Knowledge Byte: The Real Benefits of Blockchain
Looking for a succinct yet comprehensive list of benefits of blockchain? Look no further.
Blockchain provides the following benefits:
- Transparency: In blockchain, all network participants have access to the same database information and this shared version can only be updated through consensus. Even if a single record is changed, there is a version history of blocks with the previous information. Thus, data on a decentralized blockchain is more accurate and transparent than on centralized databases.
- Reduced transaction cost: Since all network participants have access to the same version of the blockchain database, it eliminates the earlier process of reconciling different databases (ledgers) as well as trusted third-party intermediaries. This results in a reduction of expenses for a business. The Internet unlocked new economic value by dramatically lowering the cost of connections. Similarly, blockchain could dramatically reduce the cost of transactions. It has the potential to become the system of record for all transactions. If that happens, the economy will undergo a radical shift, as new, blockchain-based businesses emerge.
- Faster transaction settlements, decentralization, user-controlled network: By streamlining and automating traditional paper-heavy processes with blockchain, transactions can be completed faster and more efficiently. Reconciliation of ledgers and third party trusted intermediaries can be eliminated because records stored in blockchain can be accessed by all network participants. This results in faster clearing and settlements.
- Efficiency, auditability, and traceability: For companies with a complex supply chain, it can be quite hard to trace an item to its source. When the whole supply chain from sourcing of raw material to production of goods to the transportation are recorded in a blockchain, there’s an audit trail that shows where a material / good came from and every stop it made on its journey. This historical transaction data can help to verify the authenticity of goods in a supply chain and prevent fraud.
- Security: Before being recorded in the blockchain, transactions are approved by consensus, encrypted, and linked to the previous block. Malicious actors cannot change this data because these transactions are then stored across a network of computers, rather than a centralized database. Blockchain can help prevent fraud in industries like supply chain, financial services, legal, government, and healthcare due to these advantages.
- Worldwide adoption: Blockchain has been adopted worldwide and has the support of many investors in every industry.
- Automated operations: Operations are fully automated through software. Private companies need not run any operations.
- Open: Open source technology is used in the development of blockchain. The open-source community carries out its operations.
- Distributed architecture: Records are stored and maintained in all nodes of the network, which makes it distributed mode. If any node goes down, it can be retrieved from the nearby node.
- Flexible: Blockchain is programmable using basic programming concepts.
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