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What are the Benefits of Blockchain?

Blockchain technology, over more than a decade of its existence has traveled from being a disruptive force to a foundational beam setting up the infrastructures in various industries and sectors. Any process that has the potential to be decentralized can benefit from using blockchain. 

Blockchain refers to a distributed digital ledger over a network of computers called nodes. It can also be called a peer-to-peer network where network participants engage directly without the involvement of a third party or a central authority. Cryptocurrencies like Bitcoin, Litecoin, Bitcoin Cash, Ripple, etc., have proved that blockchain advantages can be best utilized in faster payment processing,  including other multiple use cases. Let’s discuss. 

Blockchain in Payment Systems

Blockchain has established itself as a very useful technology in today’s time. It can facilitate faster payment processing since it is a new and improved way to build databases. It is also a very secure network where the information is genuine, and one cannot enter a blockchain or retrieve its data without the consent of other users. This is possible due to how a blockchain network is laid out in the form of “layers.” The database itself is not stored on one server but in the form of multiple copies of itself on the devices of network participants, called blockchain nodes

Now that we have some background about blockchain, let’s answer the question – what are the benefits of blockchain?

Benefits of Blockchain

A decentralized and immutable ledger that facilitates the process of recording transactions and tracking assets – the very structure of blockchain makes it incredibly useful in the modern-day world. One of the most important benefits of blockchain is its role in payment processing. Allow us to break down the five primary benefits of blockchain:

1. Fewer Intermediaries

Blockchain networks can confirm a transaction’s integrity, which allows the process to become smoother since it does not require further intermediaries. Buyers and sellers can make a direct transfer of funds via a peer-to-peer payment system laid out with the blockchain as the infrastructural layer. Deploying blockchain in payments processing would save the transaction data on a secure server or, should we say, multiple servers ( or nodes) in the blockchain network. While traditional transfer methods with intermediaries could be meddled with, blockchain technology allows the data to be accurate and authentic. 

2. Greater Safety

You must have heard that blockchain technology offers greater safety regarding payment systems. Here is why:

  • The quicker transfer through blockchain provides lesser time for hackers to intervene with payments
  • Every entry in the blockchain’s journal after verification becomes an irrefutable part of the history of the ledger, and the data is almost impossible for a hacker to meddle with
  • Blockchain networks use two security keys: an open (public) key available to each user and a private key used exclusively by the parties involved in the transaction. The private key is required to initialize transactions and can only be used once, so even if a hacker steals it, they cannot make any further transactions.

3. High Speed

While the slower Bitcoin blockchain performs transactions across borders in a matter of a few minutes, a faster Lightning Network transaction can be completed in a few thousandths of a second. Blockchain’s faster payment processing completely puts traditional transfer systems out of the race, which takes up to 5 days completion time for international transactions.

4. Low Cost

Since blockchain-based payment systems require fewer intermediaries, commission costs get deducted from the transaction fees. Generally, the transition to the blockchain reduces transaction costs to 0.001-0.1 of their original size. Using cryptocurrencies for money transfers can make the price of a transaction even lower. While the conversion costs of cryptocurrencies to fiat currency would be added, the size of these costs is bound to decrease as the market for crypto grows larger.

5. Anonymity

Blockchain networks are, for the most part, open source software that leaves no room for “back doors” or personal or business data recording and transmission functions. Moreover, no third parties verify or manage the transactions, allowing the blockchain ecosystem to be completely anonymous. This makes up the list of blockchain advantages as a payment processor.

How Industries Benefit From Blockchain

How Industries Benefit From Blockchain
Source: Get Dor | Various blockchain advantages for industries

Blockchain came about as a supporting mechanism for Bitcoin back in 2009, but it has since taken on a life of its own. Let’s go through the various ways other industries reap the benefits of blockchain.

1. Supply Chains and Food Chain

Blockchain networks help provide end-to-end visibility, streamline the process, and resolve issues faster, making supply chains stronger and facilitating better business relationships. Blockchain usage in food chains can also help deal with issues in safety and freshness quicker to reduce waste. Food can be traced back to its source efficiently with blockchain technology.

2. Banking and Financial Industry

In light of our discussion about blockchain as a payment method above, it is clear that blockchain technology can help streamline financial processes. By removing friction and delays, blockchain helps increase operational efficiency in financial processes such as global trade, clearing, settlement, consumer banking, etc. 

3. Healthcare 

According to data by the US government, data breaches within healthcare spiked in 2022. Integrating blockchain technology could improve patient data security and help streamline the process by making sharing records across healthcare providers easier. Due to the advantages of blockchain, the control over access would belong to the patient, making it safer.

4. Pharmaceutical 

The pharmaceutical industry can also enjoy the benefits of blockchain. As with supply chains, blockchains can easily track and record pharmaceutical products through the production and distribution stages. This would mean that products could be traced back to pharmacies or retailers, preventing the threat of counterfeiting.

5. Government 

It comes as no surprise that bureaucratic processes worldwide are riddled with problems. Blockchain can help governments make processes for citizens easier by enabling the secure sharing of information. Using the immutable audit trail in blockchain can aid regulatory compliance, contract management, citizen services, and much more.

6. Insurance 

Insurance companies can also reap the benefits of blockchain technology. They can use smart contracts to automate manual processes such as underwriting and claims settlement, which would be time-confusing and costly otherwise. Moreover, as stated earlier, blockchain’s quicker data exchanges also prevent risk, attacks, and fraud at the hands of hackers. 

Conclusion

Hopefully, this article helped answer your question of ‘what are the benefits of blockchain?’. Blockchain is, without a doubt, one of the most exciting technologies in the modern day. It has the potential to revolutionize many industries, and its uses are only bound to grow as developers worldwide continue to experiment and innovate.

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