Chapter 5 – Benefits of Blockchain Technology
The promise of blockchain technology saw all of the world's contracts and agreements digitized into code and stored in public, transparent databases that are safe from being deleted, tampered with, or revised. The future will see every kind of agreement, business process, online task, funds payment, and transactions with a single digital record that can be identified and validated. As the technology continues to expand, we'll see middlemen, like lawyers, stock exchange brokers, and banks, saving billions, if not trillions of dollars every year.
Blockchain technology is ideally suited to revolutionizing the way many industries do business. Here are just some of the ways that blockchain technology will accomplish this.
Blockchain technology will eradicate third parties and increase the number of exchanges that aren't subject to trust issues.
Blockchain will allow two or more parties to conduct a transaction, of any type, without having to resort to official oversight or intermediation with an external party. This will significantly reduce, or even eliminate counterparty risks.
Counterparty risk is a risk that each party of a contract will face if the counterparty doesn't live up to their contractual obligations. It is a risk to both parties and is something that should always be considered when evaluating a contract.
With blockchain, users are more empowered and have better control over their own data. With blockchain protocols in place, users own and are in control of all their information and transactions themselves. Uber is a perfect example of this. Uber is one of the world’s largest car services companies, but they don’t actually own any of the cars that run its business, but they rake in billions of dollars through car rides that are logged by drivers using the Uber app.
Better Data Quality and Integrity
With the blockchain technology, data is always complete because the next block can't be created or mined without being linked to a verified block being finished in the chain. It is also consistent because all the data has to conform to the protocol standards or else it won’t be recorded in the chain, as well as being widely available.
Blockchain technology has been proven not to have a single point of failure and is capable of withstanding malicious exterior attacks more efficiently. This is compared to closed systems that contain possible weaknesses and point of failure that are scattered throughout the entire system from within.
The Integrity of Data Processing and Transfers
Due to the unchangeable nature of the blocks in a blockchain, every user on the network can trust that every transaction they make will take place on the network and that they will always be executed precisely as the system was designed. This removes the need for any third party to oversee the transactions, maintaining the integrity of the data being processed and all transfers.
All transactions made to and on a blockchain are, by design, created on a public ledger that can be looked at by everyone. This creates a highly transparent system that can be searched by anyone. There are various services, such as etherscan.io, that allows users to search the vast databases and transactions in order to audit everything that is happening within and on a blockchain.
Transactions between banks, like ACH, (automated clearinghouse transactions) can take days to clear. This is especially true for transactions that are made outside of regular working hours. Just think about when you send a wire or make a purchase at the end of the business day on Friday. Without blockchains, you are unable to see any timely updates to the status of your funds. Often you aren't provided an update until the following Tuesday or Wednesday. Blockchain technology reduces the transaction times to minutes, and sometimes even seconds, and they are processed around the clock.
With blockchains, no outside parties are overlooking the transactions. Because of this blockchains can potentially reduce the transaction fees significantly. With reduced transaction fees, it could possibly lead to billions of dollars being saved annually.