Blockchain applications and benefits. It is important to understand that blockchain technology is not limited to cryptocurrencies, even though it is often associated with cryptocurrencies, digital or virtual currency schemes, payments, and financial services. However, the scope of blockchain technology is much broader.
Blockchain Applications And Benefits
Blockchain can theoretically be applied in various sectors, including trade and commerce, healthcare, governance, and many others. In addition, it has numerous potential applications. It could impact the pledging of collateral, the registration of shares, bonds, and other assets, the transfer of property titles, the operation of land registers, etc.
One of the key advantages of blockchain technology is that it simplifies the execution of a wide array of transactions. Such transaction would generally require the intermediation of a third party, such as a custodian, a bank, a securities settlement system, broker-dealers, a trade repository, or other third parties. In essence, Blockchain is all about decentralizing trust and enabling decentralized authentication of transactions. Simply put, it allows to cut out the “middleman.”
In many cases, this will likely lead to efficiency gains. However, it is essential to underscore that it may also expose interacting parties to certain risks that these intermediaries previously managed. For instance, the Bank for International Settlements recently warned that adopting blockchain technology could introduce new liquidity risks. In general, it seems that when an intermediary has additional functions other than transaction execution alone, the intermediary cannot simply be replaced by blockchain technology. Especially when the intermediary functions as a buffer against important risks, such as systemic risk, he may not be replaced by blockchain technology – Or at least not yet.
Different types of information can be stored on blockchain technology, but the most common use is as a ledger for transactions. For example, when a purchase is made using Bitcoin, the transaction shall be recorded on the Blockchain. Other users on the network then verify the transaction, which cannot be altered or deleted from the blockchain technology database once confirmed, making blockchain-based transactions more secure and transparent than traditional transactions processed by banks or financial institutions. The most obvious application of blockchain technology is in the financial sector, where banks and other financial institutions are already experimenting with blockchain-based transactions and exploring different ways to use blockchain technology to make services more efficient and secure.
In addition, blockchain technology allows for the secure and efficient creation of a tamper-proof log of sensitive activity. As a result, it is ideal for international payments and money transfers. For example, Banco Santander launched the world’s first blockchain-based money transfer service in April 2018. The service, known as “Santander One Pay FX,” uses Ripple’s xCurrent to allow customers to make same-day or next-day international money transfers. Santander has reduced the number of intermediaries typically required in these transactions by automating the entire process on the blockchain, making the process more efficient.
Final Thoughts
Since the introduction of Bitcoin, the first decentralized peer-to-peer electronic cash system, in 2008, blockchain technology has advanced significantly. Today, innovators in a variety of fields are realizing the benefits of the Bitcoin technology. Many industries, from medicine to finance, are looking for ways to integrate Blockchain into their infrastructures. Blockchain technology, due to its decentralized and trustless nature, can lead to new opportunities and benefit businesses through increased transparency, enhanced security, and easier traceability.
