Benefits of Blockchain: 8 to Think About
Since its start in 2008, blockchain has changed a lot. The benefits of the distributed digital database, such as speed, cost-effectiveness, and the ability to grow, are now clear. It’s also become clear that blockchain still has a long way to go and that some of the things that make it useful can also be problems.
8 Good Things About Blockchain
As we talk about the eight different benefits of blockchain, there are two things to keep in mind. First, even though all blockchains use the same technology, they don’t all work the same. Smaller blockchains with fewer users can be faster and more efficient, while bigger ones can be slower and cost more.
Second, blockchain technology is always getting better. Any advantages it has now will probably get even better in the future. Sean O’Brien, who started the Privacy Lab at Yale Law School, said, “The most important changes to blockchain will be in the areas of smart contracts and consensus.” He said that Layer 2 technologies would continue to change what blockchain means and bring more and more online and offline activities into the realm of Web3.
Blockchain has no one in charge.
Some say that the biggest benefit of a blockchain development company is that no bank or other group controls it. Why? “A decentralised business model is one in which it is much harder for a single entity or a group of entities to secretly change the rules to their own advantage,” said Dan Burnett, executive director of the Enterprise Ethereum Alliance, an organization that works on open blockchain specifications.
He used Uniswap as an example. Uniswap is a decentralized stock exchange that trades cryptocurrency using a fully automated algorithm that runs on Ethereum. Burnett said that there is no need for the Securities and Exchange Commission or any other governing body to be involved. “There is no need for parties to enforce it because it is done by computer code that doesn’t let anything else happen but what was programmed.”
Blockchain makes tokenization possible.
Fairlane Raymundo, an NFT artist and Web3 marketer said that blockchain technology gives people who can’t get to them now the chance to build wealth through fractional ownership.
Take the case of a real estate developer who is building an apartment building that will cost $2 billion. She said, “Back in the day, you had to go up to investors in person and ask them to invest in the whole thing at once.” “Now, you can tokenize that property and let 100,000 people from all over the world invest small amounts, each with full security and encryption. This gives each of those small investors a chance to make capital gains in the real estate market, which they can’t do right now.” Raymundo said that almost anything could be turned into tokens and owned in parts. This includes cars, houses, works of art, record albums, and businesses.
Blockchain is giving people more power.
One way that blockchain can make business and industry more democratic is by letting people who haven’t been able to participate because they don’t have enough money or access to do so.
“As long as the basic rules for transactions are followed, anyone can use blockchain at any time,” said Alex Wykoff, director of product and Web3 at tech consulting firm Wurst. “For example, if someone wanted to compete with a local grocery store, they could open a whole new market for produce and give farmers a better way to get prices in their favour,” Wykoff said.
“With transparency, we know where the money will go, and we can handle more transactions quickly and on a large scale… This makes it easier for money to flow into all markets.”
Because the blockchain is a public space where people and businesses can change how they work together, “this is a monopoly-breaking power that we don’t see very often in our traditional markets,” he said.
This can also make it possible for millions of people to join the banking system. “More emerging countries are now part of the global banking network, and many problems with cross-border payments cause friction,” said Devon Drew, founder, and CEO of DFD Partners, a data-driven distribution platform.
He said that Blockchain takes care of accounting, the speed of payments, the “know your customer” (KYC) and “anti-money laundering” (AML) protocols, security, traceability, and automation. “With transparency, we know where the money will go, and we can handle more transactions quickly and on a large scale,” he said. “This makes it easier for money to move in all markets.”
Blockchain moves quickly
Just like the internet sped up written communication (comparing sending a letter to sending an email), blockchain speeds up financial transactions. In a traditional centralized system, transactions that take hours or even days take minutes or even seconds in the blockchain.
Burnett thinks that speed will still be a huge advantage of blockchain in the future. “We’re not there yet, but imagine closing on a house sale or purchase in less than an hour, including the transfer of funds,” Burnett said.
Blockchain is good value for money.
Gas fees, or usage fees, that are too high for blockchains like Ethereum have gotten a lot of press. Burnett said, “This is only temporary,” and he predicted that as blockchain technology gets better, prices will go down. “Transaction costs will be measured in fractions of a dollar or even cents.”
Blockchain is good at using energy.
Huh? What about all the fuss about how mining hurts the environment and how much computing power it takes? This will also change, and it already is, before Ethereum switches from proof of work to proof of stake. Burnett says that a traditional financial transaction takes a lot of work and energy: If the customer has a bank account, driving to the bank to fill out paperwork. Filling out the paperwork, having someone double-check it, putting it into the bank’s system, and then waiting days for the transaction to be finished.
“If you add up the cost of human energy, heating, cooling, electricity, etc. for all of these people, it will easily be more than the cost of electricity for a similar blockchain transaction that is done automatically,” Burnett said.
Blockchain Engenders Trust
One big example of this is smart contracts, which are agreements on the blockchain to buy, sell, or carry out almost any kind of agreement (prenuptial agreements, anyone?). With a smart contract, the parties agree on terms and conditions, which are then written into the blockchain ledger. When all of the terms of the agreement are met, the deal is done automatically.
When the smart contract is added to the ledger, it can’t be changed. This means that neither the buyer nor the seller can back out or raise the price of an item. It turns out that immutability can also be a problem with blockchain, which will be talked about later in this piece.
Blockchain is open and clear.
The information on a blockchain can be seen by anyone who has access to it. The transactions could be done anonymously or under a fake name, but the terms are still there. JB Larson, a technologist, and blogger who works as a digital marketer for the data recovery company Gillware said that this openness has a lot of potential to help the public.
Larson said, “I am very optimistic about the benefits that society would see if big businesses and government agencies used a distributed ledger for transparent accounting that’s in the public interest.” “We all pay taxes, but does anyone really know where their money is going?”
Larson said that if the U.S. government used a public blockchain system, people could see what was going on with the money they gave it. He also said that blockchain could be used by nonprofits to show donors that their money is being used well.