Blockchain Disrupting Finance — Payments and Escrow
Blockchain Future Series (5 part series — Part 3)
Blockchain technology is proving to be a force to reckon with in the industrial ecosystem. And the payment systems have not been left behind. Considering that the conventional payment systems have not been working to the satisfaction of many. There have been needs for changes that will improve the services offered. Blockchain seems to be the answer to these problems that have been affecting the traditional payment systems.
But before jumping straight to how Blockchain is the future of payment system. Let’s first understand where we are coming from, and that is the conventional payment systems. In this case, the conventional Escrow service is a good place to start.
So what is Escrow?
Escrow is a neutral third party to an agreement, involved in the execution of the agreement. An Escrow collects, holds and only releases the contents of an agreement once both parties to the agreement are satisfied. This means that the conditions of the agreement have to be met first for the agreement to be executed. And an Escrow ensures that all required conditions are met.
The conventional escrow is a centralized transaction system. And centralized transaction systems have problems that are affecting efficient and reliable service delivery, which include;
Security
Because transactions are being controlled from a single point, the possibility of funds being hacked and stolen is very high. Therefore it becomes hard for people to trust such institutions with their personal information and funds.
Human error
The centralized transaction systems are in the hands of people, and therefore there are always chances of mistakes being made. Such mistakes might turn out to be costly and time-consuming when it comes to seeking solutions to the mistakes.
Charges
Centralized transaction systems tend to charge fees for services rendered. Such fees sometimes turn out to be exorbitant, which lead to people always seeking other cheaper avenues of transactions.
With such problems, there is the need for avenues or platforms that are more secure and reliable when it comes to transactions.
Enter Blockchain technology
Blockchain technology is a decentralized and public distributed ledger that records, stores and shares transactions without the possibility of being tampered with.
Blockchain has entered the market with advantages that were not possible with conventional payment systems. Such advantages include;
Security
Blockchains distributed ledger, and cryptographic security ensures total security of the system from any third party. Therefore without a single point of failure hackers find it impossible to access peoples’ data without consent.
Smart contracts
Blockchain has smart contracts, which in this case play the same role as conventional Escrow. Smart contracts help when it comes to the execution of agreements. Unlike conventional Escrow, smart contracts do not act as third parties but facilitate direct transactions between parties to the agreement. And the contract is only executed once specified conditions are met.
With smart contracts instead of third parties you are assured of;
- Faster transaction capabilities because it is automatic and directly between parties
- Cost effective because it does not involve any third party that will require fees for service rendered
- No human error because of the computational feature of the smart contracts
Transparency
Blockchain ensures transparency of all that is happening within the system. The way it works is such that in case there is any attempt made for alteration everyone in the system is alerted, and immediate changes are made.
No intermediaries
Blockchain eliminates the need for intermediaries, which in turn helps to cut cost in transactions and ensure quick and efficient transactions. Without intermediaries, there is also a lack of human error that always turns out to be costly. And no fraudulent activities are happening because there is no single point of failure.
But with all these benefits that blockchain has to offer the payment system, you are still left wondering.
Can blockchain be trusted for corporate payments?
It is understandable that there would be doubts about trusting Blockchain since it’s a technology, still in its infancy stage. But if the current situation is anything to go by blockchain is proving that it’s here to stay. And just to clear your doubts, George Soros, one of the most famous investors globally, who is already preparing to start trading in cryptocurrency.
But it’s not only George Soros; there are other platforms embracing Blockchain technology such as SpectroCoin, Jelurida and Mycelium. There is also Bitpesa and BitSpark, which are platforms specializing in remittances and are using Blockchain technology to help ease the cost and difficulty of sending money across borders.
And the SEC and FCA are already talking about regulating cryptocurrency in the near future.
Therefore to answer your question, yes, you can trust Blockchain when it comes to corporate payments. Its distributed ledger makes it impossible for any witty hacker to access content in the system. All records of ownership exchanges are kept in the network and are accessible to you at any moment, at any place. Its transparency factor and elimination of third-party reliance make it a safe and reliable technology to rely on when it comes to your funds.
One of Blockchain’s greatest attribute is creating direct transactions between parties, which will not only be cost-effective but first too. Now one question remains.
Will Blockchain be the death of intermediaries?
Blockchain currently is yet to be globally accepted as a legal tender. But with the rate at which industries are embracing Blockchain technology its global acceptability doesn’t seem that far. And therefore the probability of blockchain wiping intermediaries out of existence is very high.
Blockchain decentralized nature and cryptographic security make it the most secure base of a transaction. Compare it with intermediaries with centralized nature, and they do not stand a chance.
But if Charles Darwin’s theory of adaption is anything to by, then there is a likely hood that the conventional intermediaries in the payment systems, such as banks, will embrace this technology.
For example, Barclays bank recently announced it is launching a desk dealing in cryptocurrency. So will intermediaries die out or will they survive Blockchain technology? Only time will tell.
So, what is the future of Blockchain and payment?
Blockchain’s capability to record, store and share data eliminates the need for centralized organizations that execute such functions. And with such benefits and many more, Blockchain has led to the World Economic Forum to predict that by 2025, 10% of GDP will be stored on Blockchain technology. Already the market value of cryptocurrency has risen to over $540 billion.
Therefore the future seems bright for blockchain technology. By acting as a secure and direct system of payment, blockchain is bound to eliminate the need for intermediaries and people will benefit more from quick and cost-effective payment systems.
Final word
All said and done; there is no doubt that Blockchain is ushering in a productive future in the payment system. There is still much to be anticipated from this technology. What say you?
Blockchain Future Series (5 part series — Part 1): Blockchain Future — Atomic Swaps Could Be The Game Changer
Blockchain Future Series (5 part series — Part 2): Why Blockchain Is The Future Of Data Storage
