WHY IS BLOCKCHAIN SO REVOLUTIONARY?
Overview of Blockchain
The original and long-reigning leader of decentralized cryptocurrencies, known as Bitcoin, was the first cryptocurrency to grab the world’s attention. Back in April 2011, it was trading at a mere $1, and fast forward 10 years later, it hit highs of $60,000. Now doesn’t that seem like next-level innovation to you? The rise and rise of cryptos didn’t just stop at Bitcoin, which begs the question: What are cryptocurrencies and just how game-changing can they be?
In short, cryptocurrencies are a virtual medium of exchange, which basically means it’s a digitized version of your local fiat money.
Cryptos are popularly referred to as coins and have features that include:
- Transparency in the way transactions are verified;
- Transaction data are recorded permanently and cannot be messed around with;
- No costly and time-consuming intermediaries like banks to validate financial transactions.
The reason why cryptocurrencies are fully digitized and have features that are so technologically advanced is because of the blockchain. Basically, without the blockchain crypto as we know it wouldn’t exist!
It’s important to recognize that the blockchain is a global digital database with very high security and super-fast transaction times. After all, it’s the blockchain tech that allows crypto transactions to be verified by computerized nodes and recorded on the public ledger of the blockchain.
Blockchain continues to revolutionize the way we do business. This makes it a strong influence on the way finance is evolving. But don’t forget, finance is only the beginning; this technology has the capability to adapt to all sorts of industries globally and in Bangladesh. Just take a look at the blockchain’s most recent use-case; helping governments to track, trace, and build a record of the COVID-19 pandemic spread in populations!
Now that this quick rundown on blockchain and crypto is complete, let’s have a look at the pros and cons of blockchain. What makes it extra special and the kind of improvements it may need going forward.
Blockchain v Banks
The world has always done things a certain way. For the longest time, the global financial status-quo was this: anyone who wanted to save money, spend money, buy a house, take out a business loan, build wealth, and much, much more had a certain institution to go through.
That institution is known as a bank; no surprise here. No matter where you are, be it in Bangladesh or anywhere else in the world, banks are one of the places to go for anything financial. But now, the decentralized blockchain is a powerful competitor and possibly, powerful enough to change the need for banks as a key point of contact.
Blockchain and banks are very different. Because of these differences, it’s important to show you a side-by-side comparison, and to do this, Bitcoin’s (BTC) blockchain will be used as an example as it’s a crypto that deals purely with transacting and acts as a store of value, much like banks and fiat money.
These 4 aspects are the fundamental ways in which banks and blockchain differ from each other.
1. Transaction Fees
Banks: Banks usually accept many payment methods. Services like debit, credit, cheques, wire transfers all charge transaction fees that can range between $1-$50 depending on the location you’re transacting in.
You are charged these fees per transaction and are split between the bank and payment processors or other similar middlemen that help process your transaction.
Blockchain: The transaction fees you pay using the blockchain can tell a much different story than that of banks. On average, 35% of BTC transactions are above $20; but the cost of doing these transactions can go as low as $1 when the BTC blockchain is not over-filled with transactions.
But because of the decentralized nature of blockchain, there are actually some ways – in contrast to banks – in which you can cut transaction fees! You can either wait for a non-peak time to transact or use the Lightning Network, which helps ease BTC traffic and lower fees to only a few cents! Not bad at all.
2. Transaction Speed
Banks: Usually, big money institutions like banks take between 1-3 working days to clear transactions and even longer for large amounts of money or when you’re sending money abroad. This is because both larger amounts and international transfers need to undergo extra verifications before being released.
Also, public holidays and low manpower can slow down the number of transactions that are approved.
Blockchain: Transaction speed is a completely different ballgame on the blockchain because BTC transactions take at max a little over 1hour but can actually even be completed within 15 minutes! This is possible because of the blockchain’s advanced tech; and it helps that the blockchain doesn’t rely on any workforce like bank employees to verify and process transactions.
3. Ease of Transfers
Banks: Banks are not exactly known to have super-efficient ways of registering customers. What’s the minimum you’ll need for digital money transfers? For starters, a government-issued personal identification like a national ID or passport and a mobile phone/laptop is needed to set up any type of bank account and then conduct transfers.
Blockchain: All you need to have for BTC transfers are a laptop/mobile phone and internet connection at the bare minimum if you’re using a crypto-to-crypto
exchange! There’s definitely a stark difference between what you need for banks and blockchain here and, more importantly, the blockchain gives users the choice to opt for a more private and quick money transfer process by using a crypto-to-crypto exchange. After all, the blockchain prioritizes efficiency.
Banks: Individual banks have their own servers to secure client information to keep it safe from outsiders. It’s vital that these servers are of quality and aren’t easily hacked. But, hacking bank servers is not impossible and is in fact, prone to being targeted. Generally, bank customers are also unaware of the technical level of security banks have and they don’t necessarily control the level of security and privacy of their transactions, unlike the blockchain.
Blockchain: When it comes to privacy, it is impossible to know who has ownership of BTC if it was purchased anonymously, so that means you have a choice to either transact anonymously or not. This is a level of privacy banks have never provided. Having said that, it’s important to bear in mind that all BTC transactions are traceable in a way that makes them extremely difficult to be hacked. BTC bought using a crypto exchange account can also be directly tied to the holder of the account making ownership obvious.
Summing Up Why Blockchain Is So Revolutionary
Now that you’ve reached the end of this article, you’ll be able to understand the revolutionary features blockchain brings to its users around the world, like super high accuracy in data inputs and security when dealing with crypto transactions.
By now, you’ll also be able to better grasp the key differences between using a bank and using blockchain to transact with cryptos like Bitcoin. As you can see, some key differences include a faster transaction time for blockchain and a more secured network compared to traditional banks. This also goes to show precisely why blockchain is leading the change from traditional financial institutions like banks to a more decentralized approach to managing your finance.
To keep up with all things cryptocurrency and the blockchain, just stay tuned on Fasset blog for more.
The writer is the Head of Product Design at Fasset