How is Blockchain transforming digital payments?

How is Blockchain transforming digital payments?

How is Blockchain transforming digital payments? 

The use of digital payments like credit cards, online banking, or mobile money is constantly increasing. Every day, more and more businesses go cashless, but the problem is that there are still many global regions where trust in financial institutions is low. Blockchain technology might be able to help us solve that problem.

Understanding blockchain technology

Blockchain was initially developed as a ledger system for Bitcoin, a peer-to-peer digital currency that revolutionized our concept of digital value transfer by becoming the first example of a new form of electronic money. And it would be impossible to understand Bitcoin without going into the meaning and function of its underlying token – the bitcoin (or BTC). Today we propose to shed some light on the origins and implications of blockchain technology by asking our experts: How is Blockchain transforming digital payments?

At its most basic level, a blockchain is a record of transactions – like a traditional ledger that you might find at the local supermarket. The critical difference is that instead of having one central administrator (like a conventional bank ledger), a distributed network of computers manages the database collectively. A new ‘block’ or set of data is added to the ledger every few seconds. It can only be updated through an intensive consensus algorithm involving multiple users (“miners”) across the network. This way, the blockchain can guarantee an accurate record without compromising on security, you can refer to RemoteDBA.com for more. 

But what’s the value of this designation? 

It might make sense to consider blockchain technology as a breakthrough in information management comparable with the Internet itself for several reasons. Blockchain promises to bring vast amounts of new people, ideas, and businesses into the digital economy – even if they don’t have access to traditional banking services. It can also provide consumers with increased transparency over how their personal data is being handled, increasing trust between buyers and sellers online. And it allows you to store your identity securely on a decentralized system instead of at various institutions across online space – so no more problems with one hacked account containing all your data! What’s more, blockchain is also a cheap and convenient way to send digital currencies (like Bitcoin) across the globe in minutes.

But these are only some of blockchain’s promises. There are still more waiting to be discovered. This makes it extremely interesting for companies who want to prepare themselves for the future, especially those in the financial services industry who might use blockchain technology as part of their new payment infrastructure.     

So what does this mean for traditional banking institutions? 

If banks don’t begin exploring how they can apply these technologies, they risk becoming irrelevant as more and more people begin to trust blockchain-based technologies instead. 

The blockchain is a decentralized network architecture where all participants have access to the same ledger. In this type of system, there is no need for a central authority or trusted third party to confirm transactions, as blockchains are consensus-driven systems. It is precisely this absence of gatekeepers that makes the trustless nature of the technology so attractive to entrepreneurs, investors, and regulators alike. A distributed record that stores data in a decentralized fashion without being controlled by any single entity has many applications ranging from land registry to online identity management.

These new use cases have evolved into what we now call “distributed ledgers,” potentially changing how banks, governments, and other institutions record and verify ownership claims.  The most well-known application developed on blockchain technology is Bitcoin, a form of money that can be sent from user to user without going through a financial institution.

Blockchain Solutions 

Recently the application of blockchain technology has been extended to other digital assets besides cryptocurrencies. For instance, blockchain solutions have been created to certify and record educational diplomas, prove ownership of artistic works or track sustainable development goals. In this case, participants need not necessarily hold or use cryptocurrency to carry out a transaction on the blockchain platform. This means that we are moving away from simply viewing digital money as the primary application for blockchain technology. Instead, we are starting to explore how distributed ledgers can benefit outside fintech: for example, by creating new types of markets and allowing people who do not know each other to transact online confidently.

Conventional money is created by banks and monitored by central authorities such as the Federal Reserve, which prints new banknotes or mint coins. Digital currencies like Bitcoin can be sent from user to user without going through a financial institution using blockchain technology (the architecture underpinning the cryptocurrency). This means that we are moving away from simply viewing digital money as the primary application for blockchain technology. Instead, we are starting to explore how distributed ledgers can benefit outside fintech: for example, by creating new types of markets and allowing people who do not know each other to transact online confidently.  

This has led to an increasing number of tech companies looking at how they can apply this ingenious invention to various industries.  For example, the startup Ethereum has been adopted by several banks and corporations to record changes in supply chains or monitors the provenance of luxury goods. Another company, Everledger, uses blockchain to provide an indelible ledger for diamond certification and related transaction history. These are just two examples; other companies are exploring how this technology can be used in property rights registration, medical records management, or even proof of ownership for digital content.

Blockchain is becoming popular 

The recent interest in blockchain technology (both prevalence and rapidly accelerating evolution) was reflected at its latest annual conference, Blockchain Expo North America 2017, held on 28-29 April in Silicon Valley, where more than 1500 delegates attended. Delegates came from worldwide to participate in two days of networking, learning, and partnering. Attendees included a wide range of companies ranging from established banks and corporations in the financial services, manufacturing, oil, and gas industries interested in this new technology, along with many start-ups looking for ways to take advantage of blockchain’s potential.

In light of this increasing interest from both the private and public sectors, regulators must understand what distributed ledgers are about to make appropriate decisions on managing them. In particular, they mustn’t impair their adoption by imposing unnecessary burdens or squashing innovation because it does not fit into existing regulatory models.

 

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