4 Big Advantages of Blockchain
Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.
Ultimately, blockchain is leading the way for a wave of tech-based financial innovation that allows for much more efficient transactions and protection between merchants and buyers. It places the customer at the center of business, and it focuses on the ultimate endgame, which is leveraging blockchain to prevent disruption as well as ensure that both parties benefit from such a secured transaction.
Blockchain technology is not only transforming banks and the way both consumers and sellers are making transactions online, but it also adapts bank regulation and supervision. It enables banks to track the progressive history of every transaction on their systems to ensure that the origin, the ultimate destination, and the use of funds are traceable and clear.
A simple analogy for understanding blockchain technology is a Google Doc. When we create a document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the document at the same time. No one is locked out awaiting changes from another party, while all modifications to the doc are being recorded in real-time, making changes completely transparent.
At the heart of the excitement surrounding cryptocurrency is blockchain technology. Blockchain technology is the foundation that all virtual currencies are built upon. It is the decentralized and digital ledger technology that records all of the transactions without needed a financial intermediary, like a bank. Blockchain technology appears to offer four distinct advantages over existing payment facilitation networks.
One of the main reasons why blockchain is so intriguing is that the technology is always open source. This means that other users and developers have the opportunity to change it as they see fit. Being open source makes altering logged data within the chain, complicated, making blockchain technology particularly secure.
Reduced Transaction Costs
Blockchain allows peer-to-peer and business-to-business transactions to be completed without having to work with a third-party. Without the involvement of a middleman, like a bank, tied to the transactions in a blockchain, the costs to the user or business can be significantly reduced over time.
Blockchain & Faster Transaction Settlements
When dealing with traditional banks, it isn’t uncommon for a transaction to take days to become settled completely. This is because of the protocols established in bank transferring software, as well as the fact that most financial institutions are only open during the day. Blockchain technology, on the other hand, works 24 hours a day, seven days a week, which means transactions made with the blockchain technology can be processed more quickly.
Blockchain & Decentralization
Another reason why blockchain technology is so exciting is its lack of a central data hub. Rather than having to run a massive data center and verifying the transactions through the center, blockchain technology allows individual transactions to have their own proof of validity, as well as the authorization to enforce the constraints. Since information on a particular blockchain is piecemealed on individual servers throughout the world, it ensures that if hackers stole the data, they would only gain a small amount of data and not the entire network, keeping it from becoming completely compromised.
Even with these advantages, there is still a significant worry that can’t be overlooked. Throughout history, investors have continued to overestimate how quickly a new technology will be adopted. Like most new technologies it will take time to lay the groundwork for blockchain, and it could still be some years before businesses fully embrace this technology as a significant component of their payment systems.