Due to the rapid increase in the popularity and discussion surrounding blockchain technology, many people have begun questioning its importance and overall impact within the space of digital payments, as well as outside of it.
If you are wondering why the blockchain has been such an important innovation on a global scale, we will go over many of the benefits it provides and why it’s worth your attention going forward. Let’s dive in.
The Main Benefits of Blockchain Technology
To truly understand why blockchain is so important, we first need to look at the key benefits surrounding blockchain technology.
The blockchain is an immutable public ledger, and what this means is that any transaction that gets recorded on top of it cannot be modified in any way, ensuring trust and transparency.
Furthermore, the blockchain has complex cryptographic encryption mechanisms, which means that it is always secure.
Any transactions that occur on top of the blockchain are completed quickly, and the ledger then gets automatically updated. There is no intermediary or third party that controls the party, which means that it is fully decentralized and cannot ban or censor specific users from it at will. The authenticity of each transaction gets verified by the participants within the blockchain through a variety of different consensus mechanisms used across numerous networks. These are just some of the main benefits of blockchain technology, and how that we learn more about them, we can move on to its overall importance.
The Importance of Blockchain Technology
There are numerous ways through which blockchain technology has influenced the way we think about finance.
Transactions that occur through the usage of centralized solutions that require a third-party intermediary are typically slow and have a hefty fee associated with them. On the blockchain side of things, there is a transaction fee or a “gas” fee that needs to be paid for the transaction to occur, but this typically is far less than the fees experienced in traditional systems.
Additionally, the blockchain never sleeps. This means that anyone can make a transaction from any part of the world to any other part of the world at any point in time.
All the two participants that are a part of the transaction need to have cryptocurrency wallets, which feature public and a private keys.
The public key is essentially similar to their email address, an address where the sender can send the cryptocurrency, while their private key is their password, through which they can both confirm any transaction and access their cryptocurrency balance.
This means that, unlike traditional systems, nobody has control over your password. Only you, the user, know your password.
However, this is a double-edged sword, as in centralized systems, you can click on a “Forgot Password” button or get the support staff to recover your account, while within non-custodial wallets, ones where only you have access to your password if you end up losing or forgetting it, it can be gone forever.
It is clear, however, that the important aspect of blockchain technology, in this case, is the fact that it brings full control to the users, where they do not have to worry about getting locked from their account by the bank or have to worry about another, the third party having the ability to at any point in time access their balance.
The Industries Blockchain Technology Has Disrupted
There are numerous industries that the blockchain has begun to disrupt and which it will disrupt in the future.
For example, in the banking sector, after blockchain technology was implemented, we gained access to instant and borderless payments on a global scale. Cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), for example, completely removed any requirements to have a third party perform these transactions.
Then there’s cyber security, where the blockchain can identify malicious attacks quickly due to the peer-to-peer (P2P) connections, where the data cannot be tampered with. Each piece of data gets stored on the blockchain network and is verified as well as encrypted through the usage of a cryptographic algorithm.
Blockchain technology has also found its way into supply chain management, where the blockchain can record the history, timestamps, and date of products, and each transaction can then get recorded within a block.
This means that anyone can verify when, where, and by whom the products were transferred.
The fundamental aspects of a blockchain network include public distributed ledgers, encryption, the consensus algorithms they use, such as Proof-of-Work (PoW) and Proof-of-Stake (PoS), and the overall utility each cryptocurrency has.
The more utility a token has, the more value and desirability it will have as a result of this. The blockchain is important due to the fact that it has fundamentally shifted the way we think about digital money, as well as storing data in a decentralized way, all of which have contributed to quicker, cheaper, and more efficient workflows in a wide range of industries.