Cryptocurrency is rapidly rising in popularity, leading to increased interest in blockchain technology, which underpins digital currencies. In this article, we’ll share an overview of blockchain technology and explore its implications for global finance and communities.
What is a Blockchain?
A blockchain is a distributed ledger technology that is maintained by a peer-to-peer network of computers. Each computer in the network acts as a node, meaning that it stores a copy of the ledger and is connected to all other nodes in the network. It’s famous for being decentralized.
A blockchain is uniquely secure because it can’t be altered once a transaction is confirmed on the blockchain, making it incredibly difficult for anyone to modify or delete a transaction. This makes blockchain an ideal technology for securely storing and transferring financial data.
How Can Blockchain Revolutionize Global Finance?
Blockchain has the potential to revolutionize global finance by making financial transactions more efficient and transparent. Let’s take a look at four ways blockchain can change the world.
Blockchain Allows for Simple and Easy Banking
Blockchain technology could enable instant payments, help reduce transaction costs and fees, and eliminate the need for middlemen and third parties. It also allows people to perform specific tasks that require entering a bank, such as clearing a check instantly or opening an account.
By integrating blockchain into banking institutions, consumers can see their transactions processed in under 10 minutes, which is the time it takes to add a block to the blockchain. If major banks decide to adopt the blockchain, they’ll be able to clear crypto transactions quickly.
Blockchain Allows for the Creation of Smart Contracts
Blockchain technology could facilitate the development and implementation of smart contracts. Created for the Ethereum blockchain, smart contracts enable customers to automate payments and agreements and allow parties to quickly and easily execute contractual obligations.
Coders can quickly learn how to code smart contracts via a web3 blockchain developer bootcamp that teaches Solidity, but why use them? Because they eliminate tedious processes.
For example, if a person wants to rent out an apartment, but the landlord won’t provide the door code until they receive payment, the landlord could provide a smart contract. The door code will be revealed the moment the tenant pays first and last month’s rent per the contract’s terms.
If the landlord doesn’t provide the code before the tenant is supposed to take possession of the apartment, the smart contract could automatically refund payment. This would eliminate fees and remove the need for a mediator or attorney, as the refund was already processed.
Blockchain Won’t Deny Incomplete Transactions
Banks reserve the right to deny transactions for various reasons, which can be a positive thing. For example, if they notice purchases from an unusual location, they’ll deny the transaction. But sometimes, the bank will freeze your account without recourse, which leaves you in a bind.
Blockchain Allows for the Creation of New Assets and Currencies
Blockchain technology could also enable the creation of new assets and currencies that can be used for financial transactions, providing alternative forms of investment and payment.
Two of the most famous assets and currencies on the blockchain include NFTs and common cryptocurrencies like Bitcoin and Ethereum. When a cryptocurrency exists on the blockchain, it can operate without a central authority, which reduces risks and eliminates processing fees.
Countries that have unstable or low-valued currencies can exchange crypto, opening its citizens up to a wider network of goods and institutions to do business with on an international scale.
NFTs or Non-Fungible Tokens are another type of investment that can be traded for crypto or bank currency (if earned through a video game) or could be sold at a later date for a profit.
Blockchain Allows Everyone to Participate
You may not think that opening a bank account is difficult, but for people who can’t afford the monthly fees or don’t have a permanent citizenship, it’s basically impossible. Not only that, but banks require “Know Your Customer” procedures, which require them to record a customer’s ID before opening an account. If a person is deemed risky, they can’t store funds at a bank.
Plenty of people don’t have a credit score, home citizenship, or a well-paying job due to no fault of their own, but these factors prevent well-meaning people from succeeding. Blockchain and crypto wallets could potentially level the playing field for everyone, whether they’re rich or poor.
Blockchain Allows for Secure and Reliable Financial Services
In addition, blockchain technology could enable more secure and reliable financial services, such as immutable records and digital signatures. This could prevent cases of fraud and counterfeiting, helping to reduce the cost of compliance and regulatory overhead.
In fact, one of the blockchains’ biggest benefits is its security and transparency, but it’s important to note that they aren’t full-proof. If a person gives out their wallet number, someone else could hack it or remove money out of it. And you can’t contact a bank to reverse these charges.
With that said, the blockchain is exceptionally private, so even if the wallet is hacked, it’s impossible for the hacker to gather more information about the wallet holder or the user.
That’s because blockchain technology achieves decentralized security by storing new blocks linearly and chronologically. A person can’t go back and alter the blockchain unless the majority of the network agrees to do this. For this reason, hacking the blockchain is incredibly difficult.
Blockchain Won’t Allow for Account Seizures
Thanks to “Know Your Customer” procedures, governments can track people’s bank accounts and seize their assets for a number of reasons. Some of these reasons are understandable, but a corrupt government could seize your assets simply for disagreeing with their right to rule.
A crypto wallet cannot be tied to an individual unless said individual reveals their crypto wallet, but even when they do, it would be very difficult for a government to seize it. Since transactions are completed anonymously, they can feel safe knowing their funds will stay in their wallet.
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