The Rise of Blockchain
In March 2010, if you invested $1000 dollars in Bitcoin, today you’d be a billionaire. The growth and explosion of the cryptocurrency market in the last decade, specifically the last five years, has been staggering. Today websites allow for the purchase of physical goods with cryptocurrencies, which a decade ago, would have been preposterous. With this, the requirement for security and a system which allows for swift and smooth transactions was necessary. This is where Satoshi Nakamoto, the founder of Bitcoin, also founded blockchain.
Blockchain is essentially a public ledger of all cryptocurrency transactions. Prior to this, there was nothing to stop the use of a cryptocurrency being sold and then being sold again. Blockchain was created with the purpose of solving the double-spending problem without the need of a trusted authority or a central server. Instead, cryptocurrency users dictate and validate transactions when one person pays another for goods and services, eliminating the need for a third party to process or store payments. The completed transaction is publicly recorded into blocks and eventually into the blockchain, where it is verified and relayed by other cryptocurrency users.
The use of distributed ledger technology (DLT) has many advantages and is considered by many to be the future. The advantages of such systems can lead to enormous savings via three main issues it solves.
1) They are much cheaper than traditional accounting systems. This can mean less labour is required which helps reduce the variable cost, especially when accountants rather than costly.
2) The systems result in fewer errors due to repetitive confirmation steps. The less errors, the more efficient and smooth transactions are which in the long run will reduce costs.
3) Minimising the processing delay also means less capital being held against the risks of pending transactions.
Blockchain’s non-reliance on labour in processing is particularly beneficial in cross-border trades, which usually takes much longer because of time-zone issues and the fact that all parties must confirm payment processing. Blockchain systems can set up smart contracts or payments, triggered when certain conditions are met. For example, the use of a smart contract that automatically makes partial payments when a shipment reaches specific geographic checkpoints.
“What is Blockchain Technology? A Step by Step Guide for Beginners”, Blockgeeks.com, Retrieved from
https://blockgeeks.com/wp-content/uploads/2016/09/infographics0517-01-1.png
Blockchain will increasingly play a greater role in international trade, however, there are some disadvantages that this may lead to. Reduced regulation may be good on one hand, but frivolous deregulation could be quite dangerous. As blockchain evolves, so will our understanding and use of it in our daily lives.
Previous Post Next Post
