Consequences Of The Blockchain Technology And Their Impact On The Economy
Almost everywhere you look, people are talking about blockchain technology. There have been numerous big advances and changes in financial technology like blockchain since the beginning of the 21st century. In today's global economy, understanding what it means and what it stands for is critical. The latest innovations in distributed transaction and ledger systems rely heavily on blockchain and distributed database technology.
New open-source possibilities, particularly in the form of new digital platforms and services, are being created as a result of these technologies (Lindman vd., 2017). An open source program is one that has its source code made accessible to the public; this means that any program that has its source code made public is considered open source. Some of the world's best and brightest developers flock to new technologies, notably in the IT business, which attracts many freelancers.
Five major roadblocks to widespread adoption of blockchain technology have been found from an examination of the preceding three possible uses. Let's tackle about the different consequences of blockchain technology.
The only aim of recording every transaction with every node in the network is to eliminate the middleman. Adding this redundancy while staying an intermediary makes no sense for any intermediary, whether it financial or legal. For a bank to desire to share a record of all of its transactions with other banks, or to spend large resources on energy and computing capacity to record other financial institutions' transactions with one another, there is no compelling justification. Costs will rise as a result of this redundancy, which has no discernible advantage.
As the number of nodes in a network grows, the number of transactions in the shared ledger will expand exponentially. Members of a dispersed network will have a far greater storage and computational cost than members of a centralized network of the same size.
This is why, as Bitcoin developers look for scaling solutions, they are moving away from the pure decentralized blockchain model in favor of having payments cleared on second layers, such as the Lightning Network, or off the blockchain with intermediaries. This is because blockchains will always face this scaling barrier. Scalability and decentralization are clearly mutually incompatible concepts. It would be more expensive and result in fewer nodes if the blocks in a blockchain were expanded bigger to handle higher transaction volumes.
When it comes to decentralized ledgers that have their own currency, such as Bitcoin, governments have no control over their functioning. Even the head of the Federal Reserve has said this: Bitcoin cannot be regulated by the Fed at all. Bitcoin releases a new block about every 10 minutes, including just the legitimate transactions that have occurred in the previous ten minutes.
There is nothing that authorities can do to reverse the consensus of the network's processing power, therefore transactions will either clear or not clear. Regulated businesses such as law and banking would face difficulties if blockchain technology is used in these areas with currencies other than Bitcoin. Regulations were created for a system that is vastly different from blockchain, and as a result, they cannot be readily adapted to the extreme transparency of blockchain operation. Because it operates online across nations with varying regulatory frameworks, it is impossible to confirm that all regulations are being followed.
By appealing to the intermediary in the event of a human or software mistake, payment, contract, or database operations may be quickly corrected. Things get significantly more difficult with a blockchain. In order to reverse any transactions on a blockchain, the network must have at least 51 percent of its nodes agree to roll back the network to an altered blockchain and hope that the remaining 49 percent will not wish to form their own network and join the new one.
To undo an incorrect transaction, the bigger the network becomes. As a matter of fact, blockchain technology is designed to duplicate cash transactions online, which includes the irreversibility of cash transactions as well as none of the advantages of custodial intermediation in redress or revision. Using a blockchain framework would simply make these faults much more expensive to repair since they are the product of both human and software error.
On the basis of transaction verification and proof-of-work, the security of a blockchain database is completely dependent. In its simplest form, the concept of blockchain technology may be summarized as the transformation of electrical energy into records of ownership and transactions that can be independently verified. These verifiers must be rewarded for their time and effort by a currency associated with the payment system, so that their motivation aligns with that of the network.
If the processing power is paid for in some other currency, then the blockchain is effectively a private record kept by the person who paid for the processing power to be created. By working on a shared ledger, which provides several security vulnerabilities, mining is compromised.
Even if it utilizes a pricey and complicated process of clearing to eliminate middlemen and ensure immutability, the blockchain that allows for tampering is a fruitless exercise in technical sophistry. Even if legal and regulatory bodies are involved, current best practices in these industries use reversible and quicker and cheaper approaches.