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Why Does Blockchain Matter?
Summary: For many, blockchain is a technology that could revolutionize the global financial system and spearhead the next generation of the internet. For others, it is merely the technology behind things like Bitcoin, Dogecoin, and NFTs. Let’s look at why blockchain matters and the reasons for so much excitement around the technology. There are several ways ...
For many, blockchain is a technology that could revolutionize the global financial system and spearhead the next generation of the internet. For others, it is merely the technology behind things like Bitcoin, Dogecoin, and NFTs. Let’s look at why blockchain matters and the reasons for so much excitement around the technology.
There are several ways in which blockchain technology could be incredibly useful to billions of people. First, let’s focus on a section of the population that needs the technology the most: the unbanked. The World Bank estimates that 1.7 billion people worldwide cannot access a bank account. This is for numerous reasons but primarily because banks’ primary motive is to create a profit. Banks have little to no incentive to serve people living in unstable, poor, or remote locations. These individuals are entirely unable to access any financial tools and are thus unable to create wealth or save money in a safe place. Another issue is the lack of documentation or identification in some developing countries, which prohibits people from being able to open a bank account. Fortunately, through the power of satellite internet, the entire world can get a reliable internet connection. Blockchain technology provides a way to store value on the internet in a decentralized and trustless manner. Without blockchain, online digital ownership would require some sort of centralized entity, like a bank, to act as a trusted custodian, and there is also the risk of a hack or asset freeze. Thanks to blockchain, the unbanked can access the global financial system and the plethora of wealth-creation tools that can help them to break the cycle of poverty and preserve money.
By its most basic definition, a blockchain is a distributed ledger technology. It allows entities to interact online and engage in transactions based purely in logic. Thus, blockchain removes the need for a middleman, escrow, or custodian. In any industry requiring a layer of trust, blockchain can replace this layer and be significantly cheaper and more efficient. For example, buyers and sellers typically use an escrow company to transfer money and property deeds in the real estate market. These companies serve an invaluable role as they ensure that neither party can scam the other as inspections and agreements are finalized. Typically, these companies charge a few percentage points for this service, which can add up to a significant number when considering the hundreds of thousands of dollars a home can cost. If a real estate sale was settled on the blockchain, a smart contract could replace an escrow company and save both the buyer and seller time and money. This removal of trust layers can expand to many industries, such as finance, supply chains, and even identity verification while being more fraud-resistant. The main barrier to adopting these use cases is regulation and a lack of knowledge from the general public. Still, it will likely only be a matter of time before industries adopt blockchain as a cost-saving and productivity-improving mechanism.
Finally, blockchain matters because it is a wholly neutral and credible medium of digital expression. Since nobody has central control over public blockchains like Bitcoin and Ethereum, there is no risk of transactions being wrongfully censored or denied. Quite literally, anyone can send value to anyone else, regardless of their location in the world. Blockchain allows an asset with the flexibility and fungibility of cash to be sent over the internet without relying on a centralized entity like PayPal. This gives everyone more protection against a future dystopia, including greater government control and regulation of the internet and what we can see and do online.
Blockchain is a powerful tool to make actual digital ownership possible for the first time. It promises to bank the unbanked, remove middlemen, and provide a medium for digital value transfer. As the technology continues to be adopted, its use cases and value will increase thanks to network effects, and it may one day be the backbone of the internet.
By Lincoln Murr
