Should we entrust our entire economy to Blockchain technology?
This article is the first of a triptych; Economy — Education — Society; focusing on the impacts of Blockchain technology.
We have all probably already heard about blockchain technology, particularly in its application in cryptocurrencies like bitcoin. It is a chain of blocks like a decentralized digital register, which records transactions or even contracts and allows the tracking of assets (tangible or intangible) in a network of companies. It is a technology for storing and transmitting information.
Why do we hear so much about blockchain?
Our existing transaction systems have many disadvantages that contribute to their inefficiency: long settlement times for transactions, sometimes the need for validation by third parties or intermediaries, fraud, cyber-attacks, even simple errors or the fact that a central system exposes all participants to risks if this central system is compromised. However, the number of transactions in the world is growing exponentially and keeps increasing. This increase is facilitated by all technological developments and innovations such as the Internet and the emergence of the Internet of Things (IoT) or simply thanks to mobile phone technologies.
Blockchain technology is positioned as an answer to these disadvantages.
Blockchain technology promises to improve and modernize financial and industrial systems worldwide. Known for its features such as security, transparency and data integrity, it has become a popular topic of discussion in recent years. However, despite the promising advantages it offers, the blockchain does not lack important disadvantages, which can greatly affect the efficiency and safety of current economic and industrial processes.
In this article, we will take a closer look at the advantages and disadvantages of using this technology in our economies (in general), and how it could affect the world in the future. With the emergence of blockchain and its promising advantages, it seems fair to ask whether the disadvantages of this technology can be offset by significant advantages. Indeed, the question of whether we should turn entirely to blockchain in our economies is a concern that needs to be studied in depth.
What could be the real benefits of the Blockchain?
First, the blockchain allows greater security and transparency of transactions. In the sense that it can help prevent fraud and prevent the manipulation of data and financial information. Indeed, as information is stored in the blockchain, it is difficult to falsify them, which allows users to ensure that all final transactions are reliable and secure. The blockchain therefore records and stores all transaction information from a decentralized point of view and the information can be accessed by users at any time. This is a good way for companies to better track and control their transactions.
Blockchain is also very convenient for international trade and transactions. Companies have the possibility to transfer assets more quickly (because transactions are managed by computer, there are no intermediaries as with some traditional banks), in a more simplified, secure and transparent way. International transactions are indeed often complicated because the settlement time is high and exchange rates are constantly fluctuating for example. Blockchain can simplify and accelerate this process, allowing companies to complete transactions faster, more cost-effectively, and more transparently. It is a way for them to reduce their risk of mistakes or mismanagement of transactions and improve their business operations and business relationships. By improving the process of collecting and using data and information, companies can better understand the market and improve their business strategies.
Big banks are already using this revolutionary technology in their daily operations, reducing costs and improving process efficiency (ex: Ripple).
Why is this technology not yet used everywhere?
Blockchain technology is still in its infancy and its application is still limited. The concerns surrounding the blockchain are both legitimate and numerous. Blockchain technology has certain disadvantages that must be taken into account before deciding to use it in our economies.
The first drawback is the complexity of its implementation. Blockchain is a very complex technology and its implementation can be very costly, especially for small businesses that do not have the skills and staff to implement it. It has the potential to create isolation or exclusion of users who do not have the technical skills needed to use blockchain technology. These people could find themselves marginalized in an increasingly digital world.
Blockchain can also present significant security risks. Its use for the storage of sensitive data can lead to risks of failure and hacking. It’s a very secure technology, but it can be vulnerable to cyber attacks (just like the current digital financial system). Therefore, it is important to ensure that security systems are in place and maintained to protect against cyber-attacks and data theft.
Another concern with blockchain concerns the environmental dimension. Blockchain requires a significant amount of energy to operate and this consumption can have long-term negative consequences for the environment. Although it is true that there are ways of overcoming this over-consumption of energy, by changing the method of validation of blocks for example (proof of stake), this would require technological adjustments that may entail additional costs, especially in the case of adjustment of a blockchain already created.
“But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum.” The Truth About Blockchain, It will take years to transform business, but the journey begins now. By Marco Iansiti & Karim R. Lakhani
At this point, more and more people understand what blockchain is and how it can change our lives. A lot of the big banks are already using this revolutionary technology in their daily operations, reducing costs and improving process efficiency, thanks to RIPPLE for example.
However, the technology is still new and has its drawbacks, but projects are being implemented to partially offset these drawbacks (like substrate). Ultimately, this revolutionary technology has the potential to change our financial and business interactions. However, today, only time will tell whether it will improve our lives or make them more complex, and less personal. We can rightly wonder how the blockchain will impact our society itself (psychologically, in terms of privacy and in our social interactions) and the impact on future generations.
What do you think of blockchain? Have you had any direct experience of it? Share your experiences below and help inform people about this emerging technology.
About this article
This article has been written by a student on the Grenoble Ecole de Management’s Advanced Masters in Digital Strategy Management. As part of a content creation assignment, students are given the task of writing articles based on their digital interests and disseminating the articles online. Articles are marked but we make minimal changes to the content. Thanks for reading! James Barisic, Programme Director, MS DSM.
