What is blockchain?
Blockchain is a new form of data storage and transmission. It’s essentially the architecture underpinning digital currencies. A distributed database without a centralised server, blockchain provides a transparent form of recording transactions, without the need for an intermediary.
The most promising use of Blockchain is for automation of highly complex or manual financial products.
Blockchain enables numerous use cases and could replace centralised banking platforms and systems of authority. It is constantly growing as completed blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. It doesn’t use names or bank accounts. Instead, it uses bitcoin addresses, which are long strings of random characters.
New data blocks are added to a shared electronic ledger by members of a peer-to-peer network.
What you need to consider about blockchain and its risks:
While the use of blockchain can aid in the preservation of record, evidence and institutional memory, privacy is also a concern.
Regulatory risk management must also be considered. There may be some changes introduced by governments, which may require regulations to be set in place regarding the use of blockchain.
The technology has the potential to disrupt multiple industries and make processes more democratic. For some financial industry stakeholders, blockchain technology may threaten the overall operations, thus causing tangible disruption in the industry.
Using the technology also comes with the risk of large energy consumption. For many people, using blockchain tech to mine for bitcoin for instance, comes with large energy consumption needs.
When considering blockchain and its risks, it’s important to consider that there are also still cyber security concerns that need to be addressed. While the introduction of blockchain technology is largely a welcome addition to the tech world, it may also alert more people to cyber security concerns. Users of the technology need to be vigilant when using wallets and exchange sites.
High initial costs associated with using the technology could be a deterrent for some people.
