Blockchain Technology overcomes almost all issues that the internet and traditional database systems could not solve for good.
Although the internet and traditional database systems were the solution to so many problems and created creative and intelligent solutions. They might be limited and inefficient as a solution to future problems. That is due to several flaws in them.
Flaws of the Internet and Traditional Databases
1.Online Identities and Trust: Who am I talking to? Is a service real? Can I trust the online service?. Effective Identity management would improve trust and security on the internet and reduce operating costs. Additionally, it will help to provide a secure and safe environment to apply more complex applications that are related to money and personal data.
2.Single Point of Failure: is a part of a system that, if it fails, will stop the entire system from working. And it is very likely to happen when you have one master database with one major keyholder (administrative personnel who are tasked with performing various administrative duties) for each organizational need. If the master database fails the whole system will fail.
3.Central Authority: In most cases, people remain the final arbiter of the validity of a transaction. We see this in contract work for example. A contract between two entities completed over the Internet still requires one or more central authorities to validate data.
4.Centralizied Power: Most of the issues the internet faces today are a direct consequence of the increased Monopolization of Power (power in this context means access to data) over the internet, and the business models that sustain this dynamic. Lately, there is a lot of talk about Europe needing to create its own tech giants.
These flaws hinder us from achieving things that may shape the future. Things like ironclad online voting, workable digital currencies, confidence between machines talking to machines, and self-driving cars.
“A blockchain database is installed on all the computers that use the database. Any transaction in that database must be validated by all the participating members. It has the power to be almost hack-proof. It eliminates central authorities, significantly reduces transaction costs.”—Jonathan Reichental, Ph.D.
Distributed Data Storage: In a central database we have the database on one server in the center. In the decentralized database, it is spread out among several servers. However, a distributed blockchain database is copied to every client computer on this network. There are no database servers.
Consensus-based Permission: Blockchain eliminates the need for centralized authority by following the concept of consensus. Where all of the computers of the network that create the blockchain have to agree to give someone the permission to make a change.
The Impact of Blockchain on Finance
“Our global financial system moves trillions of dollars a day and serves billions of people. But the system is rife with problems, adding cost through fees and delays, creating friction through redundant and onerous paperwork, and opening up opportunities for fraud and crime.” — Alex Tapscott and Don Tapscott.
That blockchain technology could represent a market restructure. It may enable more people across the globe, particularly in developing areas, to participate in financial markets both as consumers and producers. Seamless electronic payment and receipt systems, easily available on all types of mobile devices, already enable e-commerce in undeveloped rural parts of the world. Examples include WeChat in China, Zoto in Nigeria, and YellowPepper in Latin America.
“For financial services, creating a network of trust between a vast collection of disparate entities that doesn’t require the enormous overhead of today’s checks and balances is groundbreaking.” — Jonathan Reichental, Ph.D.
Real-World Examples of Blockchain Use
“Blockchain technology may have significant impact on the financial industry in remarkable ways in the months and years ahead.” —Jonathan Reichental, Ph.D.
- Factom, an Austin-based blockchain service company, has launched a product called Factom Harmony that’s aimed at the mortgage industry. It uses blockchain technology to ensure that mortgage companies and their clients have complied with regulations, documents are securely preserved, and everything is easily accessible in the event of an audit.
- Bank of China HK Uses Blockchain for 85% of Real Estate Valuations. It uses the secure database capabilities of blockchain to provide quick property valuations for mortgage applicants.
- Nasdaq Stock launched the blockchain platform Linq to enable issuers to digitally represent a record of ownership. Also, it reduces settlement time and eliminates the need for paper stock certificates.
- A startup called Everledger has begun to use blockchain to store information on almost one million diamonds. Each diamond is scanned to glean 40 unique points that are then condensed into a digital footprint. This is then entered into the blockchain. Each time a diamond moves say from a seller to a buyer, a new block is created and over time a full, secure digital trail of ownership is established. The adoption of this solution is growing and Everledger is attracting attention from investors.
Possible applications of Blockchain
Goods Route Tracking
Using blockchain gives brands the ability to track a food product’s route from its origin, through each stop it makes, and finally its delivery. If a food is found to be contaminated then it can be traced all the way back through each stop to its origin. Not only that, but these companies can also now see everything else it may have come in contact with, allowing the identification of the problem to occur far sooner, potentially saving lives.
Ownership of a Digital Product.
If we could register our creation and ownership of digital products in a blockchain database, it’s possible we could attain immutable proof. For example, if you are a professional photographer and you register your photographs on a blockchain, it will be difficult for someone else to claim that they took the picture. Your ownership record will be stored on the blockchain and it will be nearly impossible to change that fact. The blockchain would also enable a more trustworthy mechanism to support the transfer of digital ownership.
By integrating blockchain into banks, consumers can see their transactions processed in as little as 10 minutes,2 basically the time it takes to add a block to the blockchain, regardless of holidays or the time of day or week.
Voting with blockchain carries the potential to eliminate election fraud and boost voter turnout. Using blockchain in this way would make votes nearly impossible to tamper with. The blockchain protocol would also maintain transparency in the electoral process, reducing the personnel needed to conduct an election and providing officials with nearly instant results. This would eliminate the need for recounts or any real concern that fraud might threaten the election.
- TEN CHALLENGES FOR THE FUTURE INTERNET — Katja Bego on NEXT GENERATION INTERNET.
- How Blockchain Is Changing Finance. — Alex Tapscott and Don Tapscott on Harvard Business Review.
- Blockchain Explained. — LUKE CONWAY on Investopedia.
- Smart Contracts. — JAKE FRANKENFIELD on Investopedia.
- Blockchain: Beyond the Basics —Jonathan Reichental, Ph.D.
- Cryptocurrency Foundations — Jonathan Reichental, Ph.D.
- Bank of China HK Uses Blockchain for 85% of Real Estate Valuations — Fintech
- COVID-19 pandemic accelerates the monopoly position of Big Tech companies. — SOMO
The Blockchain Revolution. was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.