Blockchain technology is a digitised, decentralised, public ledger of all cryptocurrency transactions, creating blocks and records them in chronological order.
Blockchain allows market participants to keep track of digital currency transactions without central recordkeeping. Each node is connected to the network and gets a copy of the blockchain and downloaded automatically.
Initially created as an accounting method for the virtual currency Bitcoin, Blockchain has the potential to be used outside of cryptocurrency with the assistance of a distributed ledger technology (DLT).
As we know, the technology is primarily used to verify transactions within digital currencies, though it is possible to digitize, code and insert practically any document into the blockchain, doing so by creating a permanent record that cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.
Electronic ledgers are much cheaper to maintain than traditional accounting systems; the employee headcount in back offices can be greatly reduced.
Nearly fully automated DLT systems result in far fewer errors and the elimination of repetitive confirmation steps.
Blockchain allows for the reduction of transaction cost by eliminating third-party intermediaries and overhead cost for exchanging assets; blockchains have the significantly reduce transaction fees.
Massive Energy Consumption as Blockchain miners attempts trillion of solutions per second to validate transition, thus requiring a considerable amount of computer power.
Despite strong encryption and permission blockchains, cybersecurity is still a concern to the public given data is decentralised and there is a fear of entrusting personal data to a blockchain solution.
Due to blockchain creating permanent records, resolving challenges such as transaction speed, data limits, the verification process is much more complicated.
Currently, all remote transactions, financial or otherwise, rely on the authentication from a central authority for the execution of both parties’ transaction. But, with the birth of the blockchain system, gave rise to a new system referred to as ‘Smart Contracts’ which was more associated with the cryptocurrency Ethereum. With that said, according to Investopedia, it is a “self-executing contract between buyer and seller, directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralised blockchain network.” That being said, Smart Contracts provides a quick and seamless alternative for multiple parties across different countries for conducting transactions without the central bank, legal system or external enforcement forces authentication, by permitting trusted sales and agreements to be carried out after the parties have met pre-existing conditions defined in the blockchain system. Furthermore, they render transactions traceable, transparent, and irreversible.
Currently, companies are adopting the use of the revolutionary Blockchain technology, some of which include giants such as Amazon.com Inc. [NASDAQ: AMZN], Alibaba Group Holding Ltd. [NYSE: BABA], Microsoft Corp [NASDAQ: MSFT], International Business Machine Corp [NYSE: IBM], all finding uses of the system to make their internal processes more efficient and meeting the needs of consumers unquenching thirst for convenience.
Moreover, stock exchanges have started adopting the use of the tech, with the first one to test its system Nasdaq Inc. [NASDAQ: NDAQ]. Additionally, within our shores, the Jamaica Stock Exchange [JSE: JSE] announces its intention to explore cryptocurrency.
What are your views, do you think Blockchain technology will create the avenue for what financial institutions, stock exchanges, corporations, and consumers have been searching for decades to have an efficient and seamless transaction process across borders?
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