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Cryptocurrencies came onto the scene about a decade ago and have continued to redefine the way we perceive and handle financial transactions.
However, the real hero of this heralding was not the cryptocurrency but the underlying technology that makes cryptocurrency transactions as feasible and efficient as they are — the blockchain.
The real potential of the blockchain came when innovators and visionaries across industries began to realize that it could be separated from the digital currency and used to revolutionize every other industry. As evidence of its effectiveness, businesses across thousands of industries have experienced mind-blowing innovations thanks to the integration of blockchain technology as developers have seized the opportunity to become creative with the versatility it offers.
As more people embraced the blockchain technology, some industries began to feel threatened by its presence and its disruptive nature.
While there is an understandable fear that Bitcoin may turn out to be just another financial bubble; the MySpace of cryptocurrency if you will, the real loss would be if the blockchain doesn’t live up to its promise.
The million dollar question then becomes, is the blockchain here to stay? To be able to answer this, we have to first understand the psychology of blockchain:
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1. The benefits of full disclosure
This was and is still one of the biggest selling points of this technology — full disclosure. Blockchain is a massive public ledger of every user activity across an extensive network.
The fact that every user activity on the blockchain (for cryptocurrencies, it’s validated financial transactions) can be monitored and traced back to its origin has made it so adaptable for so many other uses such as in the case of the supply chain.
Transparency breeds authenticity. When every blockchain user can see exactly what is happening, it helps to keep everyone honest. This feature is probably the biggest reason initial coin offerings (ICOs) have been all the rage. Successful since they started out in 2013, ICOs have had some headline-worthy wins to encourage the every intending investor, regardless of budget to jump in and earn a part of the crypto pie.
Related: Why You Can’t Afford to Ignore Cryptocurrencies and Blockchain Anymore
2. Control of finances without compromising security
We can’t keep all our money at home; financial institutions exist to help us facilitate our personal and business financial management and control.
But, how much control is too much? In a rapidly growing, technologically innovative and flexible world, people are growing increasingly dissatisfied with the traditional services of these well-established institutions with their stringent policies.
They decide everything: minimum account balance, maximum and minimum transaction value, transaction fees, credit advance, collateral value, allowed payment methods and a plethora of other conditions.
Plus these institutions can make a bad investment and lose money — customers’ money. Blockchain decentralized structure advocates returning control to the customers, letting them preside over their own financial decisions.
While banks do work to keep their customers’ money safe, it often means that the customer has to seed a great deal of financial control to the banks. Blockchain’s full disclosure and authenticity feature gives its users confidence in the safety of their money and financial transactions.
The ledger itself may be public but the data on the blockchain is verified and encrypted by advanced cryptography which makes it far more difficult to hack and the absence of third parties minimize interference and ultimately the risk of a hack.
And then there’s the offline crypto wallets, just in case you feel safer storing your digital money offline. Banks have recorded a relatively scary amount of data security breaches this year alone, with the finance industry accounting for 14 percent of the total breached records in the first half of 2017.
The blockchain is still in its infancy and does have its flaws, but it’s proving to be a much safer technology for securing our money. Little wonder many banks and major financial institutions — about 15 percent of them expected this year alone — have begun to integrate this technology to better serve their customers.
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3. Cost of spending
Financial bodies act as intermediaries for our monetary transactions; they help us send and receive money and rightly collect a fee for their services. This is one of the highest revenue-generating methods for financial institutions. While most of these institutions in their different forms have in recent years tried to implement a more flexible method of charging for their services, many argue that the cost of these services is still too high.
Card processors like MasterCard, Visa and Discove collect anywhere from 1.44 percent to 2.6 percent for every transaction (plus a fixed amount usually no less than $0.25 . . . If you were sending $100, this would amount to around $2.60 plus $0.25, or $2.85.
This may not seem like much, but for millions of merchants who use these processors, receiving thousands of dollars in payment quickly begins to add up. PayPal transaction fees stand at 2.9 percent plus $0.35 per transaction for personal accounts and 4.4 percent plus $0.30 for business accounts.
Blockchain transaction fees have historically been much lower — less than a penny as recently as 2015 — than these other established payment mediums. As the demand for Bitcoin and other cryptocurrencies has increased, so have the service charges.
While the day traders are shielding themselves from trading losses by using order types, major blockchain wallet companies have adopted flexible and dynamic payment structure in that they let wallet users choose their own fees to reduce irrelevant losses.
This also comes with a dynamic fee estimation that aids them in selecting the fee that will guarantee fastest transaction speed. This level of user control is definitely a very endearing quality that will likely grow in acceptance in the coming years.
And then there’s the added advantage that customers no longer have to bear the financial brunt of clashes between these traditional financial heavy weights. Plus, merchants can deal directly with their customers on the blockchain, effectively getting rid of any intermediary and getting the full value for their sales.
Related: How Digital Wallets and Mobile Payments Are Evolving and What It Means for You
4. Blockchain tech is permeating other industries.
This technology was originally intended to be a baseline protocol for the future of financial transactions and nothing more. However, as industries began to realize the potential of this innovation to do much more than move money, extensive research to better understand and integrate it began extensively across industries.
Today, you will find signs of blockchain infrastructure in every major industry as developers feverishly seek to make it better, faster, more secure, more user-friendly and more adaptable.
And it doesn’t stop there; startups are rapidly springing up everywhere, focused on the use of blockchain to run their businesses. For example, Game Protocol is a blockchain-focused development platform for the gaming industry. IMMLA is a freight-forwarding company centralized around the blockchain technology. There are a plethora of blockchain focused companies I’ve come across, and all of them are literally pulling out the middleman in their industries.
This wave of industry disruption is expected to continue, as any technology this flexible is likely to achieve longevity. We can only wait to see how it is going to be used to amplify the effectiveness of other already promising tech innovations such as the internet of things.
So, is the blockchain just another tech fad?
That’s really tough to say. In addition to all the benefits outlined above, blockchain is slowly changing the way we do business, the way we earn a living and the way data is made available. Blockchain has had its fair share of problems, and despite its immense success, the blockchain has its limitations that we might need to worry about.
However, currently, blockchain is making steady progress. With all the benefits the blockchain has to offer, it certainly has a lot to raise the confidence of potential users. The world is changing daily, and the blockchain is put to the test in every situation to determine its ability to withstand future challenges.