Why Blockchain Matters

whiteboard one plus one

Blockchain is a phenomenon now. The chain is cryptographically secured, so nobody can change a record once it has been inscribed. And even if you were to find a way around the cryptography, the records are visible to all members—making it nearly impossible to change a block without someone noticing. The most you can do is lay down new blocks. Everyone wants in on it.

whiteboard one plus one

Modern financial structures evolved from Venetian traders in the 15thcentury, and later, Dutch bourses in the 17th century. Double-entry bookkeeping has been with us since those very early days, and has helped build the institutions upon which our modern financial world rests.

The concept for exchanges and transactions of all kinds—including money, commodities, stocks, loans, and products—have required each participant to track every transaction using its own ledger. Most of the time, this works very well. But occasionally, ledgers get out of sync—leading to audits, mistrust, and increased scrutiny.

The difference with blockchain is that all parties use the same ledger, which is visible to all participants. Ledgers can never be out of sync when there is only one of them.

This new approach to monetary record keeping offers multiple benefits, including:

  • Increased transactional trust. Since every participant can see every block in the chain, it’s easier to ensure that all transactions are above board. It’s hard to deal under the table when everyone is watching.
  • Reduced fraud. Similarly, it becomes difficult—if not impossible—to hide, misrepresent or delete monetary or other transactions (for example, the movement of commodities).
  • Reduced risks and associated moral hazards. With more trust and reduced fraud, enterprise risk is likewise reduced. Moral hazards are harder to hide as contracts and deals are evaluated.
  • Lowered transaction costs and faster processing times.Fewer systems and organizational infrastructure simplifies and speeds up the entire transaction process, for less money.

Beyond Bitcoin

While bitcoin and blockchain are often discussed in tandem, they are not the same thing. Bitcoin is an application utilizing blockchain; blockchain does not require bitcoin. Nevertheless, bitcoin has proven, on a global basis, how blockchain works and has driven rapid interest in the technology—especially in the financial services industry among banks and credit card processors.

But the disruption opportunities of blockchain will not be limited to financial services. Consider other industries that move products through distribution, or even utilities that measure and track the use of electricity, water, and sewage. Short term housing rentals, car sharing and food production from farm to fork could experience disruptions driven by blockchain.

Examples of rapidly evolving blockchain applications include online voting, medical record keeping, provenance of art and historical artifacts, non-profit banking service for regions and populations not served by traditional banking, and process automation for generic, time-consuming back-office activities.

Other potential applications of blockchain include intercompany transactions for financials, distributed procurement through a network for vendors, and loyalty management programs for consumers.

Souce: Oracle


About Shakthi

I am a Tech Blogger, Disability Activist, Keynote Speaker, Startup Mentor and Digital Branding Consultant. Also a McKinsey Executive Panel Member. Also known as @v_shakthi on twitter. Been around Tech for two decades now.

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