If you’ve ever had the misfortune to experience the aftermath of a natural disaster, then you know the true value of a dollar. It doesn’t matter what happened where, when people need food and water above everything else a dollar is useless because you can’t eat it. There is security in knowing that a physical item can be used exactly as you intend it, but just imagine trying figure out how many groceries you could trade the insurance policy you sold that week and you can see why we need our modern currency. What if there was a currency that had the security of physical goods and services with all the convenience and adaptability of digital money? It would be a game changer, right? Good news, it already exists.
The main problem with currency is that it represents value instead of being valuable. This problem is being exacerbated by the fact that cash is increasingly being replaced by digital funds used through debit cards, credit cards, and online bank accounts, making the possibility to cheat or be cheated out of money increase dramatically.
Although it might seem counterintuitive the best way to restore value and security to digital funds is through more technology. You’ve probably heard a lot about Blockchain and cryptocurrencies like Bitcoin, but chances are you haven’t heard of the doors it opens for the finance industry.
The problem with using digital transactions is that they open up thousands of opportunities for cybercriminals to steal or disrupt transactions, making it harder to trust the value of digital funds. The main reason is that there is always a chance that one person isn’t who they say they are and aren’t selling what they say they are. Blockchain can put an end to that, and in fact, it already is.
Blockchain works by creating a ledger that keeps track of all transactions and changes to data. Every time a change is made or a transaction is complete, the data is updated in the ledger and the transaction history is added to a chain of other transactions, forming a block of data that cannot be altered. That ledger is stored between all users so that no one person can control the database or corrupt it and each transaction is approved by whether it matches with the records of the databases stored on every user’s computer.
Got it? If you don’t understand what any of that meant, the most important thing you need to know is that Blockchain makes it impossible to misrepresent your identity or the identity of what you’re giving in a transaction. You can’t say you’re a user with funds or send funds that don’t exist, and by restoring the ability to trust in the identity of a seller and their funds, Blockchain has the potential to change the financial world.
For example, right now it might take a bank a few minutes to complete an online international transaction, but days to properly verify all the information needed to safely make the transaction. If there is no doubting another party’s identity and their ability to complete the agreed upon transaction, the time it takes to verify a transaction can match the time it takes to make that transaction, saving banks and other financial institutions time and resources.
What does that look like?
Every year businesses send between $150 and 300 trillion in payments across international borders. They pay fees around 10% and have typically wait 2-5 days for the transaction to be completed to ensure that it is done safely and everyone gets what they agreed upon. Blockchain supported banks and financial institutions could cut down those costs and time by removing the need for someone to authenticate the transactions, and when you’re dealing with that much money even 1% less is a massive cut.
The benefits of Blockchain don’t just apply to businesses and banks though.
Since Bitcoin is supported by Blockchain, users can trade it themselves with full confidence. Doing so otherwise would require a bank or other financial institution, but the security of Blockchain completely cuts out the middleman. If you had a trading partner in Malaysia, you could trade funds quickly and securely on your own through Bitcoin. While not every cryptocurrency is supported by Blockchain, the ability they give individuals has the potential to completely change the way we do business.
Cryptocurrency and Blockchain won’t help you in the aftermath of a hurricane, but if you’re in that situation then you probably won’t care anyway. However, they will completely change the way we spend and send money though, and if you want to be ahead of the curve you need to take the time to research them so you can benefit as soon as possible.