The term “Blockchain” often comes up in technology discussions and panels, however, the meaning and application of it, is not easily understood by many.
So here is a very basic and cheesy way to define it;
Blockchain is simply a decentralized digital ledger of a number of transaction made possible via a peer to peer network. A peer to peer network is the one where two or more computers are connected to each other via the Internet other than using a separate server computer.
Blockchain technology has served as a foundation upon which digital currencies such as bitcoin and crypto can trade . The technology enables the trade from the time when the transaction request is initiated, towards confirmation until the confirmation of the trade request.
Since its inception, it has been working to re-invent the value exchange in various industries. The technology promises execution of smart contracts such as commercial agreements by eliminating the middleman. This will allow and enable real time review of documents and improve the turn around time. Major market players such as JP Morgan, Goldman Sachs aims to use the technology in foreign exchange settlement. German Fidor Bank in conjunction with Ripple Labs provide funds transfer services in various currencies at a lower rate.
Blockchain Technology, however, together with AI and Biometric data, position itself better to simplify the process and enable achieving this process. With the advancement of features over the years, blockchain will continue being on a forefront in offering business solutions influencing AML, Trade Financing, Claims processing and even cross border payments.
The impact of this technology, has not only resonated to the financial sector only, but rather, it has risen to become a disruptive force in industries such as Energy, Automotive, Agriculture and even the Health sector. The purpose, still the same, revolutionizing the value exchange, and making the transactions simpler and more innovative
The technology despite the purposes it serves, poises a challenge to the Financial Regulators or lack thereof, in the various jurisdictions, it operates in. The failure to have standard principles and laws with which can govern the operations of Blockchain and it’s users, contributes to the failure of monitoring the activities conducted. This led to Governments such as China banning the trading of digital currencies in 2017. However, due to it’s potential China is investing in state-backed digital currency, as part of their intiative to achieve a 100% cashless society and help them monitor money supply and challenge the international digital currencies.
Data Privacy still remains a challenge, because primarily the technology was designed to be publicly accessible to everyone. Also the reviewing of the KYC Documentation, which is key to every financial entity, as it enables an organization or the business to identify and really know it’s clients has been a challenging element to accomplishin this space.
The cost of running the technology is high as a result of the heavy computing power required to mine digital currencies. Miners get a good return for this process, it does come at a cost, an expense attributed by running multiple servers to keep it running.
Companies such as IBM, Amazon & Microsoft are working to make it cost effective by providing the technology and offer creative ways to write smart contracts. But the challenge has to reach the mass in a less complex manner in order to receive maximum engagement is yet to be answered and addressed in an effective manner.
The question of mass adoption relies on the demographic to which the blockchain technology is applied to. The technology has witnessed progress in emerging economies where as most of the population are young and unbanked. This demographic segment has been more accepting of the disruptive technology and contributed towards its high demand. The high demand being attributed by the wide access of smartphones and mobile data in these countries, which allows them to trade these digital currencies with their fingertips.
One thing is certain, there is great potential of Blockchain to serve as a disruptive force to traditional old business models, that were no longer profitable and useful.