To blockchain or not to blockchain — that is the question!
Technological innovations were designed to enable and make our lives easier and indeed We – The consumers are in a much better state than we were,lets say, three decades ago.
But what about the businesses, which are a part of our daily lives. What about the supermarkets that we buy groceries from, the local courier services that deliver products, the logistic and shipping companies that carry billions of dollars of goods everyday and many more businesses that are integrated in our lives to an extent that we do not even realize it.
Instant Communication Not EQUAL TO Efficiency
These businesses because of the advent of internet and smartphones have streamlined their communication. We used to earlier send letters and receive responses over 15-20 day intervals but today the internet has made communication instant for the parties involved in a trade deal. But if we can somehow remove this instant communication layer from these traditional businesses we will be surprised to see that they are still as inefficient as they were probably a century ago.
When everybody and every tech in the world was trying to build technology for our intermediaries – FIs, brokers and middle men in trade deals there was one guy who believed that no intermediary should be involved in asset exchange and he invented blockchian, which is primarily a decentralized database with great and magical cryptography.
That Sounds Great But How Does Blockchain Work :
Well for a layman it works like any other database. You can write to it and you can read from it but with a small exception. Once anything is written on to this database it can not be deleted or modified.So the question in your mind will be – What if there is an erroneous entry in the database and now I cannot change it?
The answer to that is, yes you cannot change it but you can always add a new updated record signaling the problem with the old entry. In a way making the latest record the usable one.
Moreover, any change is visible to all the nodes(computers) that have the copy of this database and has to be accepted by a majority of these nodes for the change to be considered the truth.
Why Should I Use Blockchain : I already have databases for my business :
Perfectly true, you have multiple databases that you control and similarly the parties that you are dealing with have multiple isolated databases that they control. All this seems to work till the point we have a failure of some kind.
Failures can broadly be divided into the following categories :
- Failure due to lack of transparency: Any financial and even non financial transaction takes a significant amount of time for the final reconciliation, settlement and closure primarily because all the parties have isolated databases and there is no real time or near real time status of the condition and state of the transaction.
- Failure due to lack of security: From online video streaming sites to healthcare companies to financial institutions have all seen some or the other flavor of hack, which results in a collective loss of billions of dollars annually. Most of these hacks are a direct consequence of weak permission controls and high trust assumptions in centralized systems
- Failure due to trust in third parties: The parties involved in a trade deal do not trust each other that is why they bring in brokers and bankers to make the arrangements and this is not only time consuming but also not cost effective
All these and many more can easily be addressed by blockchain as any and every transaction on the blockchain is visible by all the parties and in case of a private/permissioned blockchain by a few parties that signed up for it.
Remember, we talked about great cryptography! With great cryptography comes great security and that is what blockchain provides its users. Unlike traditional distributed databases that are controlled by an organisation, The nodes in a BlockChain are not owned or controlled by a single entity and make very weak trust assumptions amongst each other and constantly and automatically check each others work. Moreover, there is no single point of failure as the copy of the data is maintained by multiple parties
And the best part is, that blockchain does not require any intermediary and removes redundancy from existing systems.