Updated: Nov 6, 2020
Blockchain (Continued) –
As a continuation of the previous article, we want to expand our basic understanding of Blockchain. This time, we will review the key characteristics of the Blockchain system, identify some important benefits, current challenges, and potential business applications of this new technology.
Key characteristics of Blockchain
Security. – Blocks are created and cryptographically locked into the chain, making it very secure. Furthermore, Blockchain eliminates the single point of failure: If a part of the network fails, Blockchain continues to function.
Chronological and time-stamped. – Information is stored in a block on a chain that is linked to the previous block, forming a chronological chain of the data uploaded onto the Blockchain. The uploaded information is systematically timed-stamped making it very difficult to be altered.
User Empowered. – Users are in control of all their information and transactions.
Digital. – Every information stored on Blockchains is digital, eliminating the need for paper documentation.
Additional Key Benefits
Efficiency. – With blockchain technology, transactions are done directly between the two parties without any involvement of a third party, so transactions take place quickly.
Auditability. – Each transaction detail is recorded sequentially and it provides auditability for the asset between the two parties. It is especially beneficial for the business in which the data source is needed in order to authenticate the assets.
Transparency. – This is one of the major benefits of blockchain technology to small, medium, and large businesses. The lack of financial and commercial transparency might result in bad business relations and/or commerce delays.
Fault-Tolerant. – Due to decentralized networks, blockchains do not have a centralized point of failure and are better able to withstand malicious attacks.
Lower transaction costs. – By eliminating the third party, intermediaries, and overhead costs for exchanging assets, blockchains have the potential to greatly reduce transaction fees.
While the Blockchain has many benefits associated with its usage and adoption, it is important to mention that there are a few challenges not to be ignored or overlooked. Let’s review a few of its challenges;
Integration concerns. – Blockchain applications offer multiple solutions that require significant changes to, or complete replacements of, existing systems. In order to make the switch, companies must strategize the transition. It might take time and investment funds.
Control, Security, and Privacy. – While solutions exist, including private or permissioned blockchains and strong encryption, there are still cyber-security concerns that need to be addressed before the general public will entrust their personal data to blockchain solutions.
Cultural adoption. – Blockchain represents a complete shift to a decentralized network that requires the involvement of its users and operators.
Potential Business Applications
Let's explore how Blockchain can influence the way some business industries are operated.
Entertainment. – Blockchain could allow a recording label company to sign each digital copy of a single song to a single purchaser, preventing users from playing or duplicating unauthorized songs.
Contract Management. – Let’s consider the example of contracting services at a restaurant. As soon as the plate hits the table my checking account transfers the money.
Real State. – One of the most basic uses of blockchain technology is to keep a public ledger of transactions. This can help an easy to access a record of property titles.
Reduce Identity Theft. – Instead of asking for information that can be copied, like a social security number, computers would ask for access to digital identity records.
Financial Services. – Banks and related institutions could use Blockchain technology to improve on payment processing, clearance and settlement systems, fundraising, securities clearing, loans, and credit processing.
Blockchain is becoming the backbone technology for current and future business practices. Soon, it will impact our personal lives and online behaviors. It is up to us to prepare for it by educating ourselves. It will also be greatly important for financial institutions and other businesses to prepare for what could become the end of their current business model.
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