Blockchain technology is referred to as a decentralised ledger detailing digital transactions that are independent of any group or government’s influence. This restricts anyone to change the rules and database structure without he consensus of people using it. The transactions are processed similarly to making applications in a typical ledger that is transactions are grouped in blocks similar to making entries on new pages in a physical ledger. These blocks are linked with each other to form chains that are difficult to detach. This technology is different from traditional databases for it immutability. Any tampering is rejected by the network and is immediately spotted by other parties associated with the ledger. This technology first found its use in crypto currency named Bitcoin. With the help of this technology, it became possible to realize a global economy that was solely based on the immutable, decentralized and independent ledger that can easily be accessed via an internet connection and a computing device. Since its inception, the technology has attracted various governments and industries. However, the idea is highly transparent and apolitical which has given rise to many controversies.
The technology has been adopted by various industries and investors worldwide. Companies have adopted this technology for providing proof of performance and for ascertaining digital world. This technology is mainly used because it is impossible to reverse the transaction made in the ledger. The digital records are virtually immutable and permanent. Its application areas are discussed below.
- Proof of Provenance and Supply Chain Communication: Blockchain technology is used to track diamonds, real estate art and all such assets. Organizations proactively provide auditable and permanent records to their stakeholders to review the state of product at every value-added step.
- Notary: Blockchain technology can be easily and inexpensively used for notary services. Smartphones can be notarized after creation by adding a small amount of data to the transaction records. This is an effective way of telling stakeholders that some event took place in the particular instance of time. Notarized documentation proves to be an unaltered version.
- Smart Contracts: Blockchain technology can be used in digital contracts for making seamless and self-executable transactions. This is a step for corporate social responsibility. Smart contracts along with blockchain technology can enable self-regulation efforts by industry consortia. This involves connecting smart contracts with GPS data for import and export business.
- Fair Trade Music: This technology is also used in the Music industry for licensing and paying musicians for their songs. With the application of this technology, there is no need to manage published products with the help of lawyers and bookkeepers.
- Other applications: Blockchain is used in Ethereum programming language for accessing network resources. This language is further used in Augur, a superior prediction market that allows participants to pay their shares for some event. Then it is used for a boardroom for corporate governance over organizational It is also used as middle man for Slock it for renting physical assets of all sorts.
Use in Banking and Finance Industry
Blockchain technology has disrupted the existing operations in the finance and banking industry. It has leveraged effective fraud reduction for financial intermediaries like money transfer services and stock exchanges. This is since the technology does not relies on any central databases that are prone to cyber attacks. It has enhanced the Know Your Customer (KYC) schemes for preventing terrorist activities and money laundering by effectively verifying and identifying their customers. Blockchain enables independent verification that can be used by many organizations for a variety of purposes at a time without having to go through the entire verification procedures time and again. This reduces administrative costs in compliance departments. This technology has also given birth to smart contracts as discussed above by adding digital code to contracts that can be executed for financial transactions. This brings automation in the transaction and financial system. The technology has also revolutionized the payment procedures as it has removed all the intermediaries in the payment processing system and has enabled higher security at the same time. It has also enhanced the trading platforms by reducing operational errors and frauds.
Blockchain Technology for Expanding E-commerce Business
Adopting Blockchain technology in e-commerce can enable organizations to expand their business. In the existing system, the costs are associated with a lot of intermediaries in the payment processing system. But if the technology were adopted, these intermediaries would be eliminated, and this would result in significant cost reduction. Credit card fees will also disappear by cutting the middleman who wants some cut for their services. This makes or breaks for competitors who can benefit by eliminating the tax system from their business. This will allow people in business to invest the savings in more profitable deals thus resulting in a significant expansion of business. Blockchain technology will provide a new class of services to these organizations along with smart contract technologies for focusing businesses on commerce and for protecting themselves from fraud. The technology can also assist businesses to dominate online product distribution marketplaces and thus achieve economic growth. Companies can allow users to purchase freelanced services and work via a centralized marketplace. Companies can revolutionize the way in which they conduct business via an online marketplace. With technology’s decentralized platform, peer to peer interactions can easily be fostered. These interactions provide transparent history and user feedback.
Pros and Cons of Ecommerce
Perks for Online Merchants
Transactional Fees are lowered with the application of technology for e-commerce. This is because many hidden charges are eliminated as merchants will not have to pay transaction fees and chunks of their profits. Merchants can have a significant share of annual revenue.
This technology being unpopular in some developing nations cannot be utilized by regional merchants. Moreover, many are unsure of how the technology can work to deliver benefits.
The technology is also safe and secure as it prevents credit card frauds by safeguarding transactions that take place from any part of the world. It also protects against identity theft as the technology does not require an individual to reveal their personal information for the transaction.
The values involved with the crypto currency do not remain stable. The technology is quite volatile as prices may shoot up and down over time.
The technology does not require any Chargebacks saving significant amount of industry efforts of merchants. This is because Blockchain transactions are full and final.
The technology is considered apolitical by many governments, and they criticize the transparency in the transactions and the payment processing system. This impacts the success and reaches of technology in many application areas.
Ethical, Social and Legal Considerations
The use of Blockchain technology makes organizations lead to technological fetishism that is they rely on technology for solving any problems. But this is a wrong perspective since major challenges faced by organizations are not always technological but may be civil. Companies may then be involved in false advertising. Then it may not be wise to draft smart contracts without the oversight of a legal attorney.
A high number of individuals have been attracted to the technology, and they have shunned traditional payment systems such as ATMs, debit cards and digital wallets. It has benefitted people in disadvantaged economic circumstances by allowing microloans and micropayments. Thus, a new advantage to the world economy has been unravelled. The technology has found a genuine way around corrupted systems through the use of smart contracts. The technology has also addressed many present day issues such as the Internet of Things (IoT).
The legal challenges of Blockchain technology revolve around the smart contract structures, irrevocable and unchangeable transactions and precious data protection. Implications arise when organizations are unsure whether smart contracts fulfil all the requirements of a traditional contract or not. Then the translation of legal terms into programming languages is also quite complicated to understand. To validate these contracts, clear consensus will be required by parties involved in the contractual agreements.
Addressing these concerns
Evolution with the help of Blockchain technology must be assisted with foresight, insights and a proper protection plan. The use of technology must be done in such a way that the most valuable organizational assets and data are protected throughout. The initial issues must be explored in parallel that is the technology idea should not be dropped at once. Organizations must also explore all the regulatory and legal requirements as per the adoption of Blockchain technology. Business and Customers must be protected against potential mishaps. Organizations must also not undermine the traditional values of public institutions such as fairness, transparency, equity and accountability. Smart contracts must also be assisted with the insights of legal bodies to avoid future implications. Proper attention must be given when outside developer turns the contractual requirements into some digital codes. Moreover, this code must be translated back when the required stakeholder demands so. Attorneys must be consulted in the process for legal advice. There must be close collaboration among developers, managers and attorneys involved in the drafting of smart contracts so that no points are missed.
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