The widespread use of the Internet has made numerous transactions going on every moment across every corner of the globe, allowing users to buy and sell goods and services easily. These transactions usually require entities such as banks or payment institutions to verify the identities of both parties, which could lead to extra procedures, fees, time and risk. This is where blockchain could come in to replace the process of intermediation
What is blockchain?
A blockchain refers to a peer-to-peer shared, distributed digital ledger that facilitates the process of recording transactions and tracking tangible and intangible assets. Data are stored in the form of blocks in a blockchain where the blocks form a chain of record. Blockchains aid the transfer of information and property between users in a relatively efficient and secure way.
Blockchains may be classified into public blockchains and private blockchains.
For public blockchains, they are permissionless which means that anyone can participate in the network, create blocks, maintain the shared ledger and create transactions.
For private blockchains, pre-approval is required before one can participate in the network. Blockchain technologies refer to the rules or standards adopted with respect to the creation or maintenance of blockchains. Different blockchain technologies may involve different rules regarding participation, network, specifications, data storage as well as different consensus mechanisms.
Blockchain technologies may be utilised to support or enhance a variety of businesses and their operations.
Advantages of Blockchain technology
Blockchain helps prevent fraud and unauthorized activity by creating a record that cannot be altered and is encrypted end-to-end
All network participants with permission to access the same information at the same time. Blockchain ensures improved transparency into the details of the provenance.
The main advantage of saving information in a blockchain would be the certainty that the data does not change over time. There is an immutable shared ledger that no one can modify.
Traditional paper-based processes are time-consuming, prone to human error, and often requires third-party mediation. Blockchain-based solution can reduce processing time and cost as well.
Transactions can even be automated with “smart contracts,” which increase efficiency and speed the process even further
Source: IBM, as of May 2022
Types of Blockchains
- Anyone can participate in the network, create blocks, maintain the shared ledger and create transactions.
- Examples: Bitcoin, Ethereum, Monero, Dash, Litecoin, and Dogecoin, among others
- Pre-approval is required before one can participate in the network
- Examples: MONAX and Multichain
- Consortium blockchains are permissioned blockchains governed by a group of organizations, rather than one entity
- A popular set of consortium blockchain solutions for the financial services industry and beyond has been developed by the enterprise software firm R3.
Source: Samsung Asset Management (HK) Limited, as of Mar 2022
The Insight Partners, as of 11 Feb 2022
Foley & Lardner LLP, as of 19 Aug 2021
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