blocks to which they have access (or own) using a private key. The elements in the blockchain are all kept in sync using cryptography.
Blockchain technology was first introduced to the world in 2008 by Satoshi Nakamoto, the inventor of Bitcoin. It was the foundation on which bitcoin was built as it addressed many of the previous limitations which hindered the widespread adoption of digital currencies. Digital currencies which use blockchain technology are generally known as cryptocurrencies due to the cryptography involved in syncing all the blocks.
Why is Blockchain considered so important?
Blockchain was the first technology that addressed many security risks and concerns when it came to fully online financial transactions and data storage. Designed with total security in mind, blockchains have public records of all transactions made and prevents double-spending of duplicate records. They are also not connected to a single, central server which further reduces the risk of compromise. All in all, utilizing blockchain technology allows for extremely safe and secure financial transactions and record-keeping.
But what makes blockchain unique from any other currency or payment method is that it is completely independent of any bank or government. Even digital payment platforms like PayPal require integration with a bank account or a debit/credit card. Blockchain technology eliminates the need for a “middleman” by not only recording transactions but also verifying the identity of involved parties and creating a valid contract with the terms of the transaction. Blockchain technology has the potential to make the entire banking industry completely redundant which is why the financial sector is rushing to successfully integrate blockchain technology in their existing systems, thereby giving less reason for their customers to make the switch.
What can Blockchain be used for?
Apart from facilitating financial transactions, blockchain technology has a plethora of other real-world applications.
Some possibilities of blockchain utilization are:
Supply Chain
The fundamental way that Blockchain functions are perfectly suited for supply chain management. Blockchains will not only be able to identify inefficiencies and conduct quality control measures, but it will be able to manage contracts and verify identities independently.
Loyalty Programs
Blockchains have the potential to be utilized in loyalty programs, by allowing customers to utilize tokens stored within the blockchain to claim their loyalty points during their subsequent purchases. Blockchains also eliminates the need to deal with physical documents and cards.
Copyright Protection
As seen in how NFTs (Non-Fungible Tokens) skyrocketed in popularity recently, the same principles could be applied to protect the intellectual property of creators. Blockchain would also be able to ensure fair and real-time royalty payouts.
Transfer of Large Assets
Due to the high levels of security, blockchain’s unique benefits of being able to verify identities and create secure contracts means that even ownership transfers of large assets such as vehicles, real estate, and businesses are possible.
Online Money Lending
Money lending is one of the most recent financial transactions to be digitized, with the advent of online money lending. While online money lenders like OnCredit.lk currently utilize technologies like mobile-responsive websites and mobile apps to offer online loan sri lanka, blockchain’s unique structure would be able to take over most of the elements of this process, from identity verification, record-keeping, and smart contracts.
The Future of Blockchain
While it is undeniable that blockchain is an innovative new contender, there are those who think that it is still a wonderful solution to problems that don’t yet exist, meaning that practical, real-world uses of blockchain are still uncertain. Despite there being countless possibilities in the future, the reality is that current industries and businesses have not yet been able to harness the full potential of blockchain to enhance their business value propositions and increase customer convenience.
However, blockchain is being actively implemented in various cryptocurrencies, and the real question may just be when cryptocurrencies take over as a primary currency around the world. The fact of the matter remains that some of blockchain’s inherent features themself are a deterrent towards the widespread adoption of cryptocurrency. The security measures within the blockchain are so stringent that if a user forgets or loses their private key, they lose all their assets stored in the blockchain; this could be anything from cryptocurrencies to NFTs to even major assets like real estate and vehicles. There have been many instances in the past where users have lost millions of dollars after losing their passwords. Moreover, even though decentralization and lack of a single “owner” are considered a major positive of blockchain, those traits also carry risks in terms of there being no accountability as well as being able to facilitate illegal payments.
At the end of the day, blockchain is an impressive feat of FinTech, one which customers around the world are ready and willing to use. It is businesses and industries that need to catch up to the market expectation and look for innovative ways they can incorporate this technology into the processes to increase inefficiency and enhance customer convenience. This should ideally happen sooner than later in order to avoid being left behind by new, smaller businesses with enough agility to utilize blockchain innovatively. While blockchain remains a shining new star whose powers have not yet been harnessed entirely, there is no denying that it is here to stay and we can expect to see exciting new real-world applications in the near future.
