While blockchain gained popularity through its association with cryptocurrency, it is a valuable technology with many uses outside the crypto sphere. It could grow to play a vital part in the global economic landscape.
But what is it that makes the technology so promising? Here are five of the essential benefits that blockchain provides.
This might be the most important of all the benefits of blockchain. If something is immutable, it cannot be changed or altered. That is very important in finance when fighting illegal activity such as fraud or corruption.
A collection of nodes, blockchain works differently from typical banking systems, with the main difference being it does not rely on a central authority but on a group of nodes. Each node contains a copy of the digital ledger. Every node needs to check the validity of a transaction before adding it to the chain. If the majority thinks it’s valid, it will be added to the ledger. Without this approval, transactions can not be added.
Plus, once a transaction is added to the ledger, it can not be changed retrospectively. These features make it fully transparent and unable to be corrupted.
As mentioned, the blockchain is not controlled by a single central authority; the network nodes ensure it is decentralized.
As the system doesn’t require any governing authority, you can access it directly from the web and store assets there. You will also have direct control over them with your private key, giving people power and rights over their assets rather than being bound by any governing authority in control.
In addition to the decentralization aspect of the blockchain, you have the added protection of cryptography.
Every piece of information on the blockchain is hashed cryptographically, which hides the true nature of the data. Any data input goes through a mathematical algorithm that acts as a firewall for attacks.
This is a unique ID for every piece of data. All the blocks in the ledger come with a unique hash of their own and contain the hash ID of the previous block as well. If you try to change or tamper with the data, you’d have to change IDs on every block, which is almost impossible.
Typically, a public ledger will provide information about a transaction and the party that made it. It’s all out there in the open, and nothing is hidden.
Because all users on the system maintain the ledger on the network, the computational power across each user’s machine ensures a better, more accurate outcome of information.
The result of a distributed ledger will always be a more efficient system that can go toe to toe with more traditional ones.
Traditional banking systems are pretty slow. Sometimes it can take days to process a transaction after finalizing all settlements. It can be easily corrupted within that time. Blockchain offers a faster settlement period compared to traditional banking systems. You can transfer money relatively faster, saving time in the long run.
This is especially useful for people working overseas. Sending money back to a family can often take a lot of time, and that time could be crucial in times of need. This is a problem that blockchain can eliminate.
Another factor is the smart contract system. This can make settling any contract much faster than the traditional methods by cutting the third party out of the way, saving both parties money.
The Future of Finance
Blockchain technology is here to stay, and with these features, plus many more, it has and will continue to impact how finance is viewed and handled.
If people can fully utilize all of the benefits of blockchain, it will create a faster, more secure, and more open system for everyone.
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