Blockchain technology and cryptocurrencies like Bitcoin generated a lot of news this past year. It seems like every week there’s another headline touting an upcoming revolution or downplaying this new technology as a fad with few long-term prospects. If you are unfamiliar with blockchain tech or are still building a point of view, let me make a case for revolution.
Recipe for Disruption
Let’s start with why we trust doing business with a company. We trust our largest retailers to fulfill our purchases to deliver goods and services. We trust our banks will ensure our account balance is correct and transfers are verified and free of fraud. The systems these companies have in place build our trust. For example, regulations, anti-fraud systems, and services that verify transactions all play a role in ensuring a business is conducted above board.
Credit card companies are a specific example of a 3rd party that charges a fee on each purchase to verify and settle consumer credit. Overall, each of these parties acts as middlemen and provide their services for a fee on each transaction.
The number of transactions in our global economy is mindblowing. Worldwide retail sales are more than USD 20 trillion each year, and gross world product (GWP) is over $100 trillion. So enormous numbers of deals and transactions use intermediaries and their verification services to run trusted businesses. Their duty is to curb fraud and maintain consumer faith, but the cost of using them as intermediaries in trillions of transactions is too high. Those costs creep into the economy, driving up living expenses and the prices for goods and services.
But what would happen if there were cheaper or faster ways to verify deals in our economy? If substitutes existed, the savings would be in the trillions of dollars. For example, online payment gateways earn many billions by adding more than 2.9% of each transaction.
There’s also the cost of lost time. Middlemen all add days and weeks of delays in real estate, loan approvals or license renewals. Cutting the costs placed on every deal and order in the economy would return incredible profits to businesses and disrupt the way we engage in commerce. Injecting savings in the trillions would kick-start growth in the global economy larger than what anyone government or company could do on their own.
In comes the blockchain
Blockchain technology is primarily a decentralized system for recording trusted transactions with no middlemen. Using the power of cryptography, each transaction is irrefutably linked to each other and shared throughout a network of computers. Computers on the network automatically verify the terms of transactions, acting as instant accountants “verifying the books” without any fees. So automatic verification of transactions is the basic feature of blockchain technology.
This is how cryptocurrencies like Bitcoin work too. There are a finite number of coins earned through solving computational puzzles or purchasing them from someone else. Someone with the solution to a puzzle can prove their ownership of a coin because their proof is recorded in the underlying blockchain network. Participants in the network cryptographically verify the identity and the integrity of each other’s proofs to guarantee who owns which coins.
The impact of the blockchain concept is clear. With the use of blockchain technology, businesses can be able to save trillions and deliver faster services. Specifically, this technology would:
- Eliminate the costs of proving that transactions are trustworthy and legitimate from 3rd party services, saving trillions per year.
- Enable faster service by verifying the terms of transactions instantly, removing middlemen services like banks, governments, and marketplaces.
- Deliver more securely, using the security built into the blockchain without further investment.
- Automate more complicated businesses, like insurance services, using programmed “Smart Contracts.”
Adoption of blockchain technology could add trillions of dollars in savings to the global economy. In these early days, some platforms resemble replacements for middleman services, while others are genuinely decentralized. In so many ways, with moderate adoption, cryptocurrencies will massively disrupt the way global businesses settle deals each day by giving them a path to remove bloated costs and overhead.
Cryptocurrency is nothing but digital money which is created with the help of coding technique. It is based on the peer-to-peer control system. Let us now understand some of the unique features of cryptocurrency transactions.
Cannot be forged or reversed: Although, many people still dismiss the claim that the transactions done are irreversible, but the best thing about cryptocurrencies is that once the transaction is confirmed. A new block gets added to the blockchain, and then the transaction cannot be forged. You become the owner of that block.
Online transactions: Not only that this will make it suitable for anyone sitting in any part of the world to transact, but it also eases the speed with which transaction gets processed. As compared to real-time where you need third parties to come into the picture to buy house or gold or take a loan, You only need a computer and a prospective buyer or seller in case of cryptocurrency. This concept is smooth, speedy and filled with the prospects of ROI.
The fee is low per transaction: There is little or no charge taken by the miners during the transactions as this is taken care of by the network.
Accessibility: The idea is so practical that anyone who has access to smartphones and laptops can access the cryptocurrency market and use the technology anytime anywhere.
Cryptocurrency, without doubt, has been a revolutionary concept which sees a booming growth in years to come. At the same time, the idea is a little bit ambiguous and new to most of the people. Go ahead and enlighten yourself a bit more as to what this whole concept is and how it can benefit you.
