Updated: Nov 19, 2021
Table of Contents
Traditionally, non-blockchain trade intermediaries such as banks and other service-based platforms - Uber for transport or Airbnb for accommodation, for example - are paid on a commission basis. In other words, the more intermediaries there are, the heftier the total amount spent by the consumers of said services and goods.
Blockchain, marketed as a true technological revolution aiming at restructuring the old transaction format via peer-to-peer networking, brings about as much praise as it does criticism.
Practical applications of blockchain
The main advantage offered by blockchain is purely economic. The numerically decentralized peer-to-peer exchange platform has made the progressive removal of costly intermediaries during transactions possible.
Amongst the most notable innovations linked to this emerging technology are smart contracts. Following the launch of Ethereum, these encrypted protocols allow transacting parties to fulfill any contract terms and conditions automatically.
A host of other possibilities
To better illustrate both the reach of the technology and its various possible articulations, let us take apartment renting as an example. Say you are renting. Once the property lease expires, which would have been previously linked to an automated smart contract, the door locks itself up remotely.
The technology opens doors for many other sectors. Thanks to blockchain, and by dismissing brokers, tailoring offers, and automating contracts, insurance companies could better adjust the duration and extent of coverage, market their offers more effectively, and more precisely target clients.
Blockchain: « connecting devices and services »
By bypassing conventional commission-earning platforms, blockchain made way for an alternative approach to trade. Absorbed back in 2019 by blockchains.com, the Airbnb competitor Slock.it, along with the blockchain eBay emulator Open Bazaar, are two prime examples of platforms dedicated to putting contractual parties in touch at a substantially lower transactional cost.
Rent, sell or share anything you want
An interface with the likes of Slock.it could make it possible for users to sell or rent goods as varied as apartments, home appliances, and whatnot, through smart contracts co-signed directly on blockchain.
With the rise of ever-so-connected concepts, these new game-changing interfaces are a real menace to the survival of the long-established online platforms many people have grown accustomed to.
Wire transfers: « the fundamental transformation for a new digital world »
Thanks to its no-third-party nature, blockchain technology is slowly permeating standard wire transfer procedures as well. Mainly through the rise of Bitcoin, blockchain seems to be progressively taking over the banking sector.
Under strict peer-to-peer exchanges, money transfers no longer transit through excessive fee-charging intermediaries, as for any other sector where blockchain is available. If not free of charge, transfers now amount to a fraction of what they used to be.
A question naturally comes to mind: given that society is increasingly marching towards cashless institutions, can cryptocurrencies ever supersede paper money or even national currencies?
Kenya, pioneer of mobile payments
While in Africa countless countries and people alike are confronted with international transaction costs that are way beyond affordable, Kenya, back in 2013, first innovated with the creation of a Bitcoin mobile wallet called Kipochi. This initiative allowed a tremendous decrease in international wire transfer processing costs.
The limitations of the blockchain revolution
Despite the unlimited number of sectors likely to be impacted by the implementation of this world-changing technology, there exist limitations that, for the time being, hamper further use of blockchain in all layers of society.
For starters, blockchain remains a rather complex piece of modern technology. Proper understanding of its inner workings is frankly limited to tech-savvy entrepreneurs. This fact alone makes large-scale popularization and integration all the more challenging.
Furthermore, according to a study conducted back in 2019 regarding the effect of blockchain on the financial services sector, no less than 47% of all surveyed establishments stated to be either getting acquainted with the technology or simply barely interested in considering making use of it any time soon.
"Innovating with unlimited velocity" is undoubtedly a valuable asset in our day and age, but risking leaving people stranded is admittedly not a good indicator of success, however.
Bitcoin: falling through legal loopholes?
Another obstacle to the global adoption of blockchain revolves around one of its many applications: Bitcoin wire transfers. Cryptocurrencies as a whole tend to slip through the cracks concerning the legal framework in effect regulating other paper currencies.
While peer-to-peer transactions do promote the immediacy of exchanges, it is worth noting that Bitcoin has no legal-tender status, making it highly unstable. In other words, not only is there no central bank tasked with the responsibility of regulating its presence in the economy, but furthermore, as it has no nominal value, no trader is under obligation to take it.
All things considered, it seems that Bitcoin is more of a battleground conducive to speculation rather than a trustworthy safety net, and no groundbreaking technology could instill confidence until the currency is under control.
"Unveiling The Future"
While deep reservations can be had about blockchain, dismissing its potential to substitute the current traditional sectors is an admission of shortsightedness. Blockchain is a threat to how the system operates and failing to understand it is to fall behind.
To better respond, and rather than to dismiss it altogether, some banks, which have integrated the technology into their operating system, have already jumped on board.
Banks that have decided to actively help facilitate transactions could benefit from the technology, mainly by sharing information between different financial actors.
The world of tomorrow, in constant transformation, will require ongoing attention. We, at Funding Routes, provide expert consulting solutions for your business funding and foreign exchange needs. Do not hesitate to contact us!