As global commerce rapidly expands, more industries are adopting blockchain systems for record-keeping. Unlike standard databases, blockchain is a distributed ledger technology (DLT) that allows users to act as administrators. The technology offers regulatory freedom, transactional transparency, security, cost savings and improved supply chains.
1. Regulatory Freedom
More companies are accepting cryptocurrencies like Bitcoin because banking institutions and regulatory agencies cannot interfere with transactions. Bitcoin is the most successful and recognized blockchain, and its success had a profound effect on the marketplace. Industries such as health care, international shipping, financial technology, and real estate adopted blockchain systems after Bitcoin’s success. Because transactions do not require a bank’s authorization, blockchains are becoming more appealing to financial services industry experts. A blockchain consists of a network of its users and relies on this network to verify transactions. When a transaction occurs on a blockchain, it does not take days to clear through a bank or incur transactional fees.
2. Transactional Transparency
The user identity is not entirely anonymous on a blockchain, but personal information such as names or addresses are not used to record transactions. Blockchains assign a hash, like a PIN or a password, to each transaction. Anyone, who is part of the blockchain network, can view the transactions in real-time. When a user makes a transaction, it is added to a block that is linked to previous transactions. Users have the freedom to view every transaction in the linked blocks, and this feature allows everyone on the blockchain to easily track purchases and sales. Transaction data cannot be erased or easily manipulated.
3. Security
Although no system is invulnerable to cyberattacks, a blockchain’s security relies on its unique architecture to fight off hackers. Unlike a traditional database, a blockchain is composed of data blocks that are linked together chronologically. Each user has a separate crypto key that allows them to access the current blockchain. A hacker cannot interfere with a single block in the chain without changing every block on the network. Since each block contains thousands of user transactions, few humans or advanced computer systems could feasibly manipulate every block. Recently, the healthcare industry began implementing blockchains. Patients can send private medical data to health care providers on the blockchain without worrying about a data breach.
4. Cost Savings
A considerable advantage of the blockchain system is its elimination of the middleman. Standard transactions and contracts involve financial institutions, federal regulators, lawyers and brokers. Blockchains are not burdened by the fees and regulations imposed on traditional systems. A digital contract between two global companies will not face the same scrutiny or bureaucracy if the organizations use a blockchain to conduct business. When companies are connected to a blockchain, international regulations are no longer an obstacle for commerce. By eliminating transactional fees and improving verification speeds, a company can lower its operational costs when it adopts a blockchain.
5. Improved Supply Chains
A blockchain’s verification process allows companies to streamline their supply chains. Since each transaction is available to its users, products and transactions are easier to track. With standard forms of digital record keeping, a client could dispute a transaction but could not view a record of payment. With a blockchain, each participant in the system can view the current transactional record at any time. The buyer and supplier have the same information concerning transactions and digital contracts. This minimizes the occurrence of lost payments or disputed transactions. By decreasing the margin of error and allowing full transparency, blockchains improve the efficiency of a company’s supply chain.
Although traditional databases and record-keeping are not going away, blockchains will become more accepted as new industries adopt the system and recognize its merits. The health care and shipping industries are increasing their reliance on blockchains, but the financial technology industry has emerged as the leader in adopting blockchain systems. In the near future, it’s likely that more government institutions and emerging industries will use blockchains to conduct business.
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