Blockchain: The future currency of the global economy?
For centuries now, the driving force behind the global economy have been physical currencies and commodities. Even though the numbers involved now appear on digital screens, it’s still a market where traditional gatekeepers still rule the roost. But the emergence of blockchain has created new opportunities to transform this – and the coronavirus pandemic could now be the defining moment that embeds the technology into economies like never before.
How much impact is Blockchain having now?
The rise of Bitcoin and other cryptocurrencies has, arguably, been the most visible example of Blockchain’s role in the global economy. But, while there is some lingering uncertainty around fully-digitized currencies, the underlying appeal of Blockchain’s tech capabilities isn’t the issue. Now, it’s how about which areas of the economy (if not all) can benefit from its integration.
At the moment, there’s a lack of a consolidated and collaborative effort to achieve this. Ad-hoc adoption and piecemeal integration is as far as we’ve got. But acceptance is growing and that’s maybe best demonstrated by the fact that you can now trade Bitcoin much like any other forex instrument. So, what happens next? Will policymakers increase their trust in Blockchain too?
Blockchain’s advantages over other systems
In essence, Blockchain creates a huge network that removes control from one, central location. It puts power into the hands of everyone involved in that network and it provides the potential to radically speed up transactions between financial institutions.
First, Blockchain means bypassing central gatekeepers – removing the intermediaries that slow down transactions and increase costs. Apply this notion to international trade, for example, and you can see a situation where cross-border payments become much easier to make.
Then, there are other applications. In a global supply chain, Blockchain can remove control stored up in one bottleneck and ensure the efficient movement of goods and services. And it is, by its very nature, secure too – implementing independent verification across the network.
Are there any tough challenges to overcome? [310]
Most technologies, as a report from EY highlights, go through a certain lifecycle before its social and economic benefits are realized. And, at first, technology can often be clouded by mistrust and doubt. Not insurmountable challenges, but Blockchain is still treated with a little suspicion.
Two of the biggest barriers are cost-related, both in terms of the implementation and energy to power some solutions. New tech always comes in at the higher end of the price spectrum. But a degree of caution will always be exercised when it comes to the economic cost-benefit analysis.
Historically, a lack of regulation is a big question mark for potential adopters too.Some nations like Japan are trying to get a handle on this. But others, such as China, are much more hesitant and the lack of a unified or consistent regulatory environment only drags out those doubts.
The short-term (and long-term) expectations?
Blockchain has been charting its course into important economic sectors at a local and regional level over the past few years. But its progress hasn’t been as fast as some might like. Now, an era of social distancing and re-set priorities post-coronavirus could place Blockchain right at the heart of the economic revival that every nation is going to be chasing.
There are obstacles that do need dismantling. But a stronger desire makes it easier for that to happen. And, with increased uptake and adoption, some of those inherent barriers will start to dissipate too: cost, reluctance, and interoperability – especially as advances in technology drive forward. Is this a pivot point in our economic thinking or a natural evolution? Or is it both?
Submitted by: Tejas