Many financial industry leaders have seen significant business advantages and significant success from the technology known as blockchain. Transparency, speed of trades, improved safety, enhanced traceability at lower costs, and enhanced collaboration at higher speeds are among the top advantages of this new technology. But what are the other advantages of the technology that are being talked about today? Here is a list of several that you may not have heard about. These may surprise you. Many financial industry leaders have seen significant business advantages and significant success from the technology known as blockchain. Transparency, speed of trades, improved safety, enhanced traceability at lower costs, and enhanced collaboration at higher speeds are among the top advantages of this new technology. But what are the other advantages of the technology that are being talked about today? Here is a list of several that you may not have heard about. These may surprise you.
Increased efficiency - If you think about it, the entire premise of the decentralized ledger is to improve efficiency and decrease the amount of wasted transactions. Through the ledger, you can easily trace the public keys that have been embedded into the transaction rather than having to individually key in each transaction. In other words, the ledger provides a way for the parties involved in the trade to digitally sign their transactions rather than physically signing it. This leads to greater clarity, fewer mistakes, and increased traceability of the system.
Reduced fees and costs - Another advantage of the technology is that it reduces the number of transaction fees that are charged on each block. The reason for this is that when blocks are released in batches, the network begins with one block, and as more blocks are added, the cost per transaction decreases. This is referred to as proof of work and is referred to as the "blockchain effect."
Improved security and better traceability - By providing an open ledger to all participants in the market, you can better protect your transactions and track those of others. In the traditional model of doing business, a company had to hire a detective to look into any transaction that had occurred. With the advent of smart contracts in the ledger, this need has been eliminated. Transactions can now be fully monitored by the contractual smart contracts that specify exactly when the transaction was made and who was involved in it.
Redundancy and guaranteed redundancy - Because all transactions happen at the same time in the ledger, there are no double-spreads or third parties involved. This is a major advantage. If you were to perform a double-spend, say, of the same amount of money in two different transactions, both transactions would show up on the same ledger. However, because the transactions are all happening at the same time within the same block, no other transactions can take place between the two transactions. This is called "redundancy" and is one of the most attractive advantages of the new blockchains.
No pre-mine or centralization - This is one of the biggest disadvantages of the ledger system. It basically means that someone created the chain and then started making profits off of the backs of users before they had earned anything by actually doing business. Now, if you want to participate in the network, you have to pay a hefty fee to join, which can include a percentage of your transactions. The only way to combat this is to get into the system through an invitation, which many businesses do. There are some advantages to this, however, such as the fact that it reduces the chance of someone mining the block ahead of you and takes away from the advantages of deflation.
Lesser known advantages - One of the biggest advantages of the Blockchain is its reliance on decentralization. Because all transactions are held electronically and on a peer-to-peer basis, there is no one person or entity that can claim ownership of the ledger, leaving everyone else in charge. For example, this means that the food industry won't be at risk for fraud as it would with a traditional record-keeping system, which is why this type of system is so well-suited to the food industry. Another one of the disadvantages of the Blockchain is that it does not have a reputation system, so it's difficult to determine what companies have good reputations versus bad ones. However, this can be overcome somewhat by following the record-keeping practices outlined above to mitigate any potential negative experiences.
This article has briefly introduced the basics of how the Blockchain works, as well as its various advantages and disadvantages. The next step is for you to decide whether this technology has something of value to offer you and your organization. A recent survey showed that companies that had implemented the Blockchain were much more likely to use it to monitor their transactions than those that did not. With the high level of attention it's receiving, it's likely that the time will come when other industries will jump on the bandwagon and begin using the protocol for their transactions as well.
