Blockchain is one of the most important technologies to shape the world. One of the biggest industries that has been affected has been finance.
The market for blockchain technology in the financial sector is expected to reach over $3 billion by 2024. The question many experts are asking is: “what factors are driving the growth in blockchain in the financial industry?”
Blockchain Transforms Financial Industry
The world constantly changes and evolves. Whether it is due to the environment or human innovation, life progresses. It is up to mankind to adapt and make the best out of the circumstances we experience. Life has its ups and downs, victors and victims, and challenges and opportunities.
In business, we learn about how the business cycle accurately imitates life. There are good times and bad times. There are even okay times. It is those times in business and life that people must embrace and learn from. They must learn to harness their strength to persevere through change to experience the beauty of it.
With all that being said, we are emerging in a period of evolution in a world plagued by troubling times. A time that will fully embrace the advancement of technology in all areas of life. A time that world leaders and innovators refer to as the fourth industrial revolution. The change that seems most prevailing in terms of technological advancement is in business and finance to kickstart this revolution. In the year 2009, a man under the alias of Satoshi Nakamoto invented the first digital currency called bitcoin and initiated the use of blockchains.
Following a financial crisis back in 2008, the world’s financial system was still recovering and undergoing massive changes. The creator of bitcoin sought to create an alternative system outside of the centralized system of fiat currency that had proven to be unstable. A system that could potentially be immune to the troubles of a centralized system such as hackers, recessions, and fraud.
The possibilities of blockchain technology in the financial world seem endless but are necessary for security and reliability. While cryptocurrencies are the most popularized uses of blockchains, they can be used for just about anything. According to Investopedia.com, blockchains are databases that are irreversible and decentralized which makes it a great tool for business and finance in a new technological era. Since the development of bitcoin, numerous cryptocurrencies have been created, but none of them have peaked massive success like the original. Bitcoin has been very important for many businesses.
Nowadays, cryptocurrencies have turned into a unique asset class that has proven to be profitable and valuable for over a decade. Cryptocurrencies peaked in early 2018, specifically bitcoin reaching nearly twenty-thousand dollars, but then fell at three-thousand later that year, inevitably leading to the fall of other cryptocurrencies as reported by investopedia.com. Also, it states, in 2019 and 2020 cryptocurrencies have been on the road to recovery potentially entering a bull market.
This is intriguing as the world faces uncertainty from Covid-19, but crypto is not the only investment bringing massive returns to investors. With the stock market also hitting record highs, decentralized and centralized investments seem to be doing well during the global pandemic. Although these markets are showing signs of entering a bull market, with the global fall of fiat currency due to massive stimulus I do not think it will last long in centralized markets. History shows that all monetary systems backed by fiat currency fail because it holds no intrinsic value. The value and trust in the dollar and other fiat currencies are alleviating daily and have reached their dead-end, at least in the tangible sense. I believe the only way to preserve the lasting value in fiat currency, which is only based on society’s social agreement of value, is to digitize it. Alongside traditional investments like stocks, bonds, ETFs, mutual funds, and real estate, crypto arbitrage and other crypto serves as insurance much like gold and silver that are not backed by a failing fiat currency or centralized system. Beyond crypto as an alternative investment and means of payment, the use of blockchain technology is beginning to be embraced by companies financially and systematically. Entering into a new decade, the world can expect to transform into a technology-driven society in nearly every facade of life. The most prominent advancements being business and finance. Business is essential to human life. It is the means of where desires are met and problems are solved.
In a capitalist society, wealth is created and fueled by the effectiveness and satisfaction of business. In today’s world, business consists of human labor, human systems, and human errors. While businesses are much more advanced than at any other time in history, the use of technology in business has only scratched the surface. The use of artificial intelligence is heavily emphasized in business these days with the use of robots for more efficiency. Companies are now looking to replace humans with computers and robots to ensure maximum productivity and time-efficiency. In addition to labor, companies are looking to develop self-sufficient systems to produce high-quality products and services constantly. That is where blockchain technology can inherently improve the system of business and result in faster, easier, and sustainable transactions. Not to mention, elevated customer satisfaction. As mentioned above, blockchains are essentially databases, but not your typical database. Blockchains are protected by complex algorithms, resistant to alterations, and have no central authority. With traditional systems and databases, businesses face potential issues with fraud, regulation, and effective bookkeeping. The use of blockchain technology can combat those prevalent problems in business.
Blockchain is still relatively new in the business and financial world, but some companies have implemented this advanced technology into their strategies and have thrived since. Facebook is the most popular social media platform in the world. There are more than a billion users worldwide. In May of 2019 Facebook announced that they would create a cryptocurrency named Libra, now Deim. With this virtual currency, Facebook intends to give billions of adults’ access to digital cash that does not require a traditional banking account. It will enable users to send money online instantly and purchase things. It will be revolutionary. Many companies like Amazon, Walmart, and Ford use blockchain technology to track supply chains which have increased trust and reduced risks with consumers and investors. When an error arises, it is easy to locate and fix issues due to the integration of blockchain.
Social media and supply chain companies are not the only businesses implementing blockchain technology, business sectors such as bank and finance, healthcare, insurance, energy, real estate, trade, and travel also find it useful. Businesses have been block-chaining agreements as well, formally referred to as smart contacts, to secure terms and agreements. Smart contracts use blockchain technology to enforce and uphold agreements that are vital in business. The use of blockchain technology has only been prevalent in recent years, but this is only the beginning. In conjunction with cryptocurrencies and blockchain systems, business and finance are on the verge of entering into the fourth industrial revolution where digital transactions and systems dominate the world to create a more effective and trustworthy society. With the increasing demand of globalization, trust, ease, and efficiency will be prioritized over traditional means of payment and operations which can only be fulfilled technologically. The world is currently undergoing massive change. With a failing monetary system backed by fiat currency and inefficiencies in centralized systems, the rise of cryptocurrency and blockchain as a whole could initiate the integration of technology with life as we know it. Throughout life, there will be massive changes. Some good, some bad, and others so-so, but ultimately change is inevitable. In the year 2020, we have seen many unprecedented events, but during these uncertain times, we are emerging on technological advancement in every sector of life, especially business and finance.