You may have heard about Bitcoin or other cryptocurrencies in the media, but you may be unaware of the paradigm that was created as a result. Some experts have described it as the biggest technological invention since the Internet. It will change how consumers trust companies, how they view their reputation, how identity is verified, and how transactions are executed and recorded.
This technology paradigm, Blockchain, was born out of the 2008 financial crisis. At the time, Bitcoin was merely a white paper that was introduced to the world as a way to send electronic cash directly from one person to another without going through a financial institution. Blockchain was the backbone of this peer-to-peer electronic cash network.
In whom do we trust?
The current financial model in use for hundreds of years completely relies on trust. Trust in individuals, trust in companies, trust in the government. But with the emergence of e-commerce, the number of relationships with people and machines has grown to the point that this trust could be in jeopardy.
“Trust itself is very delicate. It’s poignant, it’s close to us, easily breakable and yet somehow were able to trust each other and transact $100 trillion a year between the seven billion of us on this planet,” says Richie Etwaru, adjunct professor of blockchain management at Syracuse University in New York in a 2017 TEDx event.
Etwaru explains that trust in today’s world of economics and commerce is manufactured. Transactions are based on a ledger system where someone can add or delete a record from that ledger without any checks and balances.
It's estimated 37% of the entire economy suffers from economic crime every year. As regulatory costs continue to rise, the consumer, in the long run, will pay for fraud and associated cost. All records can be tampered with, and Blockchain is the answer to make our ledger system tamper-proof.
Cutting out the middleman
Our current ledger system relies on intermediaries to store and keep ledgers and records. Banks, title companies, credit reporting agencies and the government are all responsible for keeping what we presume are safe and accurate ledgers. According to some predictions, because Blockchain cuts out those middlemen, it could wipe out tens of millions of jobs from the intermediaries.
However, it could also result in massive savings for the very same institutions. The Harvard Business Review states that most financial intermediaries themselves rely on a complex and costly array of intermediaries to run their own operations. By implementing blockchain, the Spanish bank Santander could potentially save $20 billion a year.
Where it's already in use
Many companies are already warming up to Blockchain as a serious model for business. The investment management company Vanguard Group has already moved $2 trillion in assets onto the Blockchain. Recent figures from PricewaterCoopers state that in 2017, there were $1.6 billion cumulative investments in Blockchain startups. JPMorgan Chase, Citigroup, and Credit Suisse are all currently investing in the technology.
In an early 2018 announcement, Amazon announced a partnership in this emerging technology. Luxoft Holdings, combined with five other consulting firms, will offer Blockchain solutions certified to run on Amazon Web Services (AWS).
Not without its challenges
Government regulators are late to the game and haven’t yet set standards around controls and protections for Blockchain-based systems. There are also some technical hurdles to overcome.
“Here is the challenge with blockchain today... It is handling 0.6% of the transactions that Visa’s credit card network is handling, and yet it’s getting slower by the minute,” Aaron Klein, CEO of tech risk tolerance company Riskalyze said in a recent CNBC interview. “We’re up to seven-minute transaction clearing times for bitcoin.”
Experts say those delays are to be expected as Blockchain grows, making the decryption technology move slower. If this technology is going to continue to revolutionize industry, it will need to keep up with today’s on-demand and instant e-commerce world.
Are your digital assets ready for Blockchain?
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