Bitcoin was designed to be a universal digital currency that is simpler and easier to track than any other currency in the world. Although it has caught on in some circles, the introduction of blockchain technology could truly change everything. Here’s what you should know about blockchain and what it could mean for the future of commerce.
What Is Blockchain?
You can think of a blockchain as a ledger of sorts. It’s to traditional monetary systems what Linux is to Windows; an open-source, globally distributed system that runs on millions of devices worldwide and is open to anyone who wants to use it. It’s not just for money, either. Users can store and move anything from contracts, deeds, assets, equity – you name it – via blockchain. The main thing that sets it apart from our traditional commerce system is the way trust is established. It doesn’t come from government intermediaries and technology companies, and it doesn’t come from banks. It comes from some very smart coding and a sense of community among those who use it.
What Financial Intermediaries Do
Think about it like this: the vast majority of transactions go through some sort of financial intermediary, which provides one or more of eight functions. Although you’re familiar with all of them in a traditional sense, blockchain can do it better. Here’s how.
- Authentication – While traditional commerce relies on credit reporting agencies and a variety of other firms to verify identity and reputation, blockchain can reduce or even eliminate the need for authentication in some cases.
- A Payment System – Debit cards, checks, currencies, credit cards – they all offer ways to transfer funds while making sure every dollar in existence is only spent once during a single transaction. Blockchain does it more efficiently, which goes a long way toward overall prosperity.
- Savings Methods – Blockchain can replicate just about any savings method you can imagine. Savings bonds, savings accounts, checking accounts, and more are all considered obsolete.
- Loans and Credit – Blockchain increases credit transparency, giving the people the power to decide who should borrow funds and who may be higher risk.
- Exchanges – Rather than relying on brokers and other firms to handle trading, blockchain makes it simpler and can cut settlement times down to just a few minutes or seconds instead of weeks or even months.
- Investments – Blockchain also automates matchmaking between entrepreneurs and venture capitalists as well as between business owners and investors. It’s more efficient, more transparent, and better for keeping records, too.
- Insurance – Because risk management changes with blockchain thanks to unsurpassed transparency, so do the rules for insurance and risk management.
- Accounting Services – Accounting services make up the recording and recording of any kind of financial transaction. The industry today is clunky, slow, and not without fault. Blockchain provides accounting information in real time, allowing consumers and businesses alike to make better decisions regarding their finances.
Blockchain offers everything that the current commerce system does, but it does everything much faster and much better. When finances, risk management, accounting, investing, and everything in between is more transparent, it helps democratize the economy by taking power from the government and putting it back into the hands of the people.