Two pitfalls that have always plagued the world of cryptocurrency have been fragmentation and fraud. Dealing in decentralized markets runs a big risk of fraudulent transactions. Unfortunately, centralized markets do not have the span or reach decentralized markets contain. In addition, markets that stretch over various regions include buyers and sellers using different currency. This requires a whole slew of individuals to manage exchange. Not only does this create a large risk of fragmentation, it also slows processes down to a crawl. This is why blockchain technology is garnering so much attention. It alleviates one of the pitfalls completely.
What Are Blockchains?
Blockchains are long streams of data. The streams are made up a series of records grouped into blocks of chains. Cryptography is used to store the information, secure the information, and even transport the information. Described as distributed ledger technology blockchains simply store records. The records list transactions and provides full transparency as to the legitimacy of the party. Users are grouped into “nodes” each networking with the other. This stream of data and connectivity allows fraudulent parties to be identified through their transactions, effectively separating the wheat from the chaff.
The technology is extremely useful as it provides a checks and balances system. Individuals can view a party’s transaction history if they want to, and the records are permanent. Any fraudulent scheme that is used to scam buyers or sellers is exposed. A record of the transaction is permanently made, and that transaction history stays with the party. The data cannot be altered so the black mark fraud stays with them forever. This kind of transparency allows transactions in decentralized markets to be secure. Both buyers and sellers can feel safe knowing that they are using viable parties.
As this takes away a huge problem cryptocurrency has had, it opens the entire market up for perspective buyers and sellers. Any big business that may have stayed away from cryptocurrency for fear of fraud, can not find reassurance and enter in the digital market. As virtual currency allows organizations and individuals to operate internationally without the headaches of exchange rates the markets are ideal. Tokenization, another technology focusing on the pitfall or fragmentation, may open the market up even further with the creations of universal currency.
Blockchains are not just for servicing the virtual currency market. They can also be used for anything that requires data allocation and ledger services. True, it is the tech running Bitcoin, but the country of Estonia also uses in the maintenance of health records. Other companies use it to improve shipping practices and supply chains, as its organization of information make the process of both far less aggravating.
Blockchains have the ability to revolutionize the market, making buying, selling, a trading a more seamless action. Its ability to place more reliability in digital currency, allows many companies to cut out the middleman and enjoy faster transactions. Like the tao of VHS and DVD, blockchains and cryptocurrency may be the precursors to complete virtualization of money.
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