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From the many complex definitions, one can derive a simple explanation of the term.
To put purely, Blockchain is a technology that records, manages and confirms transactions, where all the participants connected to the transactions hold the entire record of it, through peer-to-peer verification of transactions, as opposed to a centralised platform, where information needed to be passed over to any if required. Here, there is no central recording, but each participant has the information. Bitcoin operates this system, minus any central body.
Now imagine, all the complexities involved in general transactions, communication across channels and intermediaries, contracts and agreements and analysis of the same, cross-referencing and transfers if any, confirming authenticity and identity and conducting all this along with managing the security. All these activities and checkpoints would keep loads of people, like accountants, lawyers and admin staff, busy for innumerable hours.
With the introduction of Blockchain, the maze of such communication and staff would actually be non-existent, at least in theory, as all the above-mentioned documentation would be automatically recorded and verified and accessed by all participants over the same secured platform. The bureaucracy will be eliminated. Everything will be streamlined and united on one big database.
The blockchain is a complex set of computers, which authenticates, that a transaction has been taken place, before recording it on a ‘chain’ of computer codes. The beauty is that the details of the transactions are recorded on a ledger that can be viewed by anyone who is on the network.
This technology could bring down the budgets of banks by cutting down drastically on the infrastructure costs, specifically on global transactions, securities trading and regulatory compliance. It is predicted, the impact will be close to $20billion by the year 2022.
Mutual Distributed Ledger Technology another term for Blockchain, has the perspective to transform the insurance industry globally. There are many possibilities and many prospects across industries as well. In fact, any business, where data is shared across multiple participants, or which requires data verification, or when interactions are time bound, or where multiple parties update data, is true and applicable, then they can take advantage of the Blockchain technology.
Blockchain thus holds the revolutionary promise that the internet did almost two decades ago. Hence, not only in the financial services, (although it is considered as a breakthrough for financial interactions) but business figures like Bill Gates, Richard Branson and the ex-UK prime minister, praised its potential.
The technology, although extremely promising, can be considered to be in the nascent stage. It has a few challenges like security and regulatory backing. It is difficult to confirm if the technology can, perhaps, in the future scale itself enough, inefficiency, by developing the capability, of meeting these challenges. Nevertheless, it is promising enough to ensure that with the correct understanding and application, it can be coined as one of the key players.